Congressional Budget Office      Confronting the Nation’s       Fiscal Policy Challenges              September 13, 2011  ...
Real Gross Domestic ProductTrillions of 2005 Dollars, Logarithmic Scale
Net Job Growth per MonthThousands of jobs
Unemployment RatePercent
InflationPercentage change in prices from previous year
Deficits in CBO’s Baseline and Assuming aContinuation of Certain PoliciesPercentage of GDP
Federal Debt Held by the PublicPercentage of GDP
Enforcement Procedures of the Budget Control ActIf no legislation originating from this Committee was enacted,the followin...
Fiscal Policy Choices How much deficit reduction should be  accomplished? How quickly should deficit reduction be  imple...
Federal Revenues and Spending in 2021 UnderCBO’s Baseline or with a Continuation ofCertain Policies
Trade-offs in the Timing of Deficit Reduction Cutting spending or increasing taxes slowly  would lead to a greater accumu...
Near-Term Economic Effects of Deficit Reduction Credible policy changes that would substantially  reduce deficits later i...
Revenues and Spending, Excluding InterestPercentage of GDP
Revenues by SourcePercentage of GDP
Average Federal Tax Rates, by IncomeQuintile,1979 to 2007
Marginal Tax Rates (Income and Payroll) on Earningsfor a Family of Four with a Single Earner, 1971 to 2011Percent
Spending for Social Security, Medicare, andOther Major Health Care ProgramsPercentage of GDP
Other Federal Spending, by CategoryPercentage of GDP
Federal Revenues and Spending Historicallyand in 2021 Under CBO’s Baseline
Cumulative Budgetary Effect of Major IncomeTax Expenditures, 2010 to 2014
ConclusionGiven the aging of the population and rising costs forhealth care, attaining a sustainable federal budget willre...
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Charts from CBO's testimony on Confronting the Nation's Fiscal Policy Challenges

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Charts from CBO's testimony on Confronting the Nation's Fiscal Policy Challenges

  1. Congressional Budget Office Confronting the Nation’s Fiscal Policy Challenges September 13, 2011 Douglas W. Elmendorf Director
  2. Real Gross Domestic ProductTrillions of 2005 Dollars, Logarithmic Scale
  3. Net Job Growth per MonthThousands of jobs
  4. Unemployment RatePercent
  5. InflationPercentage change in prices from previous year
  6. Deficits in CBO’s Baseline and Assuming aContinuation of Certain PoliciesPercentage of GDP
  7. Federal Debt Held by the PublicPercentage of GDP
  8. Enforcement Procedures of the Budget Control ActIf no legislation originating from this Committee was enacted,the following would occur over the coming decade: Reductions in the caps on discretionary appropriations for defense would cut outlays by about $450 billion. Reductions in the caps on discretionary appropriations for nondefense purposes would cut outlays by about $300 billion. Reductions in mandatory spending would yield net savings of about $140 billion. Debt-service costs would decline by about $170 billion.The total reduction in deficits would be about $1.1 trillion.
  9. Fiscal Policy Choices How much deficit reduction should be accomplished? How quickly should deficit reduction be implemented? What forms should deficit reduction take?
  10. Federal Revenues and Spending in 2021 UnderCBO’s Baseline or with a Continuation ofCertain Policies
  11. Trade-offs in the Timing of Deficit Reduction Cutting spending or increasing taxes slowly would lead to a greater accumulation of government debt and might raise doubts about whether the longer-term deficit reductions would ultimately take effect. Implementing spending cuts or tax increases abruptly would give little time to plan and adjust. In addition, and particularly important given the current state of the economy, immediate spending cuts or tax increases would represent an added drag on the weak economic expansion.
  12. Near-Term Economic Effects of Deficit Reduction Credible policy changes that would substantially reduce deficits later in the coming decade and beyond—without immediate spending cuts or tax increases—would both support the economic expansion in the next few years and strengthen the economy over the longer term. There is no inherent contradiction between using fiscal policy to support the economy today, while the unemployment rate is high and many factories and offices are underused, and imposing fiscal restraint several years from now, when output and employment will probably be close to their potential.
  13. Revenues and Spending, Excluding InterestPercentage of GDP
  14. Revenues by SourcePercentage of GDP
  15. Average Federal Tax Rates, by IncomeQuintile,1979 to 2007
  16. Marginal Tax Rates (Income and Payroll) on Earningsfor a Family of Four with a Single Earner, 1971 to 2011Percent
  17. Spending for Social Security, Medicare, andOther Major Health Care ProgramsPercentage of GDP
  18. Other Federal Spending, by CategoryPercentage of GDP
  19. Federal Revenues and Spending Historicallyand in 2021 Under CBO’s Baseline
  20. Cumulative Budgetary Effect of Major IncomeTax Expenditures, 2010 to 2014
  21. ConclusionGiven the aging of the population and rising costs forhealth care, attaining a sustainable federal budget willrequire the United States to deviate from the policies ofthe past 40 years in at least one of the following ways: Raise federal revenues significantly above their average share of GDP; Make major changes to the sorts of benefits provided for Americans when they become older; or Substantially reduce the role of the rest of the federal government relative to the size of the economy.

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