THE CONCORD COALITION presented by Robert L. Bixby, Executive Director THE CONCORD COALITION Fiscal Future: The Challenges Ahead

THE CONCORD COALITION Estate & Gift Taxes ($21 billion) Composition of Projected FY 2010 Federal Government Revenues and Outlays (Deficit: $1.35 Trillion) Interest Domestic* Social Security Medicare & Medicaid Other Entitlements Defense Other Taxes Corporate Taxes Social Insurance Taxes Individual Income Taxes Outlays: $3.52 trillionRevenue: $2.18 trillion *Includes all appropriated domestic spending such as education, transportation, homeland security, housing assistance, and foreign aid. Source: CBO January 2010.

THE CONCORD COALITION 62%31% 7% 40% 15% 45%39% 6% 55% MandatoryDiscretionaryNet Interest Source: Congressional Budget Office, January Mandatory spending is consuming a growing share of the budget

THE CONCORD COALITION Current Policy Trends Lead to Large Sustained Deficits Fiscal Years CBO March 2010 Baseline The Concord Coalition Plausible Baseline adds in the effects of the new Health Care Reform law and assumes that discretionary spending grows at the rate of nominal GDP, that war costs slow gradually, that Medicare physician payment cuts are postponed, and that all expiring tax provisions (including those from the 2009 stimulus package) are extended with AMT relief. Source: Congressional Budget Office, March 2010 and Concord Coalition analysis. Billions of Dollars -$14.6 Trillion Deficit -$6.0 Trillion Deficit

THE CONCORD COALITION CBO Jan BaselinePresident’s Budget Federal Spending vs. Revenues as a Percent of GDP (FY ) CBO January Baseline Compared to the President’s Budget Source: Congressional Budget Office, January 2010 and Office of Management and Budget, Feb Average outlays: 21.0% Average revenues: 18.3% Percentage of GDP ActualProjected

THE CONCORD COALITION Debt Held by the Public as a Percent of GDP Source: GAO Analysis, September 2009 and OMB Historical Tables As a Percentage of GDP ActualProjected World War II 108.6% %

THE CONCORD COALITION Percent of Debt Held by the Public Owned by Foreigners ( ) Source: United States Treasury Department, Treasury Bulletin, December 2009.

THE CONCORD COALITION Interest Costs Go Through The Roof Source: Congressional Budget Office, Jan and Office of Management and Budget, Feb Billions of Dollars

THE CONCORD COALITION Social Security, Medicare, Medicaid and Interest Consume All Federal Revenues in Less Than 15 Years Year Percentage of Revenues Social Security, Medicare and MedicaidInterest Source: Government Accountability Office, February 2010.

THE CONCORD COALITION America’s Population is Aging Population age 65 and Over Source: Social Security and Medicare Trustees’ Report, May Year Percentage of Population Aged 65 and Over

THE CONCORD COALITION Health Care Costs are Rising Faster Than the Economy Source: Congressional Budget Office, June Percentage of GDP Historic Level of Federal Revenues Historic Level of Federal Spending Assumes that health care cost growth will not exceed GDP growth. Assumes that health care cost growth continues at the average rate for the past 40 years (2.5 percentage points greater than GDP growth.) Assumes that health care cost growth rate declines to 1.0 percentage point greater than GDP growth— consistent with the assumption used by the Medicare Trustees.

THE CONCORD COALITION Defense Discretionary Spending as a Percentage of GDP Source: Congressional Budget Office, January As a Percentage of GDP

THE CONCORD COALITION Projected Growth in Entitlement Spending far Greater than Defense Spending Source: Government Accountability Office and Congressional Budget Office.

THE CONCORD COALITION Medicare Costs Soar in the Coming Decades Calendar Year As a Percentage of GDP General Revenues required to fund the program Income from dedicated taxes, premiums, and state transfers Source: Medicare Trustees’ Report, May 2009.

THE CONCORD COALITION Social Security and Medicare Part A Cumulative Cash Surpluses and Deficits In Constant 2009 Dollars — 2009 through 2085 In Billions of Constant 2009 Dollars Calendar Year Source: Social Security Trustees’ Report—May 2009 (Intermediate Projections) $147 Billion: Cumulative Social Security Cash Surplus -$28 Trillion: Cumulative Social Security Cash Deficits -$58 Trillion: Cumulative Medicare Part A Cash Deficits -86 Trillion: Cumulative Social Security and Medicare Part A Cash Deficits

THE CONCORD COALITION Current fiscal policy is on an unsustainable path Federal Outlays as a Percentage of GDP Social Security Medicaid Medicare All Other Interest Source: Government Accountability Office, February Average tax revenue

THE CONCORD COALITION 17 Why Deficits Matter Reduce national savings Increase dependence on foreign lenders Increase burden on future generations: –Through rising debt service costs; –By reducing productivity-enhancing investments Weakened ability to meet contingencies or new challenges

THE CONCORD COALITION 18 Other Costs of Deficits Deficits raise uncertainty about future policies Deficits reduce the government’s flexibility for dealing future contingencies and crises Deficits undermine budget discipline

THE CONCORD COALITION Popular Myths that Impede Action Myth: We can grow our way out of difficult budget choices. Myth: Eliminating waste in government programs will solve the deficit problem. Myth: The deficit problem can be solved by delivering health care more efficiently. Myth: We just need to raise taxes starting with rolling back some or all of the Bush tax cuts. Myth: Cutting taxes will increase revenues.

THE CONCORD COALITION Key Points of Agreement Members of the Fiscal Wake-Up Tour do not necessarily agree on the ideal levels of spending, taxes and debt, but we do agree on the following key points: Current fiscal policy is unsustainable There are no easy solutions, such as cutting waste fraud and abuse or growing our way out of the problem. Finding solutions will require bipartisan cooperation and a willingness to discuss all options. Public engagement and understanding is vital in finding solutions. This is not about numbers. It is a moral issue.