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Ignored Crisis: A Looming Wave of Debt
Sources: Office of Management and Budget Historical Tables, Congressional Budget Office Alternative Fiscal Scenario
Deb
t as a % of G
DP
18
0
20
40
60
80
100
120
140
160
1960 1970 1980 1990 2000 2010 2020 2030
2030: 146%
Today: 62%
Widening Gap Between Spending and Revenue
12.0
14.0
16.0
18.0
20.0
22.0
24.0
26.0
28.0
1960 1970 1980 1990 2000 2010 2020
Revenue
Spending
2020 Gap: $1.25 Trillion
Sources: OMB Historical Tables (1940‐2009), Congressional Budget Office's Long‐Term Budget Outlook Alternative Fiscal Scenario
% of G
DP
17
Washington “Budgeting”
• In 2008, average TN household earned $43,000
• Using Washington logic, they would spend $74,000
• That’s $31,000more than they earn
• Must borrow 40 cents for every dollar they spend
16
1970 Spending
31%
62%
7%
Discretionary Spending (Defense, Highways,
Education): $558 billion
Interest Payments:$63 billion
Mandatory Spending (Medicare, Medicaid,
Social Security): $279 billion
In Current Dollars
Source: Congressional Budget Office15
2010 Spending
42%52%
6%
Interest Payments:$209 Billion
Discretionary Spending (Defense, Highways,
Education): $1.38 Trillion
Mandatory Spending (Medicare, Medicaid,
Social Security): $2.03 Trillion
Source: Congressional Budget Office14
2035 Spending
49%
26%
25%
Interest Payments:
$2.27 Trillion
Discretionary Spending (Defense, Highways,
Education): $2.43 Trillion
Mandatory Spending (Medicare, Medicaid,
Social Security): $4.46 Trillion
Source: Congressional Budget Office, Alternative Fiscal Scenario
In Current Dollars
13
187
6949 45 44
3012
0
20
40
60
80
100
120
140
160
180
200
Net Interest Dept of Transportation
Dept of Homeland Security
Dept of Education
Dept of Housing
TN State Budget
Dept of Labor
Billion
s of $
Debt Isn’t Free:Putting 2009 Costs Into Perspective
Sources: President’s FY’11 Budget, CBO, TN 2010‐11 Budget 12
Billion
s of $
Debt Isn’t Free:Putting 2020 Costs Into Perspective
Sources: President’s FY’11 Budget, CBO, TN 2010‐11 Budget
11
916
83 59 54 52 35 140
100
200
300
400
500
600
700
800
900
1000
Net Interest Dept of Transportation
Dept of Homeland Security
Dept of Education
Dept of Housing TN State Budget Dept of Labor
Sources: President’s FY’11 Budget, CBO, TN 2010‐11 Budget
Who Owned America’s Debt in 1960?Total Publicly Held Debt: $236.8 Billion
Source: OMB and Department of the Treasury
Domestic Holders:
$223.8 billion(95%)
Foreign Holders: $13 Billion
(5%)
10
Who Owns America’s Debt in 2010?Total Publicly Held Debt: $8.8 Trillion
Domestic Holders: $4.7 Trillion
(54%)
Foreign Holders:
$3.9Trillion (46%)
China Owns: $876 Billion (10%)
Source: Department of the Treasury, Federal Reserve Board 9
Plenty of blame to go around.
8
Historical Context
Spending: 20.3% of GDP over the last 50 years
Revenue: 18.0% of GDP over the last 50 years
7
What is Right Amount of Spending?
21% of GDP: Erskine Bowles
20.3% of GDP: 50-year Average
18% of GDP: Balanced Budget
6
Getting Spending Back to a Balanced Budget: $6.7 Trillion Reduction in Spending Over Ten Years
12.0
14.0
16.0
18.0
20.0
22.0
24.0
26.0
28.0
1960 1970 1980 1990 2000 2010 2020
Revenues as % of GDP
Outlays as % of GDP
Tough Medicine:
$6.7 Trillion
Getting to 21% of GDP would be $3.4 TrillionGetting to 20.3% of GDP would be $4.5 Trillion
5
% o
f GD
P
$670 billion a year is about what we spend
on ...
4
Fundamentally change the way Washington does
business
3
A construct that forces us to cap spending and
incentivize growth
2
We should not leave our children and
grandchildren with this crippling debt
1