This document provides a summary of a presentation by the Congressional Budget Office on the federal budget. It discusses CBO's responsibilities, products, and projections for revenues, outlays, deficits, and debt over the next decade. It also notes that given an aging population and rising healthcare costs, attaining a sustainable budget will require higher revenues, lower spending on major programs like Social Security and Medicare, or a combination of both compared to current policies.
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Overview of the Federal Budget
1. Congressional Budget Office
Overview of the Federal Budget
April 25, 2014
Barry Blom
Principal Budget Analyst, Projections Unit
This presentation provides 10-year budget projections published in Updated Budget Projections:
2014 to 2024 (April 2014), www.cbo.gov/publication/45229, economic forecasts from The Budget and
Economic Outlook (February 2014), www.cbo.gov/publication/45010, and longer term budget
projections based on 10-year budget projections from May 2013 from The 2013 Long-Term Budget
Outlook (September 2013), www.cbo.gov/publication/44521.
Presentation to the Maryland Association of CPAs, Inc.
2. 1C O N G R E S S I O N A L B U D G E T O F F I C E
CBO’s History and Mission
■ Formed under the Congressional Budget and Impoundment
Control Act of 1974
■ Provides objective, timely, and nonpartisan analysis for budget
and economic decisions
■ Most work supports the activities of committees rather than
individual Members of Congress
3. 2C O N G R E S S I O N A L B U D G E T O F F I C E
CBO’s Organization and Staffing
■ CBO has about 225 full-time employees.
■ The director is appointed by the Speaker of the House and the
President pro tempore.
■ The director appoints all CBO staff based solely on professional
competence, not political affiliation.
■ Over 70 percent of CBO’s professional staff have advanced
degrees in economics, public policy, or a related field.
4. 3C O N G R E S S I O N A L B U D G E T O F F I C E
CBO’s Responsibilities
CBO Helps Congress to:
■ Develop a budget plan
■ Stay within its budget plan
■ Assess the impact of federal mandates
■ Consider issues related to the budget and to economic policy
5. 4C O N G R E S S I O N A L B U D G E T O F F I C E
CBO’s Products
■ Annual baseline
■ Analysis of the President’s budget
■ Cost estimates
■ Scorekeeping tabulations
■ Long-term budget outlook
■ Budget options
■ Reports and testimony on budget and economic issues
6. 5C O N G R E S S I O N A L B U D G E T O F F I C E
What CBO Does Not Do
■ Make policy recommendations
– Strictly nonpartisan; no judgments about a legislative proposal’s merits
■ Write legislation
– Instead evaluates different proposals and options
■ Implement programs and regulations and enforce budget rules
– The executive branch does that
■ Audit spending or receipts
– GAO does that
7. 6C O N G R E S S I O N A L B U D G E T O F F I C E
Budget Totals, 2009, 2013 - 2015
Billions of Dollars Percentage of GDP
Actual,
2009
Actual,
2013
Baseline Actual,
2009
Actual,
2013
Baseline
2014 2015 2014 2015
Total Revenues 2,105 2,775 3,032 3,305 14.6 16.7 17.6 18.2
Total Outlays 3,518 3,455 3,523 3,774 24.4 20.8 20.4 20.8
_______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________
Total Deficit -1,413 -680 -492 -469 -9.8 -4.1 -2.8 -2.6
8. 7C O N G R E S S I O N A L B U D G E T O F F I C E
Total Deficits or Surpluses
(Percentage of gross domestic product)
1974 1979 1984 1989 1994 1999 2004 2009 2014 2019 2024
-10
-8
-6
-4
-2
0
2
4
Surpluses
DeficitsAverage Deficit,
1974 to 2013
(-3.1%)
Actual Projected
9. 8C O N G R E S S I O N A L B U D G E T O F F I C E
Total Revenues and Outlays
(Percentage of gross domestic product)
1974 1979 1984 1989 1994 1999 2004 2009 2014 2019 2024
0
4
8
12
16
20
24
28
0
4
8
12
16
20
24
28
Outlays
Revenues
Average Outlays,
1974 to 2013
(20.5%)
Average Revenues,
1974 to 2013
(17.4%)
Actual Projected
10. 9C O N G R E S S I O N A L B U D G E T O F F I C E
GDP and Potential GDP
(Trillions of 2009 dollars)
11. 10C O N G R E S S I O N A L B U D G E T O F F I C E
Actual Values and CBO’s Projections of Key Economic
Indicators (as of February 2014)
12. 11C O N G R E S S I O N A L B U D G E T O F F I C E
Revenues, by Major Source
(Percentage of gross domestic product)
1974 1979 1984 1989 1994 1999 2004 2009 2014 2019 2024
0
2
4
6
8
10
0
2
4
6
8
10
Social Insurance
(Payroll) Taxes
Other Revenue Sources
Individual
Income Taxes
Corporate
Income Taxes
Actual Projected
13. 12C O N G R E S S I O N A L B U D G E T O F F I C E
Revenues, Tax Expenditures, and Selected
Components of Spending in 2014 (February 2014 baseline)
(Percentage of gross domestic product)
Individual
Income
Tax Revenues
Social Insurance
Tax Revenues
All Other
Revenues
All Tax
Expenditures
Medicare Spending
Net of
Offsetting Receipts
Defense
Spending
Social Security
Spending
0
2
4
6
8
10
Corporate Income Tax Expenditures
Social Insurance Tax Expenditures
Individual Income Tax Expenditures
14. 13C O N G R E S S I O N A L B U D G E T O F F I C E
Projected Spending in Major Budget Categories
(Percentage of gross domestic product)
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
0
1
2
3
4
5
6
7
0
1
2
3
4
5
6
7
Major Health Care Programs
Social Security
Other Mandatory Spending
Defense
Discretionary Spending
Nondefense
Discretionary Spending
Net Interest
15. 14C O N G R E S S I O N A L B U D G E T O F F I C E
Spending and Revenues Projected in CBO’s Baseline,
Compared with Levels in 1974
(Percentage of gross domestic product)
2024
2014
1974 3.7
4.9
5.6
1.0
4.8
5.9
2.7
2.5
2.2
17.7
17.6
18.3
-0.4
-2.8
-3.7
Social
Security
Major Health Care
Programs
Total Revenues Deficit
2024
2014
1974 1.4
1.3
3.3
Net Interest
Other
Mandatory
Spending
5.4
3.4
2.7
Defense
Discretionary
Spending
3.9
3.4
2.5
Nondefense
Discretionary
Spending
18.1
20.4
22.1
Total Outlays
16. 15C O N G R E S S I O N A L B U D G E T O F F I C E
Projected Debt Held by the Public and Net Interest
Outlays
(Billions of dollars)
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
0
100
200
300
400
500
600
700
800
900
0
5,000
10,000
15,000
20,000
25,000
Net Interest Outlays (Left scale)
Debt Held by the Public (Right scale)
17. 16C O N G R E S S I O N A L B U D G E T O F F I C E
Federal Debt Held by the Public
(Percentage of gross domestic product)
1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
0
20
40
60
80
100
120
0
20
40
60
80
100
120
Actual Projected
18. 17C O N G R E S S I O N A L B U D G E T O F F I C E
Why Does Rising Federal Debt Matter?
■ High interest costs boost budget deficits and make it more
difficult to meet any chosen targets for budget deficits and
debt.
■ Crowding out of saving and investment lowers future output
and income relative to what would otherwise occur.
■ The ability of the government to respond to future challenges
is reduced.
■ The risk of a sharp jump in interest rates (perhaps related to
flight from U.S. Treasuries or U.S. assets more generally) is
heightened.
19. 18C O N G R E S S I O N A L B U D G E T O F F I C E
Population Age 65 or Older as a Share of the Population
Ages 20 to 64
(Percent)
2000 2005 2010 2015 2020 2025 2030 2035
0
10
20
30
40
0
10
20
30
40
Actual Projected
20. 19C O N G R E S S I O N A L B U D G E T O F F I C E
Spending for Social Security Under CBO’s
Extended Baseline
(Percentage of gross domestic product)
2000 2005 2010 2015 2020 2025 2030 2035
0
1
2
3
4
5
6
7
0
1
2
3
4
5
6
7
Actual Projected
21. 20C O N G R E S S I O N A L B U D G E T O F F I C E
Federal Spending on Major Health Care Programs, by
Category, Under CBO’s Extended Baseline
(Percentage of gross domestic product)
22. 21C O N G R E S S I O N A L B U D G E T O F F I C E
Conclusion
Given the aging of the population and rising costs for health care,
attaining a sustainable federal budget will require the United
States to deviate from the policies of the past 40 years in some
combination of the following ways:
■ Letting revenues rise more than they would under current law
■ Reducing spending for large benefit programs below the
projected amounts
Changes in spending for other federal activities could affect the
magnitude of the changes needed in taxes or large benefit
programs, but would not eliminate the need to make such
changes.