Restoring fiscal sanity and effective paths forward in the public sector

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Restoring fiscal sanity and effective paths forward in the public sector

  1. 1. Comeback America: The Nation’s Fiscal Challenge and A Way Forward Webinar Hooks Books with Government Information Group Bridgeport, CT November 3, 2011 Hon. David M. Walker Founder and CEO The Comeback America Initiative and Former Comptroller General of the United States
  2. 2. Growth of Government 1800 2011 2040 US GDP: $9.25 Projected US GDP: $15.24 Projected US GDP: $29.7 Billion Trillion Trillion (Constant 2011 Dollars) (Constant 2011 Dollars) (Constant 2011 Dollars)Source: Historical Statistics of the United States, Millennial Edition On Line, Cambridge 2006; CBO, The Budget and Economic Outlook: An Update, August 2011;CBO, CBO’s Long-Term Budget Outlook, Supplemental Data, June 2011. Compiled by TCAII.Note: Federal Spending for 2040 is based on the Alternative Scenario Estimates. 2
  3. 3. Composition of Federal Spending (% of Total Outlays) Defense Other Discretionary Medicare and Medicaid Social Security Other Mandatory Net Interest 7% 6% 20% 12% 12% 42% 15% 20% 19% 4% 20% 23% 307 % Growth in 1970 2010 Dollars 2010 ($944 Billion) ($2.901 Trillion)Source: CBO, Budget and Economic Outlook: Fiscal Years 2011 Through 2021, Historical Tables. Compiled by TCAII. Note: All numbers are in constant 2010 dollars . 3
  4. 4. Federal Spending & the Political Party in Power $3,500 Democratic Controlled Congress Republican Controlled Congress Patient Protection and Affordable Care Split Congress Republican President Act of 2010 America Recovery and Democratic President Reinvestment Act of 2009 $3,000 Medicare Prescription Drug, Improvement, and Modernization Act of 2003and the Invasion of Iraq End of Statutory Budget Controls 2002 $2,500 Billions of Constant 2005 Dollars Deficit Reduction Act of 1993 2001 Invasion Budget Enforcement of Afghanistan $2,000 Act of 1990 Gramm-Rudman-Hollings Balanced Budget and Emergency Deficit Control Act of 1985 $1,500 End of WWII Social Security Act of 1965 (Medicare) $1,000 Korean Conflict Vietnam Conflict 1950-53 1960-75 $500 $0 1945 1947 1949 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Fiscal YearsSource: OMB, Budget, Historical Tables, Table 1.3—Summary of Receipts, Outlays, and Surpluses or Deficits (−) in Current Dollars,Constant (FY 2005) Dollars, and as Percentages of GDP: 1940–2016. Compiled by TCAII. 4
  5. 5. Federal Revenues & the Political Party in Power $3,000 Democratic Controlled Congress Republican Controlled congress Jobs and Growth Tax Economic Growth and Tax Relief Reconciliation Relief Reconciliation Split Congress Democratic President Act of 2003 Act of 2001 & & Republican President Invasion of Afghanistan Invasion of Iraq $2,500Billions of Constant 2005 Dollars $2,000 Omnibus Budget Reconciliation Act Tax Reform Act of 1986 of 1993 Economic Recovery Tax Act of 1981 $1,500 Revenue Act of 1964 $1,000 Vietnam Conflict End of WWII 1960-75 Korean Conflict 1950-53 $500 $0 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Fiscal Years Source: OMB, Budget, Historical Tables, Table 1.3—Summary of Receipts, Outlays, and Surpluses or Deficits (−) in Current Dollars, Constant (FY 2005) Dollars, and as Percentages of GDP: 1940–2016 5
  6. 6. Federal Debt Burdens 6
  7. 7. Growing Foreign Depends 7
  8. 8. Federal Financial Hole (For Fiscal 2000 and 2010) In Trillions of Dollars 2000 2010Explicit Liabilities $ 6.9 $16.4 •Publicly Held Debt 3.4 9.1 •Military & Civilian Pensions & Retiree Health 2.8 5.7 •Other Major Fiscal Exposures 0.7 1.6Commitments & Contingencies 0.5 2.1 E.g. Pension Benefit Guaranty Corporation, Undelivered Orders Actuarys Trustees’ Alternative Estimates ScenarioSocial Insurance Promises 13.0 30.8 43.1 •Future Social Security Benefits 3.8 8.0 8.0 •Future Medicare Benefits 9.2 22.8 35.1 Future Medicare Part A Benefits 2.7 2.7 7.3 Future Medicare Part B Benefits 6.5 12.9 20.6 Future Medicare Part D Benefits - 7.2 7.2Total $20.4 $49.3 $61.6 SOURCE: Data from the Department of Treasury, 2010 Financial Report of the United States Government. NOTE: Estimates for the Actuary’s Alternative Scenario are found in note 26 of the 2010 Financial Report of the United States. 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. Actuary 2011 alternative scenario estimates for unfunded Medicare liabilities are $37 Trillion (Part A: $8.5; Part B: $21; Part D: $7.5) 8
  9. 9. Fiscal Gap 2011 (After Debt Ceiling Increase) 4,000 Mandatory spending and net interest are equal to about 97% of total revenue. $3,597 Billion This means there is only 3% of federal revenues left to cover all discretionary 3,500 Discretionary 3,000 Spending $1,353 BillionBillions of U.S. Dollars 2,500 $2,314 Billion 2,000 1,500 Mandatory $2,023 Billion 1,000 Spending 500 0 Net Interest $221 Billion Outlays Revenues Source: Congressional Budget Office, Budget and Economic Outlook: An Update, August 2011, Budget Projections, Table: 1.2. Compiled by TCAII. 9
  10. 10. Total Federal Debt & the Political Party in Power Democrat Controlled Congress Republican Controlled Congress Split Congress Republican President Democratic President $50,000 As of 12/31/2010 $45,426 $45,000 $40,000 $35,000Real 2010 Dollars $30,000 $25,000 End of WW2 $22,183 $20,000 $15,000 $10,000 $5,000 $0 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 SOURCES: U.S. Census Bureau, U.S. Department of Treasury, U.S. Bureau of Labor Statistics, U.S. House, and U.S. Senate. Compiled by TCAII NOTE: All amounts are adjusted for inflation and in 2010 Dollars. Federal Debt is the total public debt outstanding and intragovernmental holdings. 10
  11. 11. Fiscal Fitness Index: Overall Results (Best to Worst) 1. Australia 18. Mexico 2. New Zealand 19. Israel 3. Estonia 20. Slovenia 4. Sweden 21. Austria 5. China 22. Finland 6. Luxembourg 23. France 7. Chile 24. Spain 8. Denmark 25. Germany 9. United Kingdom 26. Belgium 10. Brazil 27. Italy 11. Canada 28. United States 12. India 29. Hungary 13. Poland 30. Ireland 14. Netherlands 31. Japan 15. Norway 32. Iceland 16. Slovakia 33. Portugal 17. Korea 34. GreeceSource: CAI & Stanford University’s Schools of International Policy Studies and Public Policy Program, Sovereign Fiscal Responsibility Index. 11
  12. 12. Comparative Health Costs 9,000 $7,960 8,000 The United States spends more than double the OECD average with below average health care results. 7,000Per Capita Health Care Costs 6,000 U.S. Dollars 5,000 $4,363 $4,218 $3,978 4,000 $3,722 $3,361 $3,487 $2,983 3,000 2,000 1,000 0 OECD Average Canada France Germany New Zealand Sweden United Kingdom United States Source: Organization for Economic Cooperation and Development, OECD Health Data 2011. Compiled by TCAII. Note: Per capita health expenditures for 2009 uses purchasing power parity for all dollar amounts. 12
  13. 13. Relative Defense Spending The United States spent more on defense in 2010 than the other 14 highest defense budgets combined. The Majority of which are our allies $698 Billion 700 $646 Billion Turkey Canada 600 Australia In Billions of Constant 2009 Dollars South Korea Brazil 500 Italy India Germany 400 Saudi Arabia Japan 300 U.S.A Russia 200 France United Kingdom 100 China 0SOURCE: Stockholm International Peace Research Institute, SIPRI Military Expenditure Database 2011. Compiled by TCAII. 13
  14. 14. Federal Revenue Composition Total Revenue in 2011 $2.3 Trillion Individual Income Taxes Excise 47% 3% Corporate Income Tax 8% 0 Estate and Gift 1% Other 9% Custom Duties 1% Miscellaneous 4% Payroll Taxes 35%Source: Congressional Budget Office, The Budget and Economic Outlook: An Update, August 201.Note: New figures for the components of other spending were not published. The same percentage of revenues for these figured is assumed from the June 2011 CBO report. 14
  15. 15. Progressive Tax System 15
  16. 16. Effective Tax Rates 16
  17. 17. Key Systemic Challenges• Expansion of government at all levels• Health Care Costs• Retirement Income Costs• Disability and Welfare Related Costs• Critical Infrastructure Needs• Education Costs• Corrections Costs• Outdated and Inadequate Revenue Systems• Myopia, Tunnel Vision, Special Interests and Self-Interest. 17
  18. 18. CAI’s Fiscal FrameworkScope of CAI’s illustrative Fiscal Frameworks:• Budget Controls and Process Reforms• Social Security• Medicare, Medicaid, and Healthcare• Defense and Other Spending• Comprehensive Tax Reforms• Constitutional Amendments 18
  19. 19. Feasibility TestFiscal Reforms Must Meet a Feasibility Test: 1) Do they make economic sense? 2) Are they socially equitable? 3) Are they culturally acceptable? 4) Do they pass a math test? 5) Are they politically feasible? 6) Can they achieve significant bipartisan support? 19
  20. 20. Transforming Government (Basic Questions for Policies & Programs)• When & why was it created?• Have conditions changed, and have we adapted?• How are we measuring success, and are we achieving desired outcomes?• Are there multiple programs, and if so are they working in an integrated manner?• Are we using the experience of others (e.g., countries, states) to replicate success and avoid mistakes?• Can we afford and sustain it in its present form? 20
  21. 21. Baselines Matter Presidents "Adjusted CBO August Baseline" "Current Policy" Baseline With Automatic Cuts Current Law Baseline Without Automatic Cuts Current Law Baseline With Automatic Cuts $12,000 $10.6 Trillion $10,000 $9.3 TrillionCumulative Deficit ($ Billions) $8,000 $6,000 $4.7 Trillion $4,000 $3.5 Trillion $2,000 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Source: Congressional Budget Office, Budget and Economic Outlook August 2011. ―Current law baseline with automatic cuts‖ assumes $1.2 in automaticcuts due to the Budget Control Act of 2011 provisions. ―Current Policy‖ Baseline assumes a continuation of certain policies that are not written into currentlaw, including the extension of expiring tax provisions from Bush/Obama tax cuts, indexing the Alternative Minimum Tax for Inflation, maintainingMedicare payment rates, and a reduction in troops deployed for overseas in Afghanistan to 45,000 by 2015. President’s ―Adjusted CBO August Baseline‖ isfrom ―Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction‖ September 2011. 21
  22. 22. The Super Committee• The Super Committee must first decide how it will keep score: Current Law Baseline, or Current Policy Baseline• It should then focus its recommendations on the following: – Meeting or exceeding the established deficit-reduction target – Helping generate economic growth and reducing unemployment – Facilitating greater deficit-reduction progress from 2012 through 2013
  23. 23. Public Approval of Congress “Do you approve or disapprove of the way Congress is handling it’s job?” 100 90 84% Approval After Sept 11th 84% Disapproval in August after 80 Debt Ceiling Debate 70 Percentage 60 50 Approve Dissaprove 40 30 20 13% Approval in August after Debt 10 Ceiling Debate 0 1974 2011Source: Gallup/Newsweek. Compiled by TCAII. 23
  24. 24. What Can You Do?• Educate others using the Fiscal Facts prepared presentation and notes• For further information about: – Non-partisan facts and possible solutions on fiscal sustainability Sign up at The Comeback America Initiative’s website www.TCAII.org – Providing progress over partisanship sign up at No Labels website www.NoLabels.org• Encourage other to check out these sites and sign up 24
  25. 25. Questions? 25

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