presented by

Phil Smith, National Political Director

The Concord Coalition www.concordcoalition.org

December 3, 2008 La Grange, Georgia

Short & Long Term Budget Trends

Current Fiscal Policy

$1,800

$1,600

$1,400

$1,200

$1,000

$800

$600

$400

$200

$0In b

illio

ns o

f 199

6 co

nsta

nt (

chai

n) d

olla

rs

1980 1984 1988 1992 1996 2000 2004 2008 2012

Fiscal Years

Composition of Actual FY 2008 Federal Government Revenues and Outlays (Deficit: $407 Billion)

Interest

Domestic*

Social Security

Medicare & Medicaid

Other Entitlements

Defense

Other Taxes including Estate and Gift

Corporate Taxes

Social Insurance Taxes

Individual Income Taxes

Outlays: $2.96 trillion Revenue: $2.55 trillion*Includes all appropriated domestic spending such as education, transportation, homeland security, housing assistance, and foreign aid. Source: CBO 2008.

In B

illi

ons

of D

olla

rs

Social Security, Medicare, & Medicaid as a Percentage of the Federal Budget

All other Federal Spending

$1.6 Trillion

58%

Social Security, Medicare and Medicaid

$1.1 Trillion

42%

Source: Congressional Budget Office, January 2008.

1967 1987 2007

68%

26%

7%

44%

14%

42% 38%

9%

53%

Mandatory DiscretionaryNet Interest

Source: Congressional Budget Office, January 2008

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 2008 Projected)

$0

$100

$200

$300

$400

$500

$600

$700

$ B

illio

ns

SocialSecurity

Medicare Medicaid FederalRetirement& Disability

Unemploy-mentComp.

EarnedIncome &Child TaxCredits

FoodStamps

FamilySupport

ChildNutrition

Source: Congressional Budget Office, January 2008

Automatic Growth in the Big Three Entitlements SwampsGrowth of Appropriations

10 Year Growth in Social Security, Medicare and Medicaid

$0

$250

$500

$750

$1,000

$1,250

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Year2009-2018

Spending for Social Security, Medicare and Medicaid. $5.9 trillion

Discretionary Spending $1.9 trillion

Incr

ease

Ove

r 20

07 L

evel

of

Fun

ding

In B

illi

ons

of D

olla

rs

Source: Congressional Budget Office, January 2008.

Change in Composition of Discretionary Spending

1967 1987 2007

68%32%

64%36%

47% 53%

Defense Non-defense

Source: Congressional Budget Office, January 2008

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

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

Source: Congressional Budget Office, January 2008

As

a P

erc

en

tag

e o

f G

DP

Outlays of Select DiscretionaryNon-Defense Programs

(FY 2008 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 2008*includes ground, air, and water

Federal Spending vs. Revenues as a Percent of GDP (FY 1980-2008)

Source: Congressional Budget Office, December 2008

Average outlays: 21%

Average revenues: 18.3%

Perc

en

tag

e o

f G

DP

Percent of Debt Held by the Public Owned by Foreigners

Source: United States Treasury Department

(1980-2007)

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 2009-2018

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Fiscal YearCBO September 2008 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, September 2008 and Concord Coalition analysis.

Bil

lion

s of

Dol

lars

-$7.8 Trillion Deficit

-$2.3 Trillion Deficit

America’s Population is AgingPopulation age 65 and Over

Source: Social Security and Medicare Trustees’ Report, April 2008

0%

5%

10%

15%

20%

25%

2007 2012 2017 2022 2027 2032 2037 2042 2047

Year

Per

cen

tage

of

Pop

ula

tion

Age

d 6

5 an

d O

ver

Americans are living longer and having fewer children

Consequently, fewer workers are available to support each Social Security recipient

1960: 5.1 to 1 Today: 3.3 to 1 2040: 2.1 to 1

Source: Social Security Administration, April 2008

Health Care Costs are Rising Faster Than the Economy

Source: Congressional Budget Office, December 2007

0

5

10

15

20

25

2007 2012 2017 2022 2027 2032 2037 2042 2047 2052 2057

Year

Per

cen

tage

of

GD

P

All Federal Revenues

In Fiscal Year 2007

All Federal Spending

In Fiscal Year 2007

Assumes that health care cost growth will not exceed GDP growth.

Assumes that health care cost growth continues at the average rate for the past 40 years (2.5 percentage points greater than GDP growth.)

Assumes that health care cost growth rate declines to 1.0 percentage point greater than GDP growth—consistent with the assumption used by the Medicare Trustees.

Benefits promised far exceed dedicated tax revenues

10

12

14

16

18

20

2007 2013 2019 2025 2031 2037 2043 2049 2055 2061 2067 2073 2079 2085

Source: Social Security Trustees’ Report—April 2008 (Intermediate Projections)

Social

Sec

urity

Out

lays

Payroll Tax & Taxation of BenefitsPe

rce

nt

of

Ta

xa

ble

Pa

yro

ll

Calendar Year

Social Security

Cash Deficits

Medicare Costs Soar in the Coming Decades

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, 200818

Social Security and Medicare Part A Cumulative Cash Surpluses and Deficits

In Constant 2008 Dollars—2008 through 2085In

Billion

s o

f C

on

sta

nt

20

08

D

ollars

2008 2010 2020 2030 2040 2050 2060 2070 2080

Calendar Year

Source: Social Security Trustees’ Report—March 2008 (Intermediate Projections)

$496 Billion: Cumulative Social Security Cash Surplus

-$27 Trillion: Cumulative Social Security Cash Deficits

-$55 Trillion: Cumulative Medicare Part A Cash Deficits

-82.6 Trillion: Cumulative Social Security and Medicare Part A Cash Deficits

19

Current fiscal policy is on an unsustainable path

Social Security

MedicaidMedicare

All Other

Interest

Source: Government Accountability Office, March 2008

Average tax revenue

Social Security, Medicare, Medicaid and Interest Consume All Federal Revenues in 20 Years

Source: GAO. 2007.

0%

25%

50%

75%

100%

125%

2002 2007 2012 2017 2022 2027

Year

Per

cen

tage

of

Rev

enu

es

Social Security, Medicare and Medicaid Interest

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 easy solutions, such as cutting waste fraud and abuse or growing our way out of the problem. 

• Finding solutions will require bipartisan cooperation and a willingness to discuss all options.

• Public engagement and understanding is vital in finding solutions.

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

The Concord Coalition needs your help!

There are a variety of ways to help…

Get educated, get involved, and be heard

Write letters to the editor, call into radio programs and C-span

Communicate with your Representative and both Senators

Host house parties where you show the documentary IOUSA

Join groups like the Concord Coalition

Popular Myths that Impede Action

• Myth: We can grow our way out of difficult budget choices.

• Myth: Eliminating waste in government programs will solve the deficit problem.

• Myth: The deficit problem can be solved by delivering health care more efficiently.

• Myth: We just need to raise taxes starting with rolling back some or all of the Bush tax cuts.

• Myth: Cutting taxes will increase revenues.