The Math of the U.S. Budget

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A non-political, mathematical dive into the U.S. Budget gave me a clearer view of a key hidden cause, and the path toward a surprisingly easy fix. Here is what I found.

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The Math of the U.S. Budget

  1. 1
  2. Federal Gov’t Medicare/Medicaid $579,189,772,239 $791,009,579,504 16% 22% Military$668,109,289,531 Social Security 19% $743,102,667,904 21% Federal Pensions $213,030,279,609 6% Income Security Programs Interest $365,605,593,228 $225,030,279,630 10% 6% 2
  3. In 2012, the U.S. Spent $3.5 Trillion and Borrowed $1.2 Trillion $3.5 Trillion Tax Revenue $2.3 Trillion Deficit Spent $1.2 Trillion The Deficit is our shortfall -- $1.2 Trillion The Debt is what we owe -- $16 Trillion 3
  4. Remove 8 zeroes 2012 U.S. 2012 Like a family Income $2,300,000,000,000 Income $23,000 MinusMinus Expense $3,500,000,000,000 $35,000 Expense OverEquals Deficit $1,200,000,0000,000 $12,000 Spending Credit Debt $16,000,000,000,000 $160,000 Card Debt $34,150 Post-Sequester 4
  5. 2012 Per Person Population 314 Million A baby born today inheritsIncome $7,637 $51K of Debt per Capita Minus $11,456ExpenseEquals ($3,819) Deficit Debt $50,915 5
  6. 2012 Per Person Population 314 MillionIncome $7,637 Sequester: Reduces the Deficit $270/capita – a drop in the bucket. Minus $11,456ExpenseEquals ($3,819) Deficit Debt $50,915 6
  7. 2001: Debt $5.6T. 4thconsecutive Surplus - $127B2002-08: Deficits $150B-$450B2009: 1st Deficit >$500B, $1.4T2012: 2/3rds of today’s Debtracked up in last 10 years Last 5 year borrowings exceed prior 231 years 7
  8. What To Do? “Dont find fault, find a remedy.” -Henry Ford 8
  9. Presidential Commission to identify…“policies to improve the fiscalsituation…and achieve fiscalsustainability over the long run.”
  10. 1. Achieved non-interest Breakeven in 20152. Chained CPI for all indexed programs3. Discretionary spending caps into law4. Less interest cost, by borrowing less5. $2 spending cuts / $1 new revenue6. Medicare cost share, tort reform7. SS Retirement age 68 in 2050 Nothing has been done with the8. Reduce farm subsidies recommendations
  11. A Huge Hidden Variable…61 65 79 Retiree Eligibility Ages have not increased with longevity 11
  12. Retiree Eligibility Ages have not increased with longevity • Life expectancy - 61 U.S Life Expectancy1935 • Social Security - 65 90 1935-2012 80 79 70 • Medicare - 65 60 611965 50 40 • Life expectancy - 79 30 • Eligibility - still 65,2013 w/ early option at 62 20 10 0 19… 19… 19… 19… 19… 19… 19… 19… 20… 20… National Center for Health Statistics Age 84 is today, what 65 was in 1935 12
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  14. Interest Income Security 6% Programs 10% Federal Pensions, 6% Medicare/Medicaid,Federal Gov’t. Retiree Programs 22% 16% 49% Social Security, 21% Military 19% 14
  15. Income SecurityFederal Gov’t. 16% Programs 10% Interest 6% Federal Pensions 6% Off the Table Medicare/Medicaid 65% 22% Social Security 21%Military 19% 15
  16. 2012 Tax Revenue -> $2,372,150,920,694 Medicare/Medicaid $791,009,579,504 Sources $3.5T Social Security $743,102,667,904 Tax Deficit Revenue 34% On the Table Military $668,109,289,531 66% Sequester Federal Gov’t. $579,189,772,239 Income Security $365,605,593,228 Uses $3.5T Interest $225,030,279,630If rates increase 2 points as debt Federal Pensions $213,030,279,609 35% 65%spirals > $20 T, Interest cost will On Off soar. CBO projects “interest to Minus Expenses $3,585,077,461,645 Table Table exceed military in 2017”. 2012 Deficit ($1,212,926,540,951) 16
  17. 1) Except for Interest, put all expenses On the Table.2) Graduate qualifying retiree ages and benefits. Use Actuaries versus One Size Fits All.3) Bring Simpson-Bowles up for Debate/Edit/Vote.4) Hurry. 17
  18. 1. Individuals pay 91% of tax revenue, corporations 9%2. 37% of income tax paid by the top 1% of income earners3. A tax rate of 100% on the top 1% funds the negative for 2 months4. 80% of tax is paid by the top 25%, households earning >$66k5. 117 Million Households in the U.S. 47% paid no Income Tax in 20126. 100 million (1/3rd of population) are enrolled in Medicare/Medicaid7. 62 million receive Social Security benefits8. 25 million receive Income Support9. U.S. borrows $300 per person/month 18

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