THE FISCAL CLIFF
The Fiscal Cliff and BeyondJoel Packer, Principal, The Raben
Group; [email protected] Executive Director, Committee for
Education Funding
HOW DID WE GET TO THE FISCAL CLIFF?
Record Deficits Registered in Last Four YearsSource:
Congressional Budget Office, Historical Tables.3
U.S. Deficit and Surplus (Billions of
Dollars)2009201219721996Budget Deficit $1.13 T in FY 2012The U.S.
has long history of budget deficits, but deficits in last four
years significantly larger than trendSurplusDeficit
Debt as Share of GDP, 1940-2050, Under Current Policies 5
Source: CBPP based on Congressional Budget Office data, January
2010.www.cbpp.orgFiscal Year 2012 Outlays
EPA = 0.2%Final FY 11 and 12 Appropriations7FY 11 cut ED (other
than Pell) by $1.2 billion.FY 12 total ED funding cut by $233
million.All programs cut by 0.189% across-the-board cut.
EPA has been cut by $1.9 billion since FY 10.
The Budget Control Act of 2011How small will the box be? 8
Caps and CutsBCA set in law discretionary caps for ten years (FY
12-FY 21).Reduced spending by more than $900 billion over ten
years.
Supercommittee failure triggered sequestration. $1.2 trillion in
automatic cuts between FY 13-21; 50% from defense, 50% from
nondefense FY 13 cuts now reduced and delayed until March 1,
2013.However, other than Impact Aid, education cuts would not start
until July 2013.
9
Sequestration = Largest Education Cuts Ever!FY 13 = fixed
percentage across-the-board cuts.CEF projects a cut of 5.9% = $2.9
billion for ED.Head Start cut $473 million.Pell grants exempt in
first year.
FY 14-21 will not be ACB cut; further lowers discretionary
capsSqueezes education $; Pell no longer exempt.
10Impact of Sequestration in FY 13
Education Department Funding12In billions
FY 13 sequester level = $7.9Sequester would cut EPA $500
millionFY 2013 Sequester Cuts Fall on The Smallest Pieces of the
Budget 14Mandatory$2,160BTax Expenditures$1,343BDefense
Discretionary*$729BDomestic Discretionary* $504B$43B 50% of
Sequester$27B 32% of Sequester$16BNon-Defense 50%Defense
50%Sources: Congressional Budget Office, Donald Marron and Tax
Policy Center using data from the Office of Management and Budget
and Treasury* These amounts include all discretionary budgetary
resources for the duration of FY 2013, not solely the non-exempt
monies that are subject to sequester. Additionally, the figures
assume that a continuing resolution at FY 2012 levels is enacted
for FY 2013, that war funding (Overseas Contingency Operations
funds) is provided at the level requested by the president. Defense
discretionary funds include unobligated balances from prior years,
which are subject to sequester.CutsCutsCutsWHATS IN THE FISCAL
CLIFF DEAL?Raises tax rates on individuals/households earning
$400k/$450k or moreMakes Bush-era tax cuts permanent for all other
taxpayersRaises tax rates for capital gains/dividends from 15% to
20% for same incomesRaises estate tax from 35% to 40%, with first
$5M exempted Phases out personal exemptions and limits itemized
deductions for individuals/households earning $250k/$300k
15WHATS IN THE FISCAL CLIFF DEAL?Permanently indexes AMT to
inflationExtends American Opportunity Tax Credit, Child Tax Credit,
and Earned Income Tax Credit for five yearsPreserves extenders,
includes several education tax breaks Allows temporary 2% payroll
tax cut to expireExtends unemployment insurance for one year
Extends Medicare Doc fix for one year
16WHATS IN THE FISCAL CLIFF DEAL?2 month delay in sequester$24
billion reduction paid for with $12 billion in revenues and $12
billion in spending cuts$6 billion in defense cuts and $6 billion
in NDD cutsReduces across-the-board cut form 8.2% to 5.9%.
17OUTLOOK Multiple CliffsDebt Ceiling reached by end of
FebruaryRepublicans demanding more cutsSequester set to hit on
March 1Repealing entire sequester costs $960 billion.White House
wants 50% new revenues/50% spending cutsSix-month CR expires on
March 27, 2013Provides small 0.612% across-the-board
increaseSequester cuts if they happen will be from CR levels. CR
has no effect on the sequester.
182012 Debt Limit Crisis Could Lead to DefaultSource: National
Journal Research, 2012, Analyst: Changes of U.S. Default Now 20%,
Damian Paletta, January 1, 2013, Wall Street Journal. 19Debt Limit
ReachedU.S. hits $16.4T debt limit; U.S. Treasury Secretary takes
extraordinary measures to avoid default
Congress Passes American Taxpayer Relief ActSequester delayed by
two months; Congress postpones debt reduction deal and negotiations
to raise the debt ceilingFebruary 2013Congress Negotiates Congress
debates how to reduce the national debt and whether to raise the
debt ceiling Updated1/3/13Possible Default on U.S. Debt
ObligationsFailure to reach a debt reduction deal or raise the debt
ceiling could cause the U.S. to default on debt obligations,
throwing financial markets into a tailspinMarch
2013Questions?20
Chart1-23.4-14.9-6.1-53.2-73.7-53.7-59.2-40.7-73.8-79-128-207.8-185.4-212.3-221.2-149.7-155.2-152.6-221-269.2-290.3-255.1-203.2-164-107.4-21.969.3125.6236.2128.2-157.8-377.6-412.7-318.3-248.2-160.7-458.6-1412.7-1293.5-1295.6-1130
Series 1
Sheet1Series
11972-23.41973-14.91974-6.11975-53.21976-73.71977-53.71978-59.21979-40.71980-73.81981-791982-1281983-207.81984-185.4.1985-212.31986-221.21987-149.71988-155.21989-152.61990-2211991-269.21992-290.31993-255.11994-203.21995-1641996-107.41997-21.9199869.31999125.62000236.22001128.22002-157.82003-377.62004-412.72005-318.32006-248.22007-160.72008-458.62009-1,412.702010-1,293.502011-1,295.602012-1,130.00
Chart1-2896-862-146-687-1.3-102-149-473
In millionsColumn1
Sheet1Column1Total-2896Title I-862Teacher Quality-146IDEA State
Grants-687Career, Tech, Adult-1.3Student Aid-102Higher ed-149Head
Start-473
