Understanding the President'ss FY13 Budget

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  • Explain current situation Why use CBO Baseline – current law Historical Averages Deficits as far as the eye can see
  • Tell why we are discussing this
  • Still has annual deficits. Adds to debt. Not even getting to balance or paying off debt
  • What’s driving the debt? Spending on health care. President doesn’t have reform proposals. Discussion about discretionary spending: debt limit; Budget Control Act, Find $1.2 trillion, didn’t find it so automatic sequester But let’s look at what the President is proposing for “savings” – next slide
  • Revise Slide with Gimmicks pulled out to show alternative view on Savings. President’s FY13 Budget states $4.3 trillion in deficit reduction – Leaving aside fact that debt still grows and deficits continue forever: Assumes: $1.6 trillion in savings already enacted savings in BCA $740 billion from drawdown of war – can’t use this for savings $600 billion in interest savings from reducing costs $830 billion from tax cuts expiring on wealthy
  • Just general explanation of tax revenue – revenue breakout Taxes are going to be a big part of this year’s discussion So, where are we? Corporate tax reform --- why we need fundamental tax reform / payroll and individual are more And we have a corporate tax paper as a handout
  • What is tax reform President’s budget would allow Bush era tax cuts and estate tax cuts to expire for upper earners ($250k) – raises $970 billion relative to $4.5 trillion cost of extending all of tax cuts. However, if middle-class tax cuts are extended and AMT is continually patched, this ADDS $3.5 trillion to deficit! Not decrease. In other words, President is assuming a $3.5 trillion tax increase on the middle class. Why we need a proper accounting of our tax system – reform – and stop picking winners and losers
  • Already at tipping point of 90% debt to GDP
  • OMB does not develop long-term fiscal scenarios To wrap up – what does the President’s budget fail to do? Uses gimmicks to achieve “savings” both on the tax and spending side of the budget Fails to provide reform of entitlements Does nothing to change our long-term fiscal outlook – deficits continue and debt climbs to $x trillion
  • Understanding the President'ss FY13 Budget

    1. 1. The President’s FY13 Budget: What You Need to Know Dr. Jason J. Fichtner Senior Research Fellow Mercatus Center February 23, 2012
    2. 2. <ul><li>What we’re going to discuss today: </li></ul><ul><li>Where we are: CBO baseline </li></ul><ul><li>President’s FY13 budget </li></ul><ul><ul><li>Spending, taxes, deficits and debt </li></ul></ul><ul><li>How our debt compares internationally </li></ul><ul><li>The real bottom line </li></ul>Overview
    3. 3. CBO’s Baseline Projection
    4. 4. Overview of President’s FY13 Budget   Table S-1. Budget Totals           (in billions of dollars and as a percent of GDP)                             Totals   2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013-2017 2013-2022     Budget Totals in Billions of Dollars:   Receipts………………………………… 2,303 2,469 2,902 3,215 3,450 3,680 3,919 4,153 4,379 4,604 4,857 5,115 17,167 40,274 Outlays…………………………………. 3,603 3,796 3,803 3,883 4,060 4,329 4,532 4,728 5,004 5,262 5,537 5,820 20,607 46,959 Deficit……………………………….. 1,300 1,327 901 668 610 649 612 575 626 658 681 704 3,440 6,684 Debt held by the public…………………. 10,128 11,578 12,637 13,445 14,198 14,980 15,713 16,404 17,137 17,897 18,678 19,486   Debt net of financial assets……………… 9,170 10,467 11,358 12,023 12,633 13,281 13,894 14,469 15,095 15,753 16,433 17,137   Gross domestic product (GDP)……………. 14,959 15,602 16,335 1,756 18,178 19,261 20,369 21,444 22,421 23,409 24,427 25,488   Budget Totals as a Percent of GDP:   Receipts………………………………… 15.4% 15.8% 17.8% 18.7% 19.0% 19.1% 19.2% 19.4% 19.5% 19.7% 19.9% 20.1% 18.8% 19.2% Outlays…………………………………. 24.1% 24.3% 23.3% 22.6% 22.3% 22.5% 22.2% 22.0% 22.3% 22.5% 22.7% 22.8% 22.6% 22.5% Deficit………………………………… 8.7% 8.5% 5.5% 3.9% 3.4% 3.4% 3.0% 2.7% 2.8% 2.8% 2.8% 2.8% 3.8% 3.3% Debt held by the public………………….. 67.7% 74.2% 77.4% 78.4% 78.1% 77.8% 77.1% 76.5% 76.0% 76.5% 76.5% 76.5%   Debt net of financial assets……………… 61.3% 67.1% 69.5% 70.1% 69.5% 69.0% 68.2% 67.5% 67.3% 67.3% 67.3% 67.2%         Source: President's FY13 Budget, OMB                          
    5. 5. Overview of President’s FY13 Budget
    6. 6. Public Debt Projections
    7. 7. Federal Spending: Medicare/Medicaid and Social Security
    8. 8. President’s Proposed “Savings” Table S-3. Deficit Reduction Since January 2011 (Deficit reduction (-) or increase (+) in billions of dollars)                 2012-2021 2013-2022 Enactment of 2011 full-year appropriations ᵃ……………..…………………………………………. -357 -320     Enactment of 2012 full-year appropriations………………………………......................................... -565 -598     Budget Control Act discretionary caps for 2013 through 2021 ᵇ…………………………………….. -681 -791     PAYGO legislation enacted during the 1st Session of the 112th Congress ᵃ………………………… -7 -11     2013 Budget:   Short-term measures for job growth………………………………………………………………. 354 176 Tax cuts for families, individuals, and businesses c …………….………………............................. 319 352 Reauthorize surface transportation………………………………………………………………... 117 125 Health and other mandatory initiatives……………………………………………………………. -446 -597 Expiration of high income tax cuts………………………………………………………………… -1236 -1433 Other revenue proposals…………………………………………………………………………… -423 -480 Cap Overseas Contingency Operations (OCO) funding…………………………………………... -741 -848 Proposed program integrity cap adjustment for IRS and   Unemployment Insurance, including mandatory savings…………………………………….. -23 -28 Proposed Budget Control Acct disaster relief cap adjustment……………………………………. 6 6 Outlay effects of discretionary policy…………………………………………………………….. -31 -38     Debt service……………………………………………………………………….………………….. -595 -800     Total deficit reduction since January 2011 ………………………… - 4309 -5286     Memorandum, revenue and outlay effects:   Enacted outlay reductions and 2013 Budget spending proposals………………………………… -3136 -3777 Enacted receipt increases and 2013 Budget revenue proposals…………………………………... -1174 -1510 ᵃ Savings totaled through 2021. ᵇ Includes program integrity and the cap adjustment for proposed disaster relief. c Includes the effects of continuing certain expiring provisions through calendar year 2013.
    9. 9. When “Savings” Are Not Savings
    10. 10. When “Savings” Are Not Savings
    11. 11. Federal Revenues by Fiscal Year
    12. 12. A Closer Look at Key Tax Proposals Revenue Proposals Allow 2001/2003 Tax Cuts to Expire for Income Above $250,000 $970 billion Limit Tax Expenditures for High Earners $585 billion Reduce Corporate Tax Preferences $310 billion Other Revenue Increases $240 billion Manufacturing and &quot;Insourcing&quot; Incentives (-$125) billion
    13. 13. U.S. Government Debt
    14. 14. Gross Central Government Debt
    15. 15. Government Central Debt Held by the Public
    16. 16. The Real Bottom Line
    17. 17. <ul><li>Any Questions??? </li></ul>
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