presented by

Robert L. Bixby, Executive Director

The Concord Coalition www.concordcoalition.org

Daunting Budget Outlook

United States Naval Academy

March 8, 2007

Composition of Actual FY 2006 Federal Government Revenues and Outlays

(Deficit: $248 Billion)

544

506

520

496

361

227

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

2,750

1044

838

354

14328

Interest

Other

Social Security

Medicare & Medicaid

Defense

Domestic*

Estate & Gift Taxes

Other Taxes

Corporate Taxes

Social Insurance Taxes

Individual Income Taxes

Outlays: $2.65 trillion Revenue: $2.41 trillion*Includes all appropriated domestic spending such as education, transportation, homeland security, housing assistance, and foreign aid. Source: CBO & Treasury, 2006

Bil

lio

ns

of

Do

lla

rs

1965 1985 2006

66%

27%

7%

44%

14%

42% 38%

9%

53%

Mandatory DiscretionaryNet Interest

Source: Congressional Budget Office, January 2007

Mandatory spending is consuming a growing share of the budget

NOTE: Numbers may not add up due to rounding.

Outlays of Select Mandatory Spending Programs

(FY 2007 Projected)

$0

$100

$200

$300

$400

$500

$600

$ B

illio

ns

SocialSecurity

Medicare Medicaid FederalRetirement& Disability

Unemploy-ment

Comp.

EarnedIncome &Child TaxCredits

FoodStamps

FamilySupport

ChildNutrition

Source: Congressional Budget Office, January 2007

Change in composition of discretionary spending

1965 1985 2006

66%34%

61%39%

49% 51%

Defense Non-defense

Source: Congressional Budget Office, Jan. 2007

Defense Discretionary Spending as a Percentage of GDP

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004

Source: Congressional Budget Office, January 2006

As

a P

erc

en

tag

e o

f G

DP

Outlays of Select DiscretionaryNon-Defense Programs

(FY 2007 Projected)

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$ B

illio

ns

Education Transpor-tation

IncomeSecurity

NaturalResources

& Env.

Veterans Foreign Aid HomelandSecurity

Science,Space, &

Technology

Source: Congressional Budget Office, January 2007*includes ground, air, and water

Federal Spending vs. Revenues as a Percent of GDP (FY 1980-2006)

16%

18%

20%

22%

24%

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Fiscal Year

Revenues Total Outlays

Source: Congressional Budget Office, January 2007 and Office of Management and Budget, 2007

Average outlays: 21%

Average revenues: 18.3%

Perc

en

tag

e o

f G

DP

Debt Held by the Public as a Percent of GDP 1980-2006

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Source: Office of Management and Budget; Forecast: Congressional Budget Office, January 2007

Percent of Debt Held by the Public Owned by Foreigners

Source: United States Treasury Department

(1980-2006)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1987 1990 1993 1996 1999 2002 2005

Current Policy Trends Lead to Large Sustained DeficitsFiscal Years 2008-2012

-$600

-$400

-$200

$0

$200

2008 2009 2010 2011 2012

Fiscal Year

Source: Congressional Budget Office, January 2007 and Concord Coalition analysis.

Bil

lion

s of

Dol

lars

President’s Proposed 2008 Budget: -$513 billion deficit

President’s Budget with AMT Reform and Plausible War Spending: -$1.342 trillion deficit

Non-defense Spending as a Percent of GDP under the President’s Budget

2%

3%

4%

5%

6%

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

Fiscal Year

Perc

ent of G

DP

Source: Office of Management and Budget, February 2006

1980-2005 Historical average: 3.77%

Current Policy Trends Lead to Large Sustained DeficitsFiscal Years 2008-2017

-$1,000

-$800

-$600

-$400

-$200

$0

$200

$400

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Fiscal YearCBO January 2007 Baseline

The Concord Coalition Plausible Baseline assumes that discretionary spending grows at the rate of nominal GDP, that war costs slow gradually, and that all expiring tax provisions are extended with AMT relief.

Source: Congressional Budget Office, January 2007 and Concord Coalition analysis.

Bil

lion

s of

Dol

lars

$4.9 Trillion Deficit

$800 Billion Surplus

Social Security and Medicare Part A Cumulative Cash Surpluses and Deficits

In Constant 2006 Dollars—2006 through 2080

-$2,500

-$2,000

-$1,500

-$1,000

-$500

$0

$500

In B

illion

s o

f C

on

sta

nt

20

06

D

ollars

2006 2010 2020 2030 2040 2050 2060 2070 2080

Calendar Year

Source: Social Security Trustees’ Report—March 2006 (Intermediate Projections)

$692 Billion: Cumulative Social Security Cash Surplus

-$27.4 Trillion: Cumulative Social Security Cash Deficits

-$44.4 Trillion: Cumulative Medicare Part A Cash Deficits

-71.8 Trillion: Cumulative Social Security and Medicare Part A Cash Deficits

Medicare Costs Soar in the Coming Decades

0

5

10

15

2005 2010 2020 2030 2040 2050 2060 2070 2080

Calendar Year

As a

Perc

en

tag

e o

f G

DP

General Revenues required to fund the program

Income from dedicated taxes, premiums, and state transfers

Source: Medicare Trustees’ Report, 2006

Current Fiscal Policy is on an Unsustainable Path

0

10

20

30

40

50

2007 2015 2030 2045

The simulation assumes that discretionary spending grows with the economy after 2007 and that all expiring tax provisions are extended. After 2017, revenue is held constant as a share of GDP.

Net Interest

Social Security

Medicare and Medicaid

All other spending

Revenue

Source: Government Accountability Office, February 2007.

0%

50%

100%

150%

200%

250%

300%

2006 2010 2015 2020 2025 2030 2035 2040

Assumes discretionary spending grows with the economy and all expiring tax cuts are extended

Assumes discretionary spending increases only with inflation and tax cuts expire

Source: Government Accountability Office, September 2006

Policy Changes Matter

Projected Debt Held by the Public as a Percent of GDP Under Alternative Scenarios

(2006-2040)

Washington Needs a Fiscal Wake-Up Call From “We The People”

• The Fiscal Wake-Up Tour consists of speakers from diverse perspectives who are increasingly alarmed by the nation’s long-term fiscal outlook.

• Our mission is to cut through the usual partisan rhetoric and stimulate a more realistic public dialogue on what we want our nation’s future to look like, along with the required trade-offs.

• Elected leaders in Washington know there is a problem, but they are unlikely to act unless their constituents — We The People — demand it.

Key Points of Agreement

Members of the Fiscal Wake-Up Tour do not necessarily agree on the ideal levels of spending, taxes and debt,

but we do agree on the following key points:

• Current fiscal policy is unsustainable• There are no free lunch solutions, such as cutting

waste fraud and abuse or growing our way out of the problem. 

• The best way to make the hard choices is through a bipartisan process with all options on the table.

• Public engagement and understanding is vital in finding solutions.

• This is not about numbers. It is a moral issue.