THE CONCORD COALITION The Federal Budget Now and In the Future presented by Joshua Gordon, Policy Director

Composition of Fiscal Year 2013 Federal Budget Revenues and Outlays, in Billions of Dollars (Deficit: $642 Billion) Includes CHIP, spending related to exchanges and subsidies **Includes all appropriated domestic spending such as education, transportation, homeland security, housing assistance and foreign aid. Source: Congressional Budget Office, May Outlays: $3.46 trillion Revenues: $2.81 trillion Interest Domestic** Social Security Medicare & Medicaid* Other Mandatory Defense Estate & Gift Taxes ($19 billion) Individual Income Taxes Social Insurance Taxes Corporate Taxes Other Taxes $809 $1,133

53% 40% 7% 38% 14% 49% 35% 14% 59% MandatoryDiscretionaryNet Interest *Projected Source: Congressional Budget Office, September Automatic Expenditures Are Consuming a Growing Share of the Budget % 62% 6% 2023*

Outlays of Select Mandatory Spending Programs Fiscal Year 2013 projected Source: Congressional Budget Office, February 2013.

Defense Discretionary Spending as a Percentage of GDP Source: Congressional Budget Office, February As a Percentage of GDP Projected

Outlays of Select Non-Defense Discretionary Programs (FY 2012 Projected) Source: Congressional Budget Office, January *includes ground, air, and water Education Transp. Housing Veterans Foreign Aid Natural Science, General Agriculture Energy & Resources Space & Government Nutrition Asst. Technology

Domestic Discretionary Projected to be Cut Dramatically Fiscal Years Source: Congressional Budget Office, January 2011, August 2012 and Concord Coalition analysis. Percent of GDP

Tax Expenditures: The Hidden Entitlement Fiscal Year 2012 Source: Congressional Budget Office and Tax Policy Center, Tax Notes, April 9, Revenues collected from Individual Income and Corporate Taxes Amount of Forgone Revenue in the Individual and Corporate Tax from “Tax Expenditures”

Largest Tax Expenditures Fiscal Years Source: Joint Committee on Taxation, JCS-1-13, February 1, Tax expenditures are any reduction in income tax liabilities that result from special tax provisions or regulations that provide tax benefits to particular taxpayers. These special income tax provisions are referred to as tax expenditures because economically they are considered analogous to direct outlay programs. Billions of Dollars

How Marginal Tax Rates Work: First Calculate “Taxable Income” Gross Income (Wages, Dividends, Capital Gains, Tips, etc.) − Less Certain Deductions (IRA contributions, alimony payments, some educator and student expenses) = Adjusted Gross Income (AGI) − Less Standard Deduction (taken by 70% of taxpayers) Or Itemized Deductions (Charitable Contributions, Mortgage Interest, State & Local Taxes, etc.) = Taxable Income ($100,000 in this case)

How Marginal Tax Rates Work: Only your taxable income in the last “bucket” get taxed at the highest rate. This highest rate also determines the value of your deductions. = $100,000 $8,925 15% Note: 2013 Income Tax Rates/Brackets 35% rate applies to $1,650 of income below $400K

CBO Projected Baseline Federal Spending vs. Revenues as a Percent of GDP CBO Baseline Source: Congressional Budget Office, Percentage of GDP Projected Average outlays: 20.4% Average revenues: 17.4%

Source: Congressional Budget Office, May Interest costs rise sharply under current law Net Interest, in Billions of Dollars,

Percentage of Debt Held by the Public Owned by Foreigners Calendar Years Source: United States Treasury Department, Treasury Bulletin, Table OFS-2, December Percentage of Ownership of Publicly-Held Debt

The Sources of Growth in Federal Spending Source: CBO Alternative Fiscal Scenario, 2013 Medicare Medicaid Social Security All Other Spending Interest Medicaid, CHIP, Exchange Subsidies

Effects of aging and health care spending on the federal budget. Source: Congressional Budget Office, June 2010 & Percent of Growth Attributed to: Health Care Cost Growth36%56% Aging64%44%

America’s population is aging. Percentage Change in the Increase in Working-Age and Elderly Population, Increase in Working Age Population Increase in Population Aged 65 and Over

Americans are Living Longer and Having Fewer Children Consequently, fewer workers are available to support each Social Security recipient 1960: 5.1 to 1 Today: 2.9 to : 2.1 to 1 Source: Social Security and Medicare Trustees’ Report, 2012.

Social Security Promised Benefits Exceed Dedicated Tax Revenues Source: Social Security Trustees’ Report—May 2012 (Intermediate Projections). Social Security Outlays Payroll Tax & Taxation of Benefits Percent of GDP Calendar Year Cash Deficits Rise to 1.5% of GDP and Stabilize

Medicare Costs Under Alternative Scenarios Calendar Year As a Percentage of GDP Current Law Alternative Physician projection Source: Medicare Trustees’ Report, May, Full Alternative projection

America is on an Unsustainable Fiscal Path Debt Held by the Public, as a Percent of GDP, Source: CBO’s Long Term Outlook Extended Alternative Scenario, As a Percentage of GDP ActualProjected World War II 106% %

Looking at the Simpson-Bowles Commission Report