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Pgpf chart book 051310 final Pgpf chart book 051310 final Presentation Transcript

  • The Financial Condition and Fiscal Outlook of the U.S. Government Background Charts May 13, 2010
  • The Foundation’s Research Team prepared this set of charts under the supervision of Susan  Tanaka (former Associate Director and Senior Analyst, Congressional Budget Office, and  Budget Examiner, Office of Management and Budget).  Ann Futrell (former Analyst,  Congressional Budget Office) directed the construction of the charts by Tim Roeper, Kristin  Francoz, and Purnima Anand, and Natasha Caesar assisted with the Team’s efforts.
  • Table of Contents Section Debt and Deficits I Spending II Revenues III Health Care IV Personal Finances V
  • Section I: Debt and Deficits Page Debt held by the public:1800-2010 (percentage of GDP) 1 Debt held by the public: projections through 2080 under current policies (percentage of GDP) 2 Composition of the total debt: debt held by the public and intragovernmental debt (current dollars and percentage of GDP) 3 U.S. public debt including state and local debt (percentage of GDP): 1980-2020 4 U.S. public debt levels compared to other countries (percentage of GDP) 5 Historical deficits: 1800-2010 (percentage of GDP) 6 Deficits: projections through 2080 under current policies (percentage of GDP) 7 Impacts of alternative assumptions on projections of the long-term fiscal gap 8 Little impact on the projected gap between spending and revenues if tax cuts expire and troops are withdrawn from Iraq and Afghanistan (percentage of GDP) 9 The projected, widening gap between spending and revenues (percentage of GDP) 10 Waiting to close the fiscal gap, by using spending cuts or tax increases alone, would lead to more and more difficult choices in the future 11 Projected growth in spending by category compared with projected revenues through 2040 (percentage of GDP) 12
  • Section I: Debt and Deficits (continued) Page Projected growth in spending by category compared with projected revenues through 2040 if interest rates increase by 2 percent (percentage of GDP) 13 Historical Treasury interest rates 14 Impact on projected cost of net interest of a 2 percent increase in interest rates 15 Growth in U.S. dependency on foreign lenders to finance the public debt 16 Largest foreign holders of Treasury securities (February 2010) 17 Foreign purchases of Treasury securities by maturity 18 Historical and projected U.S. net external debt (percentage of GDP) 19 Growth in foreign purchases of Treasury Inflation Protect Securities 20 Fiscal Exposures (75-year present value in trillions of dollars) 21
  • Since 1800, U.S. debt held by public has exceeded 60% of GDP only during World War II 120 WWII 100 Percentage of GDP 80 TARP & Recession 60 Great Depression 40 Civil War WWI 20 0 1800 1830 1860 1890 1920 1950 1980 2010 NOTE: Debt held by the public refers to all federal debt held by individuals, corporations, state or local governments, and foreign entities.  SOURCES: Data from the Congressional Budget Office, Long‐Term Budget Outlook: June 2009; the Government Accountability Office, The  Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update, alternative simulation using Congressional Budget Office  assumptions. Compiled by PGPF. 1-Debt and Deficits
  • Future U.S. debt held by the public is projected to soar if current policies remain unchanged 1,400 1,197% Actual Projected 896% 1,200 Percentage of GDP 652% 1,000 457% 800 303% 600 187% 60 % 400 of GDP 110% 200 0 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 NOTE: Debt held by the public refers to all federal debt held by individuals, corporations, state or local governments, and foreign entities.  SOURCES: Data from the Congressional Budget Office, Long‐Term Budget Outlook: June 2009; the Government Accountability Office, The  Federal Government’s Long‐Term Fiscal Outlook, January 2010 Update, alternative simulation using Congressional Budget Office  assumptions. Compiled by PGPF. 2-Debt and Deficits
  • The total debt includes debt held by the public (domestic and foreign investors) and debt the government owes to various government programs* 14 $ 12.9 Trillion 12 Trillions of Dollars Intragovernmental Debt $4.5 (31%) 10 Debt Held by the Public 8 89 % 6 $ 5.6 Trillion of GDP 4 $2.2 (23%) $8.4 (58%) 57 % 2 $3.4 (35%) of GDP 0 2000 April  30, 2010 *Intragovernmental debt refers to Treasury securities held by federal trust funds (e.g., Social Security and Medicare) and other  government accounts. Debt held by the public refers to any federal debt held by individuals, corporations, state or local governments,  and foreign entities. NOTE:  Totals may not add due to rounding. SOURCES: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget: February 2010, Historical  Tables; and the Department of Treasury, Daily Treasury Statement (April 30, 2010). Compiled by PGPF. 3-Debt and Deficits
  • Within 10 years, the total public debt in the U.S. (including state and local government held debt) is projected to reach Greece’s current debt level 140 120 Percentage of GDP 100 80 60 40 20 0 1980 1990 2000 2010 2020 NOTES: Projected state and local government debt was assumed to be held constant as a percent of the economy at the average of years  2000 to 2009 (14.4%). Public debt here refers to all federal debt held by individuals, corporations, state or local governments, and  foreign entities, in addition to state and local government debt.  SOURCES: Data from the Federal Reserve, Flow of Funds Accounts of the United States; the Government Accountability Office, The  Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update, alternative simulation using Congressional Budget Office  assumptions; and the Congressional Budget Office, Long‐Term Budget Outlook, June 2009. Compiled by PGPF. 4-Debt and Deficits
  • Public debt levels in the U.S are comparable to some of the most financially troubled countries in Europe 2008 2009 2010 140 120 Percentage of GDP 100 80 60 40 20 0 Greece Italy Portugal Ireland Spain United  United  Kingdom States NOTE: All 2009 and 2010 numbers are projections. Public debt here refers to state and local governmental debt as well as debt held by  the public, or all federal debt held by individuals, corporations, state or local governments, and foreign entities.  SOURCE: International data from the International Monetary Fund. U.S. data from the Federal Reserve, Flow of Funds Accounts of the  United States; and the Office of Management and Budget, The 2011 Budget: Historical Tables. Compiled by PGPF. 5-Debt and Deficits
  • Up until the Great Depression, the U.S. experienced more budget surpluses than deficits 35 WWII Deficits (+) and Surpluses (‐)  30 as a Percentage of GDP 25 Great Depression 20 WWI 15 Civil War 10 5 0 ‐5 1800 1830 1860 1890 1920 1950 1980 2010 SOURCES: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February  2010; the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update, alternative  simulation using Congressional Budget Office assumptions; and the Historical Statistics of the United States, Millennial Edition Online,  Cambridge 2006. Compiled by PGPF. 6-Debt and Deficits
  • Under current policies, federal deficits are projected to more than double as a percentage of GDP even after the economy recovers 80 Deficits (+) and Surpluses (‐)  Actual Projected 70 57% as a Percentage of GDP 60 44% 50 33% 40 24% 74% 30 16% 20 10% 10 0 ‐10 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 NOTE: Current policy estimates assume extension of the 2001 and 2003 tax cuts, alternative minimum tax (AMT) exemption amount is  indexed to inflation, Medicare physician payments are not reduced, and discretionary spending grows with GDP.  SOURCES: Data the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February 2010;  and the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update, alternative  simulation using Congressional Budget Office assumptions. Compiled by PGPF. 7-Debt and Deficits
  • Using alternative assumptions would affect projections of the long-term fiscal gap Alternative  Alternative  Alternative  Baseline Assumptions Baseline and alternative Health Care  Productivity  Immigration  assumptions used in projections of the fiscal gap: 10 Fiscal Gap as a Percentage of GDP Excess health care cost 9 growth: Baseline Health care costs per person 8 grow 2% faster than GDP 7 per capita; alternatives are 1% and 0.5%. 6 5 Productivity: Baseline output per hour increases 4 by 2.3% percent per year; alternatives are 2.8% and 3 1.8% 1.0 2 1.8% 0.7 2.0% Mil. 1.3 1% 2.3% 2.8% Mil. Immigration: Baseline is 1 0.5% Mil. 1 million immigrants per year; alternatives are 1.3 0 million and 0.7 million. Excess Health Care Cost  Productivity Growth Rate of Immigration Growth NOTE: The fiscal gap refers to the increase in taxes or reduction in non‐interest spending required to keep the debt‐to‐GDP ratio stable  over the next 75 years.   SOURCE: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytical Perspectives,  February 2010. Compiled by PGPF. 8-Debt and Deficits
  • Elimination of Bush tax cuts and withdrawal of troops from Iraq and Afghanistan would have a small impact on the long-term fiscal gap 40 Historical Projected Primary Spending 0.7% GDP   35 difference  (excluding net interest) in 2080 30 Percentage of GDP 25 20 1.8% GDP  difference  15 Revenues in 2080 10 Primary Spending Revenues 5 Tax cuts expire on schedule End deployment to Iraq and Afghanistan 0 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 SOURCE: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February  2010; the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010, alternative simulation  based on Congressional Budget Office assumptions; and the Congressional Budget Office, Budget Outlook: January 2010. Compiled by  PGPF. 9-Debt and Deficits
  • Over three quarters of the long-term budget gap in 2080 is caused by escalating projected interest costs assuming the baseline interest rate of 5.0% 100 90 Historical Projected 80 Total Spending Percentage of GDP 70 60 Primary Spending Net Interest 74% of (excluding net interest) 57% of 50 GDP GDP 40 30 20 10 Revenues 0 1960 1980 2000 2020 2040 2060 2080 SOURCES: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February  2010; and the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010, alternative  simulation based on Congressional Budget Office assumptions. Compiled by PGPF. 10-Debt and Deficits
  • If we wait to close the fiscal gap, by using spending cuts or revenue increases alone, we would face more and more difficult choices in the future 35 Revenue Increase Spending Cuts 30 64%   25 Revenue  Percentage of GDP 50%  48%  Increase 20 36 %  Revenue  Spending  Spending  Increase Cuts Cuts 15 10 5 0 2010 2030 NOTE: Spending refers to non-interest spending. The amounts shown are the non-interest spending cuts or revenue increases from the projected levels required to close the projected fiscal gap by using only one or the other, not both. The fiscal gap refers to the reduction in spending or increase in revenues required to keep debt-to-GDP no higher than the 2010 level in 2085. SOURCE: Data from the Congressional Budget Office, Long-Term Budget Outlook, June 2009. Compiled by PGPF. 11-Debt and Deficits
  • Without reforms, within 12 years, future revenues will only cover Social Security, Medicare, Medicaid and interest on the debt assuming the baseline interest rate of 5.0% 50 45 Discretionary  40 Spending Revenue 9 % Percentage of GDP 35 2 % Other Mandatory 30 9 % Medicare &  25 2 % 11% Medicaid 9 % 20 9 % 9% 2 % 6% Social Security 15 4 % 6% 6% 10 5% Net Interest 5% 14% 5 5% 1% 9% 5% 0 2010 2020 2030 2040 SOURCE: Data from the Government Accountability Office The Federal Government’s Long‐Term Fiscal Outlook: January 2010, alternative  simulation using Congressional Budget Office assumptions. Compiled by PGPF. 12-Debt and Deficits
  • Without fiscal reforms, federal interest costs alone would consume all projected revenues by 2040 if baseline interest rates rise 2 percent to 7.0%. (The historical interest rate since 1980 is 6.4%.) 50 45 Discretionary  9 % 40 Spending Revenue 2 % Percentage of GDP 35 Other Mandatory 9 % 30 11% Medicare &  2 % Medicaid 25 9 % 9% 6% Social Security 20 9 % 2 % 15 4 % 6% 6% 10 5% 5% 20 % Net Interest 5 5% 12 % 2% 7 % 0 2010 2020 2030 2040 NOTE: The projections use implied CBO interest rates through 2020, and an interest rate of 5.0 percent thereafter. A 2 percent rate  increase would be within historic range for Treasury interest rates. SOURCE: Data from the Government Accountability Office The Federal Government’s Long‐Term Fiscal Outlook: January 2010, alternative  simulation using Congressional Budget Office assumptions. Compiled by PGPF. 13-Debt and Deficits
  • Current Treasury interest rates are low by historical standards 16 3‐ Month 14 10‐Year 12 30‐Year Average Interest Rate 10 Interest Rate: 6.5% over past 8 30 years 6 4 2 0 1980 1985 1990 1995 2000 2005 Apr‐06 NOTE: The U.S. Treasury Department did not offer 30‐year bonds between 2003 and 2006.  SOURCE: Data from the Federal Reserve Statistical Release, Table H.15, Selected Interest Rates, Historical Data, accessed April 14, 2010.  Complied by PGPF. 14-Debt and Deficits
  • A rate increase of just two percent from baseline levels of 5.0 percent have a dramatic effect on interest costs 25 Additional Interest from  20 Rate Increase from 5.0% to  7.0% Percentage of GDP 5.7% Baseline Net Interest of 15 GDP 10 14.1% of GDP 5 0 2010 2015 2020 2025 2030 2035 2040 NOTE: The projections use implied CBO interest rates through 2020, and an interest rate of 5.0 percent thereafter. SOURCE: Data from the Government Accountability Office The Federal Government’s Long‐term Fiscal Outlook: January 2010, alternative  simulation using Congressional Budget Office assumptions. Compiled by PGPF. 15-Debt and Deficits
  • U.S. dependency on foreign lenders to finance the public debt has risen sharply 1970 1990 2010 est. Total Debt: $283 billion Total Debt: $2,412 billion Total Debt: $8,387 billion Foreign Holdings: Foreign Holdings: Foreign Holdings: 19% 47% 5% NOTE: 2010 data reflects debt levels through February 2010.  SOURCES: Data for 1970 and 1990 from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytical  Perspectives, February 2010. Data for 2010 from Department of Treasury, Daily Treasury Statement (February 26, 2010) and Treasury  International Capital Reporting System, April 15, 2010 release.  Compiled by PGPF.  16-Debt and Deficits
  • Foreign holdings of U.S. Treasury securities are concentrated among a few countries Total Foreign February 2010 Holdings: 47% Holdings Holdings (in billions of (as a percent of Country U.S. dollars) total U.S. debt) China $877.5 11% Japan $768.5 10% United Kingdom $233.5 3% Oil Exporters $218.8 3% Brazil $170.8 2% All other countries $1,483.1 19% NOTE: U.S. debt here refers to debt held by the public, or all federal debt held by individuals, corporations, state or local governments,  and foreign entities. All numbers reflect debt levels as of December 2009. SOURCES: Data from the United States Treasury, Treasury International Capital System, Major Holders of Treasury Securities, April 30,  2010. U.S. debt is debt held by the public, U.S. Treasury, Debt to the Penny, February 26, 2010. Compiled by PGPF. 17-Debt and Deficits
  • Foreign purchases of marketable Treasury securities are overwhelmingly in shorter maturities, indicating sizeable interest-rate risk upon rollover 1,200 Billions of Constant 2009 Dollars 30 years 10 Years 1,000 2‐7 Years 1 year or less 800 635 600 400 340 451 200 104 5 182 22 33 0 46 8 2001 2002 2003 2004 2005 2006 2007 2008 2009 NOTE: Purchases reflect gross foreign purchases of  bills (4‐week, 13‐week, 26‐week, 52‐week, and cash‐management bills); notes (2‐ year, 3‐year, 5‐year, 7‐year, and 10‐year) and bonds (30‐year). Data excludes sales of Treasury Inflation Protected Securities (TIPS), and  also is not net of sales.  SOURCE: Data from the U.S. Treasury, Office of Debt Management, Investor Class Auction Allotments. Compiled by PGPF. 18-Debt and Deficits
  • By itself, the U.S. net external debt projection is unsustainable under baseline assumptions and worse if fiscal conditions erode 160 Actual Projected 140 133% 120 “The projected path is so Cline Baseline Projection unsustainable and Percentage of GDP 100 dangerous that a crisis 80 Cline Fiscal Erosion  would virtually be certain to 64% Scenario 60 occur long before the U.S. Historical Data reached such a painful 40 point of reckoning.” 20 William Cline, 0 Peterson Institute for ‐20 International Economics ‐40 1980 1990 2000 2010 2020 2030 NOTE: Displays U.S. net international investment position: a positive number means external  liabilities are greater than external assets.  SOURCE: Bureau of Economic Analysis and  William Cline, “Long‐term Fiscal Imbalances, U.S.  External Liabilities, and Future Living Standards,”  in  C. Fred Bergsten, ed., The Long‐term  International Economic Position of the  United States,  Peterson Institute for International  Economics, 2009.  Compiled by PGPF. 19-Debt and Deficits
  • Growth in purchases by foreign investors of Treasury Inflation Protected Securities (TIPS) reflect concern about U.S. inflation outlook 35 Billions of Constant 2009 Dollars 30 25 190% $29.2 billion increase Or 6.4% of foreign 20 purchases of long-term Treasury securities 15 10 $10.1 billion Or 5.1% of foreign 5 purchases of long-term Treasury securities 0 2000‐2004 2005‐2009 NOTES: Purchases only reflect gross foreign purchases (they exclude gross sales of TIPS by foreign investors). Data reflects TIPS with  maturities of 5, 10, 20 and 30 years; and total long‐term Treasury security purchases reflect securities with maturities of 5‐7, 10, and 30  years. Treasury Inflation Protected Securities were first offered in 1997.  SOURCE: Data from the U.S. Treasury, Office of Debt Management, Investor Class Auction Allotments. Compiled by PGPF. 20-Debt and Deficits
  • Major Fiscal Exposures: Another measure of the federal government’s fiscal condition In Trillions of Dollars 2000 2009 Explicit liabilities $6.9 $14.1 Publicly held debt 3.4 7.6 Military & civilian pensions & retiree health 2.8 5.3 Other Major Fiscal Exposures 0.7 1.3 Commitments & contingencies 0.5 2.0 E.g., Pension Benefit Guaranty Corporation, undelivered orders Social insurance promises 13.0 45.8 Future Social Security benefits 3.8 7.7 Future Medicare benefits 9.2 38.2 Future Medicare Part A benefits 2.7 13.8 Future Medicare Part B benefits 6.5 17.2 Future Medicare Part D benefits -- 7.2 Total $20.4 $61.9 NOTE: Numbers may not add due to rounding. Estimates for Medicare and Social Security benefits are from the Social Security and Medicare Trustees reports, which are as of January 1, 2009 and show social insurance promises for the next 75 years. Future liabilities are discounted to present value based on a real interest rate of 2.9% and CPI growth of 2.8%. The totals do not include liabilities on the balance sheets of Fannie Mae, Freddie Mac, and the Federal Reserve. Assets of the U.S. government not included. Does not include civil service and military retirement funds, unemployment insurance and debt held by other government accounts outside of Social Security and Medicare. SOURCE: Data from the Department of Treasury, 2009 Financial Report of the United States Government. Compiled by PGPF. 21-Debt and Deficits
  • Section II: Spending Page Federal spending: 1900‐2080 (percentage of GDP) 1 Composition of federal spending: 1970, 2010 (est.), and 2040 (est.) 2 Composition of federal spending in 2010 (excluding stimulus package) 3 Historical spending for R&D: 1965‐2009 (percent of total spending) 4 International comparison of countries with highest military expenditure in  5 2008 Historical spending growth by major category: 1950‐2010 (percentage of  6 GDP) Timeline of when projected net interest costs will exceed areas of spending  7 and revenue Projected growth in Medicare, Medicaid and Social Security: 2010‐2080  8 (percentage of GDP) Contributing factors in projected growth for Medicare, Medicaid and Social  9 Security: 2010‐2080 (percentage of GDP)  Historical Social Security trust fund cash flows: 1936‐2009 (percentage of  10 GDP)
  • Section II: Spending(continued) Page Projected Social Security trust fund cash flows: 1970‐2080 (percentage of GDP) 11 Impacts of raising taxable maximum income for payroll taxes on Social Security  12 trust fund cash flows: 2010‐2080 (percentage of GDP) Impacts of balancing Social Security benefits and receipts on the long term fiscal  13 gap: 1990‐2080 (percentage of GDP)
  • Federal spending is projected to soar far above its 50-year average of 20.5 percent of GDP if current policies remain unchanged 100 Historical Projected 90 80 Percentage of GDP 70 62% 60 50 42% 2080 40 92% of  28 %  GDP 30 20 10 0 1900 1920 1940 1960 1980 2000 2020 2040 2060 2080 SOURCES: Data from the Historical Statistics of the United States, Millennial Edition Online, Cambridge 2006, the Office of  Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February 2010, and the Government  Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook, January 2010 Update, alternative simulation using  Congressional Budget Office assumptions. Compiled by PGPF. 1-Spending
  • Mandatory programs − including Social Security, Medicare, Medicaid and other entitlement programs − and interest costs are taking over more and more of the federal budget Total  Total  Total  Mandatory Net Interest Mandatory Net  Mandatory  38% 7% 62% Interest 82% 5% Discretionary 18% Mandatory Net Interest Programs  Discretionary Mandatory 35% 31% Discretionary 38% 62% Programs  Mandatory 57% Programs 47% Total Spending 1970:  Total Spending 2010:  Total Spending 2040:  $900 Billion  $3.5 Trillion (est.)  $12.3 Trillion (est.)  (Constant 2009 Dollars) (Constant 2009 Dollars)  (Constant 2009 Dollars)  SOURCES: Data derived from the Office of Management and Budget, FY 2011 Budget, Historical Tables, February 2010; and the  Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook, January 2010 Update, alternative simulation  using Congressional Budget Office assumptions. Calculated by PGPF. 2-Spending
  • Nondefense discretionary includes many programs that could promote future economic growth 2010 (est.) Net Interest 6% Defense Education 19% 4% Transportation 3% Health* 2% Other 20% Mandatory All Other Programs 55% 11% NOTES: *Discretionary health programs include National Institutes of Health, Center for Disease Control and Prevention, & Indian Health Service.  Spending excludes the 2009 Stimulus package and emergency funding for activities in Iraq and Afghanistan. R&D investment spending over the last  decade has been about 3.1% of GDP, or 15% of the budget, and makes up a large part of non‐defense discretionary spending.  SOURCE: Data from the Congressional Budget Office The Budget and Economic Outlook: Fiscal Years 2010 to 2020, January 2010. Compiled by PGPF. 3-Spending
  • Growth in entitlements has already crowded out important investments such as federal spending for R&D, which has dropped by more than half as a percent of total spending since the late 1960s 35 As a Percentage of Total Spending 30 25 52% decrease  since late 60s 20 15 10 5 0 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 NOTE: Research and development includes spending in major public physical capital, education and training. The top sources of allocations of R&D in the U.S. are Defense systems development, the National Institutes of Health (NIH), education, transportation,  NASA, Nuclear Security Administration (NSA), National Science Foundation (NSF),the Defense Advanced Research Projects Agency  (DARPA), and the Air Force, Army, and Navy.  SOURCE: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February  2010. Compiled by PGPF. 4-Spending
  • U.S. spending on defense exceeds the next largest fourteen defense budgets combined in 2008 700 $581 billion Australia $607 billion 600 Spain Canada 500 Brazil In billions of dollars India Saudi Arabia South Korea 400 Italy U.S.A. Japan 300 Germany Russia 200 UK 100 France China 0 SOURCE: Data from Stockholm International Peace Research Institute, 15 Major Spender Countries in 2008. Compiled by PGPF. 5-Spending
  • Growth in Social Security, Medicare and Medicaid have more than offset declines in defense since the late 1960s 30 25 Percentage of GDP 20 Net Interest 15 All Other Programs 10 Medicare & Medicaid Social Security 5 Defense 0 1950 1960 1970 1980 1990 2000 2010 SOURCE: Data from the Office of Management and Budget, FY 2011 Budget, Historical Tables, February 2010. Compiled by PGPF. 6-Spending
  • Unless current polices change, net interest costs are projected to exceed total federal revenues in 2046 Projected net interest will exceed….. In year Medicaid spending, 1.7% of GDP 2012 Defense spending, 3.6% of GDP* 2017 Medicare spending, 3.9% of GDP 2018 Social Security,  5.4% of GDP 2022 Total Revenues, 18.1% of GDP 2046 *Assumes that troops in Iraq and Afghanistan would be reduced to only 60,000 troops by 2015, and that projected defense  spending would grow at the same rate as GDP thereafter.  NOTE: Net Interest already exceeds most federal budget functions including Science, Space and Technology (250),  Transportation (400), and Education (500).  The projections use implied CBO interest rates through 2020, and an interest  rate of 5.0 percent thereafter. If interest rates rise, projected interest costs will exceed projected program costs earlier. SOURCES: Data from the Congressional Budget Office, Analysis of the President’s Budget: March 2010 and Government  Accountability Office The Federal Government's Long‐Term Fiscal Outlook: January 2010 Update. Compiled by PGPF. 7-Spending
  • Social Security, Medicare and Medicaid, the three largest entitlement programs, are projected to more than double as a percentage of GDP under current policies 30% 25% 4 %  Percentage of GDP of GDP 20% Medicaid 15% 14%  24 %  2% of GDP of GDP Medicare of  10% GDP 3% of GDP 5% 6%  5% of GDP Social Security of GDP 0% 2010 2020 2030 2040 2050 2060 2070 2080 Fiscal Year SOURCE: Data from the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update,  alternative simulation using Congressional Budget Office Assumptions. Compiled by PGPF. 8-Spending
  • Aging drives most of the projected cost growth in Social Security, Medicare and Medicaid until 2054. After that year, excess cost growth of health spending takes over as the leading driver of cost growth. 25 Sources of Projected Growth in Social Security,  Medicare and Medicaid as Percentage of GDP 2054 20 8 %  Effect of Excess Health  of GDP Care Cost Growth 15 4.8% 6%  Effect of Aging 4.8% of GDP 10 In the Absence of  5 Aging and Excess  9%  Health Care Cost  8.9% Growth of GDP 0 2010 2020 2030 2040 2050 2060 2070 2080 Fiscal Year NOTE: “Excess health care cost growth” is the amount growth in age‐ adjusted health care costs per person exceeds the growth in per  capita GDP. SOURCE: Data from the Congressional Budget Office, The Long‐Term Budget Outlook, June 2009. Compiled by PGPF. 9-Spending
  • Since its inception, the Social Security program has experienced more surpluses than deficits 1.0 Social Security Cash Surpluses (+) and  Deficits (‐)  as a Percentage of GDP 0.8 0.6 0.4 0.2 0.0 ‐0.2 ‐0.4 1936 1945 1954 1963 1972 1981 1990 1999 2008 NOTE: Excludes interest earnings.  SOURCE: Data from the Office of Management and Budget, FY 2011 Budget, Historical Tables, February 2010. Compiled by PGPF. 10-Spending
  • In the future, persistent cash deficits are projected for Social Security 1.5 2000 Social Security Surplus 0.9 % of GDP  ($114 Billion*)  Social Security Surpluses /Deficits In Percent of GDP 1 2040 Social Security Deficit 2080 Deficit  1.3 % of GDP  ($342 Billion*)  1.4% of GDP  0.5 ($700  Billion*) 0 ‐0.5 ‐1 ‐1.5 ‐2 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 * In 2009 Dollars. NOTE: CBO projections show negative cash deficits in 2010 and 2011. Excludes interest earnings. SOURCE: Data from the Social Security Administration, Provisions Affecting Payroll Tax Rates: 2009. Compiled by PGPF. 11-Spending
  • Raising the taxable maximum wage level subject to payroll taxes would somewhat increase Social Security cash receipts and reduce projected deficits 1.0 Social Security Surpluses and Deficits In  Savings when raising the  taxable maximum wage level 0.5 Percent of GDP 0.0 ‐0.5 ‐1.0 15%  decrease ‐1.5 2010 2020 2030 2040 2050 2060 2070 2080 NOTE: : Assumes that wage cap for payroll taxes will be raised to include 90 percent of total covered earnings, from $106,800 to $181,500 in 2010.  More recent projections show negative cash deficits in 2010 and 2011. SOURCE: Data from the Social Security Administration, Provisions Affecting Payroll Tax Rates: 2009. Compiled by PGPF. 12-Spending
  • Balancing Social Security benefits and receipts would have a small impact on the long term fiscal gap 40 Historical Projected Primary Spending 1.3% of  35 GDP   (excluding net interest) Change 30 Percentage of GDP 15.6%  25 of GDP   Gap 20 15 Revenues 10 Primary Spending 5 Revenues 0 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 NOTE: Balancing Social Security is defined as having Social Security benefit payments no higher than Social Security payroll tax receipts. SOURCE: Data from the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010; CBO  Analysis of America’s Future Act of 2010. Compiled by PGPF. 13-Spending
  • Section III: Revenues Page Composition of revenues: 2010 1 Composition of revenues: 1935‐2020 (percentage of GDP) 2 Federal revenues: 1970‐2030 (percentage of GDP) 3 Impact on the projected deficit of restoring pre‐2001 tax rates (percentage of GDP) 4 Impact on projected federal revenues of extending 2001 and 2003 tax cuts (percentage of GDP) 5 Top 5 most expensive tax expenditures 6 Top 5 corporate tax expenditures 7 Relative size of the top 5 tax expenditures to large spending areas 8 Median household income tax rates by quintile (percentage of total income) 9 Median individual income tax rates by quintile (percentage of total income) 10
  • Section III: Revenues (continued) Page Share of pre‐tax income and total federal taxes by quintile 11 Share of pre‐tax income for high and low income households 12 International comparison of tax burdens 13
  • Individual income and payroll taxes comprise most of federal receipts 2010: Total Revenues $2,177 billion Corporate Income  Excise Taxes 3% 7% Payroll Taxes 40% Estate and Gift 1% Other Customs Duties 1% 9% Miscellaneous Individual Income  4% Taxes 43% SOURCE: Data from the Congressional Budget Office, Preliminary Analysis of the President’s Budget, March 2010. Compiled by PGPF. 1-Revenues
  • The composition of federal revenues has been relatively constant since the mid-1970s 25 Current Law Actual Projection* 20 1% Percentage of GDP 2% Other Receipts 15 Corporate  6% Income Taxes 10 Social Insurance Taxes 5 11% Individual Income Taxes 0 1935 1945 1955 1965 1975 1985 1995 2005 2015 * The “Current Law Projection” assumes that the 2001 and 2003 tax cuts expire as scheduled. SOURCES: Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February 2010, and  Congressional Budget Office, Analysis of the President’s Budgetary Proposals for FY 2011, March 2010. Compiled by PGPF. 2-Revenues
  • Since 1970, federal revenues have averaged 18 percent of GDP and will return to about that level if the 2001 and 2003 tax cuts are extended 22 Actual         GAO Projected* 20 40‐Year Average Percentage of GDP 18 16 14 0 12 1970 1980 1990 2000 2010 2020 2030 *Projections assume the 2001 and 2003 tax cuts are extended and the alternative minimum tax (AMT) exemption amount is adjusted to  inflation.  SOURCES: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February  2010, and the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update. Compiled by  PGPF. 3-Revenues
  • Restoring pre-2001 tax rates on households earning over $250,000 will have a small impact on projected deficits. 6 5 Percentage of GDP 4 OMB Baseline Deficit  3 5.1% 5.5% 5.1% 4.7% Deficit if Upper‐Income Tax  2 3.9% 3.4% Provisions in FY11 Budget  are Implemented * 1 Deficit if 2001 and 2003  Tax Cuts to Expire for  0 Everyone  2015 2020 SOURCE: Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, February 2010. * Includes expanding/reinstating income tax rates, reinstating the personal exemption phase‐out and limitation on itemized  deductions, and imposing a 20 percent tax rate on capital gains and dividends for taxpayers with income over $250,000 (married) and  $200,000 (single).  4-Revenues
  • Extending the 2001 and 2003 tax cuts would reduce federal revenues by $2.7 trillion between 2011 and 2020 5,000 4,500 4,000 Billions of Dollars 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Revenues Under Current Law Baseline Revenues with Tax Cuts * SOURCE: Data from the Congressional Budget Office, Analysis of the President’s Budget: March 2010 and The Budget and Economic  Outlook, January 2010. Compiled by PGPF. * Includes interactive effects of extending the tax cuts (EGTRRA and JGTRRA) and indexing the AMT (Alternative Minimum Tax)  5-Revenues
  • Tax expenditures, deductions, credits, and other special provisions total an estimated $1 trillion annually and provide substantial benefits that are not counted in the budget Tax Revenue Lost  Top 5 Tax Expenditures (FY2010) 1.  Exclusion of employer provided health insurance from taxable  $262 billion income.* 2.   Exclusion of pension contributions and earnings.** $122 billion 3.   Deduction of mortgage‐interest on a primary residence. $92 billion 4.   Deduction of non‐business state and local taxes (includes $53 billion income, property and sales taxes) 5.   Capital gains (except agriculture, timber, iron ore, and coal).*** $45 billion Total of Top 5 $573 billion *      Includes the exclusion from payroll taxes and income taxes.   **    Includes employer pension plans, employee and employer contributions to 401k plans, IRAs, and Keough plans. *** In addition, the biodiesel producer tax credit results in a $200 million reduction in excise tax receipts in 2010. NOTE: Numbers may not add due to rounding.  SOURCE: Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytic Perspectives, February 2010. 6-Revenues
  • The top 5 corporate tax expenditures, deductions, credits and other special provisions are relatively small compared to the largest tax expenditures Tax Revenue Lost  Top 5 Corporate Tax Expenditures (FY2010) 1.  Deferral of income from controlled foreign corporations $31 billion 2.   Deduction for U.S. production activities $8.8 billion 3.   Credit for increasing research activities $5.8 billion 4.   Deferred taxes for financial firms on certain income earned  $5.5 billion overseas 5. Credit for low‐income housing investments $ 5.4 billion Total of Top 5 $56.4 billion NOTE: Numbers may not add due to rounding.  SOURCE: Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytic Perspectives, February 2010. 7-Revenues
  • The value of the five largest tax expenditures is sizeable relative to major spending programs in 2010 $800 $700 Billions of Dollars $600 $500 $400 $300 $200 $100 $0 Top 5 Tax  Medicare Social Security Defense Expenditures NOTE: Health Insurance, Retirement Saving, Mortgage Interest, and State & Local taxes are categories of spending that reduce taxable  income.  SOURCE: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytic Perspectives, February  2010. 8-Revenues
  • The U.S. tax system has progressive attributes: effective median tax rates rise with income (households by income quintile in 2010) 30 25 27.9% Percent of Income 20 22.2% 18.7% 15 15.5% 10 5 7.9% 1.3% 0 Lowest  Second  Middle  Fourth               Top        Top 1%  Quintile            Quintile  Quintile  Quintile  Quintile  $532,500+ Less than  $17,800‐ $34,800‐ $63,400‐ $104,200+ $17,800 $34,800 $63,400 $104,200 NOTE: Effective federal tax rate is calculated as total federal taxes paid divided by cash income.  Federal taxes include individual and  corporate income tax, and payroll taxes for Social Security and Medicare. SOURCE:  Data from the Tax Policy Center. Compiled by PGPF.  9-Revenues
  • Effective median individual income tax rates are negative or zero for households with incomes below $34,800 20 18.8% Percentage of Total Income 15 10.8% 10 6.4% 5 3.2% 0% 0 ‐5 ‐4.2% ‐10 Lowest Quintile  Second Quintile  Middle Quintile  Fourth Quintile  Top Quintile  Top 1%  <$17,800 $17,800‐ $34,800‐ $63,400‐ $104,200+ $532,500+ $34,800 $63,400 $104,200 SOURCE: Data from the Tax Policy Center. Compiled by PGPF.  10-Revenues
  • High-income households earn a disproportionate share of pre-tax income and pay a disproportionate share of total federal taxes 100 Top 0.5%  (15% ) Top 0.5%  90 (23% ) 80 70 55% Top Quintile      69% $67,400+ 60 Percent Fourth Quintile  50 $45,200‐$67,399 40 20% Middle Quintile   30 $30,500‐$45,199 20 17% 13% Second Quintile    $17,900‐$30,499 10 8% 9% 4% 1% Lowest Quintile          0 4% Less than$17,900 Share of Total Pre‐Tax Income Share of Total Federal Taxes NOTE: Data for 2005 in 2005 dollars. SOURCE: Congressional Budget Office, Historical Effective Tax Rates: 1979‐ 2005: Additional Data on Sources of Income and High‐Income  Households December 2008. Compiled by PGPF. 11-Revenues
  • The share of total pre-tax income has increased for the wealthy but decreased for low income households since 1980 16 14.6 % Percentage of Total Pre‐Tax Income 14 Top 0.5% 12 Lowest Quintile 10 8 6.6 % 6 5.7 % 4.0 % 4 2 0 1980 2005 SOURCE: Data from Congressional Budget Office, Historical Effective Tax Rates, 1979 to 2005: Additional Data on Sources of Income and  High‐Income Households, December 2008. Compiled by PGPF.  12-Revenues
  • Total tax burdens are lower in the U.S. than many other industrial countries 60 50 as a Percentage of GDP 48% Total Tax Revenue  40 43% 30 36% 33% 28% 20 18% 10 0 Sweden France OECD ‐ Total Canada Mexico United  States NOTE: Data for each country is as of 2007.  OECD is the Organization of Economic Cooperation and Development. Total tax revenue  includes federal, state and local. SOURCE: Data from OECD Statistics Extract. Compiled by PGPF. 13-Revenues
  • Section IV: Health Care Page Federal health expenditures: 1960‐2040 (as percentage of GDP) 1 Growth in health care consumption per capita: 1990‐2030 (constant 2009 dollars)  2 Projected health care costs per capita: 2010‐2080 (constant 2009 dollars) 3 International  comparison of health care costs (as percentage of GDP) 4 International comparison of health care costs per capita (U.S. dollars) 5 Selected US health outcomes ranked against other nations 6 International comparison of CT scanners per capita 7 International comparison of MRI units per capita 8 International comparison of angioplasty per 1,000 people 9 International comparison of coronary bypass operations per 1,000 people 10 Growth in U.S. population (65 and older) by age group 11 Comparison of U.S. health care costs per person by age group  12
  • Section IV: Health Care (continued) Page Composition of health care coverage, pre and post enactment of health care reform law 13 Comparison across U.S. states of Medicare costs per person 14 Portion of Medicare spending that go towards services in the last year of life 15 Comparison across U.S. states of number of visits to specialist by Medicare beneficiaries  in last two years of life 16
  • U.S. health expenditures are projected to soar to more than one-third of the economy by 2040 40 Actual         Projected 35 34 % 30 29 % Percentage of GDP 25 22 % 20 17 % 15 13 % 12 % 10 8 % 7 % 5 % 5 0 1960 1970 1980 1990 2000 2010 2020 2030 2040 SOURCE: Data from the Congressional Budget Office, The Long‐Term Fiscal Outlook: June 2009. Compiled by PGPF. 1- Health Care
  • In the future, the share of per capita consumption that is devoted to health care will rise from 24 percent in 2010 to 40 percent in 2030. It was 17 percent in 1990. 40,000 Actual         Projected 35,000 Per Capita Consumption in  30,000 40% Health Spending 2009 Dollars  25,000 24% 20,000 15,000 76% 10,000 60% Non‐Health Spending 5,000 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 Calendar Year NOTE: Total spending is equal to the sum of personal and government consumption as defined by the Bureau of Economic Analysis. SOURCE: Data from the Congressional Budget Office, The Long‐Term Budget Outlook, June 2009. Compiled by PGPF. 2- Health Care
  • Average health care costs per American are projected to soar to over $30,000 in 2050 from $8,064 in 2010 $32,047 35000 (297% increase  from 2010) 30000 Current 2009 Dollars 25000 20000 15000 $8,064 10000 5000 0 2010 2020 2030 2040 2050 Calendar Year SOURCE: Data from the Congressional Budget Office, The Long‐Term Budget Outlook: June 2009; and the U.S. Census Bureau.  Compiled by PGPF. 3- Health Care
  • U.S. health care costs are far higher than those of any other OECD country 18 16% ** 16 14 Percentage of GDP 12 10% 11% 11% 10% 10% 10 9% 9% 9% 8% 8% 8 6 4 2 0 Japan* France Australia Switzerland  Italy Germany Austria Canada UK Sweden US *Japan data from 2006. ** Estimate for the United States in 2010 is 17 percent of GDP. NOTE: Health care costs in 2007, unless otherwise noted. SOURCE: Data from OECD Health Data 2009, November 2009. Compiled by PGPF. 4- Health Care
  • Currently, Americans spend about twice as much per capita on health care than other OECD countries with no appreciable difference in health outcomes 8,000 $7,290 Per Capita Health Care Costs 7,000 6,000 U.S. Dollars 5,000 $4,417 $3,895 4,000 $3,357 $3,588 $3,601 $3,323 $2,992 3,000 $2,581 $2,686 2,000 1,000 0 Japan* France Australia Germany Italy Switzerland  Canada UK US Sweden *Japan data from 2006. NOTE: Per capita health expenditures in 2007, unless otherwise noted. Comparison uses Purchasing Power Parity, which adjusts exchange rates to assume identical price of goods in different countries. SOURCE: Data from OECD Health Data 2009, November 2009. Compiled by PGPF. 5- Health Care
  • Even though the U.S. spends more on health care than other countries, its health outcomes are generally no better Outcome Rank 15% 29% Heart Attacks 9 out of 23 34% 64% U.S. = 4% deaths per 100 people in 2005 Life Expectancy at Birth 24 out of 30 U.S. = 78.1 years in 2006 Infant Mortality 28 out of 30 U.S. = .67% deaths per live birth in 2006 Obesity 14 out of 14 U.S. = 34% over age 15 in 2006 SOURCE: Data from OECD Health Data 2009, November 2009. Compiled by PGPF. 6- Health Care
  • The U.S. has the most CT scanners per capita of any OECD country 40 35 34.0 Per Million Population 30 25 20 18.7 16.7 15 12.0 10.0 10 8.4 7.6 5 0 Canada France Germany Netherlands Switzerland United  United  Kingdom States NOTE: Number of CT scanners in 2006. SOURCE: Data from OECD Health Data 2009, November 2009 and OECD Health Data 2008, December 2008. Compiled by PGPF. 7- Health Care
  • By far, the U.S. has highest number of MRI units per capita of any OECD country 30 25.9 25 Per Million Population 20 14.4 15 10 7.7 8.2 6.7 6.6 5.7 5 0 Canada France Germany** Netherlands* Switzerland United  United States Kingdom *As of 2005. **As of 2006. NOTE: Number of MRI units in 2007, unless otherwise noted. SOURCE: Data from OECD Health Data 2009, November 2009 and OECD Health Data 2008, December 2008. Compiled by PGPF. 8- Health Care
  • The U.S. has more angioplasty operations per capita than any other OECD country other than Germany 600 Per 100,000 Population (in‐patient) 536.1 500 436.8 400 300 190.8 200 135.9 144.6 112.8 93.2 100 0 Canada France Germany Netherlands Switzerland United  United  Kingdom States NOTE: Number of angioplasty operations in 2006. SOURCE: Data from OECD Health Data 2009, November 2009. Compiled by PGPF. 9- Health Care
  • The U.S. has the most coronary bypass graft operations per capita of any OECD country, other than Germany 140 129.1 Per 100,000 Population (in‐patient) 120 100 84.5 80 72.7 58.2 60 43.4 40 30.9 33.8 20 0 Canada France Germany Netherlands Switzerland United  United  Kingdom States NOTE: Number of MRI units in 2006. SOURCE: Data from OECD Health Data 2009, November 2009. Compiled by PGPF. 10- Health Care
  • The size of the population ages 85 and older is expected to triple in size − from 2.4 million to 7.4 million − between 1980 and 2030 70 85+ 7 60 75‐84 50 65‐74 6 24 Millions of People 40 15 5 2 5 30 3 13 10 12 20 8 38 32 10 18 19 22 16 0 1980 1990 2000 2010 2020 2030 SOURCE: Data from the Center for Medicare & Medicaid Services, Office of the Actuary Last Year of Life Study. Compiled by PGPF. 11- Health Care
  • Per capita health care spending by those ages 85+ was 7 times higher than per person spending by those under the age of 65 $30,000  $25,691  $25,000  Health Costs Per Person $20,000  $16,389  $15,000  $10,778  $10,000  $5,276  $3,581  $5,000  $0  All Ages 0‐64 65‐74 75‐84 85+ SOURCE: Data from the Center for Medicare and Medicaid Services, National Health Expenditures: 2008, reflects 2004 data. Compiled by  PGPF. 12- Health Care
  • In 2019, health care reform legislation will lower the number of uninsured Americans primarily through the creation of health insurance exchanges and expanded Medicaid coverage Without Reform After Health Care Reform Act Exchanges 7% Medicaid  Medicaid  Medicare & CHIP & CHIP 17% 10% 15% Medicare 18% Uninsured 16% Employer Uninsured 48% 6% Employer 47% Nongroup  & Other Nongroup  9% & Other 7% NOTE: Nongroup refers to people who purchase health insurance under individual plans. SOURCE: Data from the Congressional Budget Office, Cost Estimate: H.R. 4872, Reconciliation Act of 2010, March 20, 2010 and Centers  for Medicare & Medicaid Services, National Health Expenditures Historical and Projections, 1965‐2019: January 2010. Compiled by PGPF. 13- Health Care
  • Medicare spending per capita varies substantially across the States 14,000 Medicare Spending per Enrollee $11,883 $11,594 $11,697 $11,849 12,000 $10,002 10,000 $7,754 $7,531 $7,493 8,000 6,000 4,000 2,000 0 New  Iowa Florida Louisiana Hawaii Texas New  United  Jersey Mexico States NOTE: Data estimated for 2009 using average annual growth rates from 1991‐2004. SOURCE:  Data derived from the Center for Medicare and Medicaid Services, National Health Expenditures: 2008. Calculated by PGPF. 14- Health Care
  • Almost three out of every ten Medicare dollars is spent for people who are in the last year of life Medicare Spending  In the Last Year of  Life (1999  Decedents) 29% Other Medicare  Spending (1999  Survivors) 71% NOTE: Data in 1999. SOURCE: Data from the Center for Medicare & Medicaid Services, Office of the Actuary Last Year of Life Study. Compiled by PGPF. 15- Health Care
  • The number of visits made to specialists by Medicare beneficiaries in the last two years of life varies by State 35 Medical Specialist Visit per Decedent 30 29.0 25 20.8 20.4 20 15 11.7 10 6.2 6.6 5 0 New Jersey Florida California Oregon Minnesota Massachusetts SOURCE: Dartmouth Atlas Group. Compiled by PGPF.  16- Health Care
  • Section V: Personal Finances Page Poverty levels by age groups: 1970‐2008 (percentage of age  group) 1 Ratio of covered workers to beneficiaries: 1950‐2070 2 International comparison of ratio of those 65 and older  to total work force 3 Historical look at longevity of those 65 and older: 1940‐2080 4 Population 65 and older as a percentage of total population:  1950‐2050 5 Variations in life expectancy at birth by income 6 Japan’s ratio of elderly population rises, national savings declines: 1990‐2010 7 Importance of Social Security benefits to seniors (percentage of total income) 8 Variation in lifetime Social Security benefits by income and by birth cohort 9 International comparison of households savings (percentage of disposable income) 10 Growth in U.S. household debt: 1952‐2009 (percentage of disposable income) 11 U.S. personal savings: 1930‐2009 (percentage of disposable income) 12 Net national savings: 1930‐2009  (percentage of GDP) 13
  • Poverty levels for the young population have remained higher than other age groups and have been on the rise, while the poverty levels for the elderly have declined 25 Under 18 Years 20 Percent in Poverty 15 65 Years and Older 10 18‐64  Years 5 0 1970 1975 1980 1985 1990 1995 2000 2005 2008 SOURCE: Data from the U.S. Census Bureau, poverty statistics. Compiled by PGPF.  1-Personal Finances
  • As the population ages, there will be many fewer covered workers for each Social Security beneficiary 18 16.5 16 Workers per Beneficiairy 14 12 10 8 6 3.7 3.4 4 3.0 2.2 2.1 2.0 2 0 1950 1970 1990 2010 2030 2050 2070 SOURCE: Data from the Social Security Administration 2009 Trustees Report. Compiled by PGPF.  2-Personal Finances
  • Now and in the future, the U.S. population is slightly older than that of emerging countries, but younger than most developed nations United States Brazil Mexico 2010 China 2050 Canada Switzerland UK France Germany Spain Japan Italy 0 20 40 60 80 100 Ages 65+ as Percentage of Total Labor Force SOURCE: Data from the OECD Economic Outlook Volume 2009 Issue 2: December 2009. Compiled by PGPF.  3-Personal Finances
  • As the baby boomers retire, the result will be a nation of Floridas 25 Population 65 and over as a percent of the  21 % 20 % 20 % 20 16 % total population  15 13 % 12 % 13 % 11 % 9 % 10 % 10 8 % 5 0 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 SOURCE: Data from the OECD, Factbook 2009. Compiled by PGPF. 4-Personal Finances
  • At age 65, people today live 50 percent longer on average than in 1940. By 2085, longevity at age 65 is projected to be 80 percent longer than 1940 22 years  24 remaining Historical                 Projected Remaining Years of Life at Age 65 22 20 18 16 14 12 1940 1960 1980 2000 2020 2040 2060 2080 SOURCE: Data from the Social Security Administration, Trustees Report: 2009. Compiled by PGPF. 5-Personal Finances
  • Over the last two decades, improvements in life expectancy at birth have been greater for those with higher socio-economic status 80.0 79.2  (+ 3.4 years) Most Deprived Least Deprived 78.0 Life Expectancy at Birth 76.0 75.8 74.7  (+1.7 years) 74.0 73.0 72.0 70.0 1980‐82 1998‐2000 NOTE: The deprivation index considers 11 different factors, among them education, wealth, occupation, and income. SOURCE: Data from Gopal K. Singh and Mohammad Siahpush, "Widening Socioeconomic Inequalities in U.S. Life Expectancy, 1980–2000," International Journal of Epidemiology, vol. 35, no. 4 (2006), pp. 969–979. Compiled by PGPF. 6-Personal Finances
  • Japan’s example: As the elderly population increases as a share of the population, household savings rate declines 25 23.1% 20 Elderly Population  % of Total Percentage 15 10 Household Savings % of GDP 5 2.6% 0 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 SOURCE: Data from the OECD Economic Outlook Volume 2009 Issue 2: December 2009. Compiled by PGPF.  7-Personal Finances
  • Social Security benefits account for most of low-income seniors’ total income 90 80 As a Percent of Total Income Social Security Benefits  70 60 50 40 81% 79% 30 61% 20 40% 32% 10 15% 0 Total          Lowest Quintile  Second Quintile  Third Quintile  Fourth Quintile  Highest Quintile  (Median  (Median  (Median  (Median  (Median  (Median  $26,350) $10,700) $14,400) $21,600) $31,750) $58,000) NOTE: Data assumes that seniors spend down a portion of their assets to supplement their income in retirement. Total asset levels for  each quintile is imputed based upon total asset income.   SOURCE: Data derived from the Social Security Administration Income of the Population 55 or Older: 2008. Calculated by PGPF.  8-Personal Finances
  • Under current law, the Social Security lifetime benefits for the highest income earners grow faster than those of lower income earners 800,000 Lowest Quintile 700,000 Median Lifetime Benefits,  Middle Quintile 600,000 Highest Quintile In 2009 Dollars 500,000 400,000 300,000 200,000 100,000 0 2005 2015 2025 2035 2045 2055 2065 10‐year Birth Cohort, Turning 65 in Year SOURCE: Data from the Congressional Budget Office Long‐Term Projections for Social Security: June 2009. Compiled by PGPF.  9-Personal Finances
  • Among OECD countries, U.S. has the lowest average household savings rate as a percent of disposable income over 2000-2010 period 35 32% Savings Rate as a Percent of  30 Disposable Income 25 20 15 13% 11% 10% 10 5 4% 4% 3% 0 China* France Germany Italy Japan Canada United  States *Data for China actually reflects average across the period of 2000‐2007. SOURCE: Data from the OECD Economic Outlook Volume 2009 Issue 2: December 2009; CEIC Flow of Funds data, for China. Compiled by  PGPF.  10-Personal Finances
  • U.S. household debt has reached historically high levels as a percent of disposable Income 140 123% Household Debt as a Percentage of  120 Disposable Income 100 80 215%  39% Increase  60 since 1952 40 20 0 1952 1959 1966 1973 1980 1987 1994 2001 2008 SOURCES: Data from the Federal Reserve, Flow of Funds Accounts—Liabilities of Households and Nonprofit Organizations; and Bureau of  Economic Analysis, Personal Income and Its Disposition: February 2010. Compiled by PGPF.  11-Personal Finances
  • Current U.S. personal savings as a percent of disposable income has fallen to historically low levels 30 WWII Percentage of Disposable Income 25 20 15 10 Great  Depression 4.3% 5 0 ‐1.7% ‐5 1930 1940 1950 1960 1970 1980 1990 2000 2009 SOURCE:  Data from Bureau of Economic Analysis, Personal Income and Its Disposition: February 2010. Compiled by PGPF. 12-Personal Finances
  • Current net national savings are at their lowest level since the Great Depression WWII 20 16.1% 15 as a Percentage of GDP Net National Savings  Great  10 Depression 5 0 ‐2.5% ‐5 ‐7.5% ‐10 1930 1940 1950 1960 1970 1980 1990 2000 2009 SOURCE: Data from the Bureau of Economic Analysis, National Income and Product Accounts. Compiled by PGPF.  13-Personal Finances