Restoring fiscal sanity and effective paths forward in the public sector
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Transcript of Restoring fiscal sanity and effective paths forward in the public sector
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
1800 2011 2040
US GDP: $9.25
Billion
(Constant 2011 Dollars)
Projected US GDP: $15.24
Trillion
(Constant 2011 Dollars)
Projected US GDP: $29.7
Trillion
(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
Growth of Government
42%
20%
4%
15%
12%
7%
Defense Other Discretionary Medicare and Medicaid
Social Security Other Mandatory Net Interest
2010
Source: CBO, Budget and Economic Outlook: Fiscal Years 2011 Through 2021, Historical Tables. Compiled by TCAII. Note: All numbers are in constant 2010 dollars .
($944 Billion) ($2.901 Trillion)
20%
19%
23%
20%
12%
6%
1970
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307 % Growth in
2010 Dollars
Composition of Federal Spending (% of Total Outlays)
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$0
$500
$1,000
$1,500
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$3,500
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Bil
lio
ns
of
Con
stan
t 2005 D
oll
ars
Fiscal Years
Democratic Controlled Congress Republican Controlled Congress
Split Congress Republican President
Democratic President
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. Compiled by TCAII.
Social Security Act of 1965
(Medicare)
Medicare Prescription Drug,
Improvement, and Modernization Act
of 2003and the Invasion of Iraq
America Recovery and
Reinvestment Act of 2009
Patient Protection and
Affordable Care
Act of 2010
Gramm-Rudman-Hollings
Balanced Budget and Emergency
Deficit Control Act of 1985
Budget Enforcement
Act of 1990
Deficit Reduction
Act of 1993 2001 Invasion
of Afghanistan
Vietnam Conflict
1960-75
Korean Conflict
1950-53
End of WWII
End of Statutory Budget Controls 2002
Federal Spending & the Political Party in Power
5
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
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Bil
lio
ns
of
Con
stan
t 2005 D
oll
ars
Fiscal Years
Democratic Controlled Congress Republican Controlled congress
Split Congress Democratic President
Republican President
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
Revenue Act of 1964
End of WWII
Economic Recovery
Tax Act of 1981
Tax Reform Act of 1986
Economic Growth and Tax
Relief Reconciliation
Act of 2001
&
Invasion of Afghanistan
Jobs and Growth Tax
Relief Reconciliation
Act of 2003
&
Invasion of Iraq
Omnibus Budget
Reconciliation Act
of 1993
Korean Conflict
1950-53
Vietnam Conflict
1960-75
Federal Revenues &
the Political Party in Power
6
Federal Debt Burdens
7
Growing Foreign Depends
In Trillions of Dollars 2000 2010
Explicit 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 1.6
Commitments & Contingencies 0.5 2.1
E.g. Pension Benefit Guaranty Corporation, Undelivered Orders
Trustees’
Estimates
Actuary's
Alternative
Scenario
Social 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 7.2
Total $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
Federal Financial Hole (For Fiscal 2000 and 2010)
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0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Outlays Revenues
Bil
lio
ns
of
U.S
. D
oll
ars
Discretionary
Spending
Mandatory Spending
Net Interest
$1,353 Billion
$2,023 Billion
$221 Billion
Mandatory spending and net interest are equal to about 97% of total revenue.
This means there is only 3% of federal revenues left to cover all discretionary
Source: Congressional Budget Office, Budget and Economic Outlook: An Update, August 2011, Budget Projections, Table: 1.2. Compiled by TCAII.
$3,597 Billion
$2,314 Billion
Fiscal Gap 2011 (After Debt Ceiling Increase)
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$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Rea
l 2
01
0 D
oll
ars
Democrat Controlled Congress Republican Controlled Congress Split Congress
Republican President Democratic President
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.
End of WW2 $22,183
As of 12/31/2010 $45,426
Total Federal Debt & the Political Party in Power
11
1. Australia
2. New Zealand
3. Estonia
4. Sweden
5. China
6. Luxembourg
7. Chile
8. Denmark
9. United Kingdom
10. Brazil
11. Canada
12. India
13. Poland
14. Netherlands
15. Norway
16. Slovakia
17. Korea
18. Mexico
19. Israel
20. Slovenia
21. Austria
22. Finland
23. France
24. Spain
25. Germany
26. Belgium
27. Italy
28. United States 29. Hungary
30. Ireland
31. Japan
32. Iceland
33. Portugal
34. Greece
Source: CAI & Stanford University’s Schools of International Policy Studies and Public Policy Program, Sovereign Fiscal Responsibility Index.
Fiscal Fitness Index: Overall Results (Best to Worst)
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$3,361
$4,363
$3,978 $4,218
$2,983
$3,722 $3,487
$7,960
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
OECD Average Canada France Germany New Zealand Sweden United Kingdom United States
Per
Ca
pit
a H
ealt
h C
are
Cost
s
U.S
. D
oll
ars
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.
The United States spends more than double the OECD average with below average
health care results.
Comparative Health Costs
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U.S.A
China
United Kingdom
France
Russia
Japan
Saudi Arabia
Germany
India
Italy
Brazil
South Korea
Australia
Canada Turkey
0
100
200
300
400
500
600
700
In B
illi
on
s o
f C
on
sta
nt
20
09
Do
lla
rs
$698 Billion
$646 Billion
SOURCE: Stockholm International Peace Research Institute, SIPRI Military Expenditure Database 2011. Compiled by TCAII.
The United States spent more on defense in 2010 than the other 14 highest
defense budgets combined. The Majority of which are our allies
Relative Defense Spending
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Payroll Taxes 35%
Individual Income Taxes
47%
Corporate Income
Tax 8%
0
Excise
3%
Estate and Gift 1%
Custom Duties 1%
Miscellaneous 4%
Other 9%
Total Revenue in 2011 $2.3 Trillion
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.
Federal Revenue Composition
15
Progressive Tax System
16
Effective Tax Rates
• 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
Key Systemic Challenges
Scope 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
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CAI’s Fiscal Framework
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Fiscal 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?
Feasibility Test
• 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?
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Transforming Government (Basic Questions for Policies & Programs)
21
Baselines Matter
$9.3 Trillion
$4.7 Trillion
$3.5 Trillion
$10.6 Trillion
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Cu
mu
lati
ve
Def
icit
($ B
illi
on
s)
President's "Adjusted CBO August Baseline" "Current Policy" Baseline With Automatic Cuts
Current Law Baseline Without Automatic Cuts Current Law Baseline With Automatic Cuts
Source: Congressional Budget Office, Budget and Economic Outlook August 2011. ―Current law baseline with automatic cuts‖ assumes $1.2 in automatic
cuts due to the Budget Control Act of 2011 provisions. ―Current Policy‖ Baseline assumes a continuation of certain policies that are not written into current
law, including the extension of expiring tax provisions from Bush/Obama tax cuts, indexing the Alternative Minimum Tax for Inflation, maintaining
Medicare payment rates, and a reduction in troops deployed for overseas in Afghanistan to 45,000 by 2015. President’s ―Adjusted CBO August Baseline‖ is
from ―Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction‖ September 2011.
• 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
The Super Committee
23
0
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20
30
40
50
60
70
80
90
100
1974 2011
Per
cen
tag
e
Approve
Dissaprove
84% Approval After Sept 11th
13% Approval in August after Debt Ceiling Debate
“Do you approve or disapprove of the way Congress is handling it’s job?”
84% Disapproval in August after Debt Ceiling Debate
Source: Gallup/Newsweek. Compiled by TCAII.
Public Approval of Congress
• 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
What Can You Do?
Questions?
25