United States Federal Budget

872019 United States Federal Budget

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United States federal budget 1

United States federal budget

Fiscal Year 2010 US Federal Spending Projections- Cash or Budget Basis

Fiscal Year 2010 US Federal Receipts

The Budget of the United States

Government is the Presidents

proposal to the US Congress which

recommends funding levels for the

next fiscal year beginning October 1

Congressional decisions are governed

by rules and legislation regarding the

federal budget process Budget

committees set spending limits for the

House and Senate committees and for

Appropriations subcommittees which

then approve individual appropriations

bills to allocate funding to various

federal programs

After Congress approves an

appropriations bill it is sent to the

President who may sign it into law or

may veto it A vetoed bill is sent back

to Congress which can pass it into law

with a two-thirds majority in each

chamber Congress may also combine

all or some appropriations bills into an

omnibus reconciliation bill In

addition the president may request and

the Congress may pass supplemental

appropriations bills or emergency

supplemental appropriations bills

Several government agencies provide

budget data and analysis These

include the Government

Accountability Office (GAO)

Congressional Budget Office the

Office of Management and Budget

(OMB) and the US Treasury

Department These agencies have reported that the federal government is facing a series of important financing

challenges In the short-run tax revenues have declined significantly due to a severe recession and expenditures have

expanded dramatically for stimulus and bailout measures In the long-run expenditures related to entitlement

programs such as Social Security Medicare and Medicaid are growing considerably faster than the economy overall

as the population matures[1]

[2]




Budget principles

The US Constitution (Article I section 9 clause 7) states that [n]o money shall be drawn from the Treasury but in

Consequence of Appropriations made by Law and a regular Statement and Account of Receipts and Expenditures of

all public Money shall be published from time to time

Each year the President of the United States submits his budget request to Congress for the following fiscal year as

required by the Budget and Accounting Act of 1921 Current law (31 USC sect 1105 [3](a)) requires the president to

submit a budget no earlier than the first Monday in January and no later than the first Monday in February

Typically presidents submit budgets on the first Monday in February The budget submission has been delayed

however in some new presidents first year when previous president belonged to a different party

The federal budget is calculated largely on a cash basis That is revenues and outlays are recognized when

transactions are made Therefore the full long-term costs of entitlement programs such as Medicare Social Security

and the federal portion of Medicaid are not reflected in the federal budget By contrast many businesses and some

foreign governments have adopted forms of accrual accounting which recognizes obligations and revenues when

they are incurred The costs of some federal credit and loan programs according to provisions of the Federal Credit

Reform Act of 1990 are calculated on a net present value basis[4]

Federal agencies cannot spend money unless funds are authorized and appropriated Typically separate

Congressional committees have jurisdiction over authorization and appropriations The House and Senate

Appropriations Committees currently have 12 subcommittees which are responsible for drafting the 12 regular

appropriations bills that determine amounts of discretionary spending for various federal programs Appropriations

bills must pass both the House and Senate and then be signed by the president in order to give federal agencies legal

authority to spend[5]

In many recent years regular appropriations bills have been combined into omnibus bills

Congress may also pass special or emergency appropriations Spending that is deemed an emergency is

exempt from certain Congressional budget enforcement rules Funds for disaster relief have sometimes come from

supplemental appropriations such as after Hurricane Katrina In other cases funds included in emergency

supplemental appropriations bills support activities not obviously related to actual emergencies such as parts of the2000 Census of Population and Housing Special appropriations have been used to fund most of the costs of war and

occupation in Iraq and Afghanistan so far

Budget resolutions and appropriations bills which reflect spending priorities of Congress will usually differ from

funding levels in the presidents budget The president however retains substantial influence over the budget process

through his veto power and through his congressional allies when his party has a majority in Congress

Federal budget data

Several government agencies provide budget data These include the Government Accountability Office (GAO) the

Congressional Budget Office the Office of Management and Budget (OMB) and the US Treasury Department

CBO publishes The Budget and Economic Outlook in January which is typically updated in August It also publishes

a Monthly Budget Review OMB which is responsible for organizing the Presidents budget presented in February

typically issues a budget update in July GAO and Treasury issue Financial Statements of the US Government

usually in the December following the close of the federal fiscal year which occurs September 30 There is a

corresponding Citizens Guide a short summary The Treasury Department also produces a Combined Statement of

Receipts Outlays and Balances each December for the preceding fiscal year which provides detailed data on

federal financial activities

Historical tables within the Presidents Budget (OMB) provides a wide range of data on Federal Government

finances Many of the data series begin in 1940 and include estimates of the Presidentrsquos Budget for 2009ndash 2014

Additionally Table 11 provides data on receipts outlays and surpluses or deficits for 1901ndash 1939 and for earliermulti-year periods This document is composed of 17 sections each of which has one or more tables Each section




covers a common theme Section 1 for example provides an overview of the budget and off-budget totals Section 2

provides tables on receipts by source and Section 3 shows outlays by function When a section contains several

tables the general rule is to start with tables showing the broadest overview data and then work down to more

detailed tables The purpose of these tables is to present a broad range of historical budgetary data in one convenient

reference source and to provide relevant comparisons likely to be most useful The most common comparisons are in

terms of proportions (eg each major receipt category as a percentage of total receipts and of the gross domestic

product)[6]

Federal budget projections

CBO calculates 35-year baseline projections which are used extensively in the budget process Baseline projections

are intended to reflect spending under current law and are not intended as predictions of the most likely path of the

economy During the George W Bush Administration OMB presented 5-year projections but presented 45-year

projections in the FY2010 budget submission CBO and GAO issue long-term projections from time to time

Major receipt categories

During FY 2010 the federal government collected approximately $216 trillion in tax revenue Primary receipt

categories included individual income taxes (42) Social SecuritySocial Insurance taxes (40) and corporate

taxes (9)[7]

Other types included excise estate and gift taxes

Tax revenues have averaged approximately 183 of gross domestic product (GDP) over the 1970-2009 period

generally ranging plus or minus 2 from that level Tax revenues are significantly affected by the economy

Recessions typically reduce government tax collections as economic activity slows For example during both

FY2009 and FY2010 the US government collected about $400 billion less than FY2008 revenues of $25 trillion

During 2009 individual income taxes declined 20 while corporate taxes declined 50 At 149 of GDP the

2009 and 2010 collections were the lowest level of the past 50 years[8]

Tax policy

Revenue and Expense as GDP

The appropriate level and distribution of

federal taxes has long been a controversial

topic Since the 1970s some supply side

economists have contended that lowering

taxes could stimulate economic growth to

such a degree that tax revenues could rise

other factors being held constant However

economic models and econometric analysis

have found weak support for the supply

side theory The Center on Budget and

Policy Priorities (CBPP) summarized a

variety of studies done by economists across

the political spectrum that indicated tax cuts

do not pay for themselves and increase

deficits[9]

Studies by the CBO and the US

Treasury also indicated that tax cuts do not

pay for themselves[10]

[11]

[12]

[13]

In 2003 450 economists including ten Nobel Prize




Estimated Funding Gaps in Medicare and Social Security

laureate signed the Economists statement

opposing the Bush tax cuts sent to President

Bush stating that these tax cuts will worsen

the long-term budget outlook will reduce

the capacity of the government to finance

Social Security and Medicare benefits aswell as investments in schools health

infrastructure and basic research [and]

generate further inequalities in after-tax

income[14]

Economist Paul Krugman wrote in 2007

Supply side doctrine which claimed

without evidence that tax cuts would pay for

themselves never got any traction in the

world of professional economic research

even among conservatives[15] Economist

Nouriel Roubini wrote in October 2010 that the Republican Party was trapped in a belief in voodoo economics the

economic equivalent of creationism while the Democratic administration was unwilling to improve the tax system

via a carbon tax or value-added tax[16]

Warren Buffett wrote in 2003 When you listen to tax-cut rhetoric

remember that giving one class of taxpayer a break requires -- now or down the line -- that an equivalent burden be

imposed on other parties In other words if I get a break someone else pays Government cant deliver a free lunch

to the country as a whole[17]

Former Comptroller General of the United States David Walker stated during January

2009 You cant have guns butter and tax cuts The numbers just dont add up[18]

Francis Fukuyama summarized these concepts Prior to the 1980s conservatives were fiscally conservativemdash that

is they were unwilling to spend more than they collected in taxes But Reaganomics introduced the idea thatvirtually any tax cut would so stimulate growth that the government would end up taking in more revenue in the end

(the so-called Laffer curve) In fact the traditional view was correct if you cut taxes without cutting spending you

end up with a damaging deficit Thus the Reagan tax cuts of the 1980s produced a big deficit the Clinton tax

increases of the 1990s produced a surplus and the Bush tax cuts of the early 21st century produced an even larger

deficit[19]

Economist Bruce Bartlett wrote in 2009 that without benefit cuts in Medicare and Social Security federal taxes

would have to increase by 81 of GDP now and forever to cover estimated program shortfalls while avoiding debt

increases[20]

The 30-year historical average federal tax receipts are 184 of GDP so this would represent an

enormous tax increase[21]

Tax expenditures

The term tax expenditures refers to income exemptions or deductions that reduce the tax collections that would be

made applying a particular tax rate alone In November 2009 The Economist estimated the additional federal tax

revenue generated from eliminating certain tax expenditures for the 2013-2014 period These included income

exemptions for employer-provided health insurance ($215 billion) and various income deductions such as mortgage

interest ($147B) state amp local taxes ($65B) capital gains on homes ($60B) property taxes ($33B) and municipal

bond interest ($37B) These total $557 billion All of these steps together would reduce the projected deficit at that

time by nearly half[22]




US taxes relative to foreign countries

Comparison of tax rates around the world is difficult and somewhat subjective Tax laws in most countries are

extremely complex and tax burden falls differently on different groups in each country and sub-national units

(states counties and municipalities) and the types of services rendered through those taxes are also different

One way to measure the overall tax burden is by looking at it as a percentage of the overall economy in terms of

GDP The Tax Policy Center wrote US taxes are low relative to those in other developed countries In 2006 UStaxes at all levels of government claimed 28 percent of GDP compared with an average of 36 percent of GDP for the

30 member countries of the Organization for Economic Co-operation and Development (OECD)[23]

Economist

Simon Johnson wrote in 2010 The US government doesn rsquot take in much tax revenue -- at least 10 percentage

points of GDP less than comparable developed economies -- and it also doesnrsquot spend much except on the military

Social Security and Medicare[24]

In comparing corporate taxes the Congressional Budget Office found in 2005 that the top statutory tax rate was the

third highest among OECD countries behind Japan and Germany However the US ranked 27th lowest of 30

OECD countries in its collection of corporate taxes relative to GDP at 18 vs the average 25[25]

A comparison

of taxation on individuals amongst OECD countries shows that the US tax burden is just slightly below the average

tax for middle income earners[26]

Major expenditure categories

The federal governments expenditures include Medicare amp Medicaid ($793B or 23) Social Security ($701B or

20) Defense Department ($689B or 20) and non-defense discretionary ($660B or 19) Expenditures are

classified as mandatory with payments required by specific laws or discretionary with payment amounts renewed

annually as part of the budget process During FY 2010 the federal government spent $346 trillion on a budget or

cash basis down 2 vs FY 2009 but up 16 versus FY2008 spend of $297 trillion

Mandatory spending and entitlements

Entitlement Spending Risks

Social Security Medicare and Medicaid

expenditures are funded by permanent

appropriations and so are considered

mandatory spending Social Security and

Medicare are sometimes called

entitlements because people meeting

relevant eligibility requirements are legally

entitled to benefits although most pay taxes

into these programs throughout their

working lives Some programs such as

Food Stamps are appropriated entitlements

Some mandatory spending such as

Congressional salaries is not part of any

entitlement program Mandatory spending

accounted for 53 of total federal outlays in

FY2008 with net interest payments

accounting for an additional 85[27]

Mandatory spending is expected to increase as a share of GDP This is due to demographic trends as the number of

workers continues declining relative to those receiving benefits For example the number of workers per retiree was

51 in 1960 this declined to 33 in 2007 and is projected to decline to 21 by 2040[28]

These programs are also




affected by per-person costs which are also expected to increase at a rate significantly higher than the economy This

unfavorable combination of demographics and per-capita rate increases is expected to drive both Social Security and

Medicare into large deficits during the 21st century Unless these long-term fiscal imbalances are addressed by

reforms to these programs raising taxes or drastic cuts in discretionary programs the federal government will at

some point be unable to pay its obligations without significant risk to the value of the dollar (inflation)[29]

[30]

bull Medicare was established in 1965 and expanded thereafter In 2009 the program covered an estimated 45 millionpersons (38 million aged and 7 million disabled) It consists of four distinct parts which are funded differently

Hospital Insurance mainly funded by a dedicated payroll tax of 29 of earnings shared equally between

employers and workers Supplementary Medical Insurance funded through beneficiary premiums (set at 25 of

estimated program costs for the aged) and general revenues (the remaining amount approximately 75)

Medicare Advantage a private plan option for beneficiaries funded through the Hospital Insurance and

Supplementary Medical Insurance trust funds and the Part D prescription drug benefits for which funding is

included in the Supplementary Medical Insurance trust fund and is financed through beneficiary premiums (about

25) and general revenues (about 75)[31]

Spending on Medicare and Medicaid is projected to grow

dramatically in coming decades The number of persons enrolled in Medicare is expected to increase from 47

million in 2010 to 80 million by 2030[32]

While the same demographic trends that affect Social Security alsoaffect Medicare rapidly rising medical prices appear to be a more important cause of projected spending

increases Various reform strategies were proposed for healthcare[33]

and in March 2010 the Patient Protection

and Affordable Care Act was enacted as a means of health care reform

bull Social Security is a social insurance program officially called Old-Age Survivors and Disability Insurance

(OASDI) in reference to its three components It is primarily funded through a dedicated payroll tax of 124

During 2009 total benefits of $686 billion were paid out versus income (taxes and interest) of $807 billion a

$121 billion annual surplus An estimated 156 million people paid into the program and 53 million received

benefits roughly 294 workers per beneficiary[34]

Since the Greenspan Commission in the early 1980s Social

Security has cumulatively collected far more in payroll taxes dedicated to the program than it has paid out to

recipientsmdash nearly $24 trillion by 2008 This annual surplus is credited to Social Security trust funds that holdspecial non-marketable Treasury securities and this surplus amount is commonly referred to as the Social

Security Trust Fund The proceeds are paid into the US Treasury where they may be used for other government

purposes Social Security spending will increase sharply over the next decades largely due to the retirement of

the baby boom generation The number of program recipients is expected to increase from 44 million in 2010 to

73 million in 2030[35]

Program spending is projected to rise from 48 of GDP in 2010 to 59 of GDP by 2030

where it will stabilize[36]

The Social Security Administration projects that an increase in payroll taxes equivalent

to 19 of the payroll tax base or 07 of GDP would be necessary to put the Social Security program in fiscal

balance for the next 75 years Over an infinite time horizon these shortfalls average 34 of the payroll tax base

and 12 of GDP[37]

Various reforms have been debated for Social Security Examples include reducing future

annual cost of living adjustments (COLA) provided to recipients raising the retirement age and raising the

income limit subject to the payroll tax ($106800 in 2009)[38]

[39]

Because of the large accumulated surplus in the

Social Security Trust Fund however the Social Security system is expected to be able to pay all promised

benefits through 2037 without adding to the deficit[40]




Other spending

Defense Spending 2000 - 2011

FY 2010 Estimated Federal Spending per 2011 Budget

bull Military spending The military budget

of the United States during FY 2009 was

approximately $683 billion in expenses

for the Department of Defense (DoD)

and $54 billion for Homeland Security a

total of $737 billion[41]

The US defense

budget (excluding spending for the wars

in Iraq and Afghanistan Homeland

Security and Veterans Affairs) is around

4 of GDP[42]

Adding these other costs

places defense and homeland security

spending between 5 and 6 of GDP

The DoD baseline budget excluding

supplemental funding for the wars has

grown from $297 billion in FY2001 to a

budgeted $534 billion for FY2010 an

81 increase[43]

According to the CBO

defense spending grew 9 annually on

average from fiscal year 2000-2009[44]

Much of the costs for the wars in Iraq and

Afghanistan have not been funded

through regular appropriations bills but

through emergency supplemental

appropriations bills As such most of

these expenses were not included in the

budget deficit calculation prior to

FY2010 Some budget experts argue that

emergency supplemental appropriations

bills do not receive the same level of

legislative care as regular appropriations

bills[45]

bull Non-defense discretionary spending is

used to fund the executive departments (eg the Department of Education) and independent agencies (eg the

Environmental Protection Agency) although these do receive a smaller amount of mandatory funding as well

Discretionary budget authority is established annually by Congress as opposed to mandatory spending that is

required by laws that span multiple years such as Social Security or Medicare The Federal government spent

approximately $660 billion during 2010 on the Cabinet Departments and Agencies excluding the Department of

Defense representing 19 of budgeted expenditures[46]

or about 45 of GDP Several politicians and think

tanks have proposed freezing non-defense discretionary spending at particular levels and holding this spending

constant for various periods of time President Obama proposed freezing discretionary spending representing

approximately 12 of the budget in his 2011 State of the Union address[47]

bull Interest expense Budgeted net interest on the public debt was approximately $189 billion in FY2009 (5 of

spending) During FY2009 the government also accrued a non-cash interest expense of $192 billion for

intra-governmental debt primarily the Social Security Trust Fund for a total interest expense of $381 billion[48]

Net interest costs paid on the public debt declined from $242 billion in 2008 to $189 billion in 2009 because of




lower interest rates[49]

Should these rates return to historical averages the interest cost would increase

dramatically Historian Niall Ferguson described the risk that foreign investors would demand higher interest

rates as the US debt levels increase over time in a November 2009 interview[50]

Public debt owned by

foreigners has increased to approximately 50 of the total or approximately $34 trillion[51]

As a result nearly

50 of the interest payments are now leaving the country which is different from past years when interest was

paid to US citizens holding the public debt Interest expenses are projected to grow dramatically as the US debt

increases and interest rates rise from very low levels in 2009 to more typical historical levels

Understanding deficits and debt

Deficit and Debt Increases 2001-2009

The annual budget deficit is the difference

between actual cash collections and

budgeted spending (a partial measure of

total spending) during a given fiscal year

which runs from October 1 to September 30

Since 1970 the US Federal Government

has run deficits for all but four years

(1998ndash 2001)[52]

contributing to a total debt

of $140 trillion as of December 2010[53]

The US Federal Government collected

$252 trillion in FY2008 while budgeted

spending was $298 trillion generating a

total deficit of $455 billion However

during FY2008 the national debt increased

by $1017 billion much more than the $455

billion deficit figure This means actualexpenditure was closer to $35 trillion [why] The national debt represents the outstanding obligations of the

government at any given time comprising both public and intra-governmental debt which was $123 trillion as of

January 18 2010[54]

Differences between the annual deficit and annual change in the national debt include the

treatment of the surplus Social Security payroll tax revenues (which increase the debt but not the deficit)

supplemental appropriations for the Iraq and Afghanistan wars and earmarks

These differences can make it more challenging to determine how much the government actually spends relative to

tax revenues The increase in the national debt during a given year is a helpful measure to determine this amount

From FY 2003-2007 the national debt increased approximately $550 billion per year on average For the first time

in FY 2008 the US added $1 trillion to the national debt[55]

In relative terms from 2003-2007 the government

spent roughly $120 for each $100 it collected in taxes This increased to $140 in FY2008 and $190 in FY2009

Social Security payroll taxes and benefit payments along with the net balance of the US Postal Service are

considered off-budget Administrative costs of the Social Security Administration (SSA) however are classified

as on-budget In large part because of Social Security surpluses the total federal budget deficit is smaller than the

on-budget deficit The surplus of Social Security payroll taxes over benefit payments is invested in special Treasury

securities held by the Social Security Trust Fund Social Security and other federal trust funds are part of the

intergovernmental debt The total federal debt is divided into intergovernmental debt and debt held by the

public




Contemporary issues and debates

Budgetary impact of the 2001 and 2003 tax cuts

Congressional Research Service-Impact of Extension of the Bush Tax Cuts

A variety of tax cuts were enacted under

President Bush between 2001ndash 2003

(commonly referred to as the Bush tax

cuts) through the Economic Growth and

Tax Relief Reconciliation Act of 2001

(EGTRRA) and the Jobs and Growth Tax

Relief Reconciliation Act of 2003

(JGTRRA) Most of these tax cuts were

scheduled to expire December 31 2010

Since CBO projections are based on current

law the projections discussed above assume

these tax cuts will expire which may prove

politically challenging

In August 2010 CBO estimated that

extending the tax cuts for the 2011-2020

time period would add $33 trillion to the

national debt $265 trillion in foregone tax revenue plus another $066 trillion for interest and debt service costs[56]

The non-partisan Pew Charitable Trusts estimated in May 2010 that extending some or all of the Bush tax cuts would

have the following impact under these scenarios

bull Making the tax cuts permanent for all taxpayers regardless of income would increase the national debt $31

trillion over the next 10 years

bull Limiting the extension to individuals making less than $200000 and married couples earning less than $250000

would increase the debt about $23 trillion in the next decade

bull Extending the tax cuts for all taxpayers for only two years would cost $558 billion over the next 10 years[57]

The non-partisan Congressional Research Service (CRS) has reported the 10-year revenue loss from extending the

2001 and 2003 tax cuts beyond 2010 at $29 trillion with an additional $606 billion in debt service costs (interest)

for a combined total of $35 trillion CRS cited CBO estimates that extending the cuts permanently including the

repeal of the estate tax would add 2 of GDP to the annual deficit[58]

The Center on Budget and Policy Priorities wrote in 2010 The 75-year Social Security shortfall is about the same

size as the cost over that period of extending the 2001 and 2003 tax cuts for the richest 2 percent of Americans

(those with incomes above $250000 a year) Members of Congress cannot simultaneously claim that the tax cuts forpeople at the top are affordable while the Social Security shortfall constitutes a dire fiscal threat

[59]

Stimulus packages

The Economic Stimulus Act of 2008 provided an estimated $170 billion in tax rebates to stimulate the economy The

Congressional Budget Office (CBO) estimated that the Act would increase budget deficits (or reduce future

surpluses) by $152 billion in 2008 and by a net amount of $124 billion over the 2008-2018 period[60]

The American Recovery and Reinvestment Act of 2009 was passed by the US Congress on 13 February 2009 The

nearly $800 billion bill appropriated money toward tax credits and infrastructure programs The CBO estimates that

enacting the bill would increase federal budget deficits by $185 billion over the remaining months of fiscal year

2009 by $399 billion in 2010 by $134 billion in 2011 and by $787 billion over the 2009-2019 period [61]




Stimulus can be characterized as investment spending or tax cuts For example if the funds are used to create a

physical asset that generates future cash flows (eg a power plant or toll road) the stimulus could be characterized

as investment Extending unemployment benefits are examples of government spending Tax cuts may or may not be

spent There is significant debate among economists regarding which type of stimulus has the highest multiplier

(ie increase in economic activity per dollar of stimulus)[62]

Earmarks

GAO defines earmarking as designating any portion of a lump-sum amount for particular purposes by means of

legislative language Earmarking can also mean dedicating collections by law for a specific purpose[63]

In some

cases legislative language may direct federal agencies to spend funds for specific projects In other cases earmarks

refer to directions in appropriation committee reports which are not law Various organizations have estimated the

total number and amount of earmarks An estimated 16000 earmarks containing nearly $48 billion in spending were

inserted into larger often unrelated bills during 2005[64]

While the number of earmarks has grown in the past

decade the total amount of earmarked funds is approximately 1-2 percent of federal spending[65]

Fraud waste and abuseThe Office of Management and Budget estimated that the federal government made $98 billion in improper

payments during FY2009 an increase of 38 vs the $72 billion the prior year This increase was due in part to

effects of the financial crisis and improved methods of detection The total included $54 billion for healthcare-related

programs 94 of the $573 billion spent on those programs The government pledged to do more to combat this

problem including better analysis auditing and incentives[66]

[67]

During July 2010 President Obama signed into

law the Improper Payments Elimination and Recovery Act of 2010 citing approximately $110 billion in

unauthorized payments of all types[68]

Former GAO Director David Walker said Some people think that we can solve our financial problems by stopping

fraud waste and abuse or by canceling the Bush tax cuts or by ending the war in Iraq The truth is we could do all

three of these things and we would not come close to solving our nations fiscal challenges[69]

2010 Budget Proposal

2010 Budget Projected Deficits and Debt Increases

President Barack Obama proposed his 2010

budget during February 2009 He has

indicated that health care clean energy

education and infrastructure will be

priorities The proposed increases in the

national debt exceed $900 billion each year

from 2010ndash 2019 following the Bush

administrations outgoing budget which

allowed for a $25 trillion increase in the

national debt for FY 2009[70]

Tax cuts will expire for the wealthiest

taxpayers to increase revenues returning

marginal rates to the Clinton levels Further

the base Department of Defense budget

increases slightly through 2014 (Table S-7)

from $534 to $575 billion although




supplemental appropriations for the Iraq War are expected to be reduced In addition estimates of revenue are based

on GDP growth assumptions that exceed the Blue Chip Economists consensus forecast considerably through 2012

(Table S-8)[71]

[72]

2010 Healthcare reform

The CBO estimated in December 2009 that the Senate healthcare reform bill later signed into law on 23 March2010 would reduce the deficit during the 2010-2019 period by a total of $132 billion This figure comprises $615

billion in incremental costs offset by cost reductions of $483 billion and additional taxes of $264 billion The CBO

also estimated that the deficit would be about 05 lower each year in the 2020-2029 decade or about $70 billion

annually in 2010 dollars[73]

Whether the deficit reduction will materialize is questioned by some conservative

budget experts[74]

State finances

The US federal government may be required to assist state governments further as many US states are facing

budget shortfalls due to the 2008-2010 recession The sharp decline in home prices has affected property tax

revenue while the decline in economic activity and consumer spending has led to a falloff in revenues from state

sales taxes and income taxes The Center on Budget and Policy Priorities estimated that the 2010 and 2011 state

shortfalls will total $375 billion[75]

As of July 2010 over 30 states had raised taxes while 45 had reduced

services[76]

State and local governments cut 405000 jobs between January 2009 and February 2011[77]

GAO estimates that (absent policy changes) state and local governments will face budget gaps that rise from 1 of

GDP in 2010 to around 2 by 2020 25 by 2030 and 35 by 2040[78]

Further many states have underfunded pensions meaning the state has not contributed the amount estimated to be

necessary to pay future obligations to retired workers The Pew Center on the States reported in February 2010 that

states have underfunded their pensions by nearly $1 trillion as of 2008 representing the gap between the $235

trillion states had set aside to pay for employeesrsquo

retirement benefits and the $335 trillion price tag of thosepromises

[79]

Whether a US state can declare bankruptcy enabling it to re-negotiate its obligations to bondholders pensioners

and public employee unions is a matter of legal and political debate Journalist Matt Miller explained some of these

issues in February 2011 The AG [State Attorney General] might put a plan forward and agree to conditions

However the AG has no say over the legislature And only a legislature can raise taxes In some cases it would

require a state constitutional amendment to reduce pensions Add to this a federal judge who would oversee the

processand a state has sovereign immunity which means the governor or legislature may simply refuse to go along

with anything the judge rules or reject the reorganization plan itself[80]

Unemployment trade deficit and globalization

US Current Account or Trade Deficit

CBO reported in 2009 that income tax revenues had declined by nearly

20 due to higher unemployment caused by the recession while social

safety net expenditures increased significantly[81]

The Economic

Policy Institute (EPI) estimated in May 2010 that 15 million

Americans were unemployed and another 11 million were

involuntarily working part time or had dropped out of the labor

force[82]




The US has a large current account or trade deficit meaning its imports exceed exports This also affects

employment levels In 2005 Ben Bernanke addressed the implications of the USAs high and rising current account

deficit which increased by $650 billion between 1996 and 2004 from 15 to 58 of GDP[83]

The trade deficit

reached a dollar peak of approximately $700 billion in 2008 (49 of GDP) before dropping to $420 billion in 2009

(29 of GDP) due to the 2009 recession[84]

Imported goods are made by workers in other countries EPI estimated US job losses due to the trade deficit withChina alone at 23 million jobs between 2001 and 2007 along with significantly lowered US wages

[85]USA Today

reported in 2007 that an estimated one in six factory jobs (32 million) have disappeared from the US since 2000

due to automation or off-shoring to countries like Mexico and China where labor is cheaper These lost

manufacturing jobs are fueling a debate over globalization -- the increasing connection of the United States and other

economies An estimated 84 of Americans in the labor force are employed in service jobs up from 81 in 2000

Princeton economist Alan Blinder said in 2007 that the number of jobs at risk of being shipped out of the country

could reach 40 million over the next 10 to 20 years That would be one out of every three service sector jobs that

could be at risk[86]

Former Fed chair Paul Volcker argued in February 2010 that the US should make more of the goods it consumes

domestically We need to do more manufacturing again Were never going to be the major world manufacturer as

we were some years ago but we could do more than were doing and be more competitive And weve got to close

that big gap You know consumption is running about 5 percent above normal That 5 percent is reflected just about

equally to what were importing in excess of what were exporting And weve got to bring that back into closer

balance[87]

Implications of entitlement trust funds

Both Social Security and Medicare are funded by payroll tax revenues dedicated to those programs Program tax

revenues historically have exceeded payouts resulting in program surpluses and the building of trust fund balances

The trust funds earn interest Both Social Security and Medicare each have two component trust funds As of

FY2008 Social Security had a combined $24 trillion trust fund balance and Medicares was $380 billion If during

an individual year program payouts exceed the sum of tax income and interest earned during that year (ie an annual

program deficit) the trust fund for the program is drawn down to the extent of the shortfall Legally the mandatory

nature of these programs compels the government to fund them to the extent of tax income plus any remaining trust

fund balances borrowing as needed Once the trust funds are eliminated through expected future deficits technically

these programs can only draw on payroll taxes during the current year In effect they are pay as you go programs

with additional legal claims to the extent of their remaining trust fund balances[88]

Deficit

Describing the budgetary challenge

Then OMB Director Peter Orszag stated in a November 2009 interview Its very popular to complain about the

deficit but then many of the specific steps that you could take to address it are unpopular And that is the

fundamental challenge that we are facing and that we need help both from the American public and Congress in

addressing He characterized the budget problem in two parts a short- to medium-term problem related to the

financial crisis of 2007ndash 2010 which has reduced tax revenues significantly and involved large stimulus spending

and a long-term problem primarily driven by increasing healthcare costs per person He argued that the US cannot

return to a sustainable long-term fiscal path by either tax increases or cuts to non-healthcare cost categories alone

the US must confront the rising healthcare costs driving expenditures in the Medicare and Medicaid programs[89]

Fareed Zakaria said in February 2010 But in one sense Washington is delivering to the American people exactly

what they seem to want In poll after poll we find that the public is generally opposed to any new taxes but we also




discover that the public will immediately punish anyone who proposes spending cuts in any middle class program

which are the ones where the money is in the federal budget Now there is only one way to square this circle short of

magic and that is to borrow money and that is what we have done for decades now at the local state and federal

levelSo the next time you accuse Washington of being irresponsible save some of that blame for yourself and

your friends[90]

Andrew Sullivan said in March 2010 the biggest problem in this country istheyre big babies I mean peoplekeep saying they dont want any tax increases but they dont want to have their Medicare cut they dont want to have

their Medicaid [cut] or they dont want to have their Social Security touched an inch Well its about time someone

tells them you cant have it babyYou have to make a choice And I fear thatmdash and I always thought you see that

that was the Conservative position The Conservative is the Grinch who says no And in some ways I think this in

the long run looking back in history was Reagans greatest bad legacy which is he tried to tell people you can have

it all We cant have it all[91]

Harvard historian Niall Ferguson stated in a November 2009 interview The United States is on an unsustainable

fiscal path And we know that path ends in one of two ways you either default on that debt or you depreciate it

away You inflate it away with your currency effectively He said the most likely case is that the US would default

on its entitlement obligations for Social Security and Medicare first by reducing the obligations through entitlement

reform He also warned about the risk that foreign investors would demand a higher interest rate to purchase US

debt damaging US growth prospects[92]

The CBO reported several types of risk factors related to rising debt levels in a July 2010 publication

bull A growing portion of savings would go towards purchases of government debt rather than investments in

productive capital goods such as factories and computers leading to lower output and incomes than would

otherwise occur

bull If higher marginal tax rates were used to pay rising interest costs savings would be reduced and work would be

discouraged

bull Rising interest costs would force reductions in important government programs

bull Restrictions to the ability of policymakers to use fiscal policy to respond to economic challenges and

bull An increased risk of a sudden fiscal crisis in which investors demand higher interest rates[93]

Can the US outgrow the problem

GAO Comparative Increase in Spend vs GDP

There is debate regarding whether tax cuts

less intrusive regulation and productivity

improvements could feasibly generate

sufficient economic growth to offset the

deficit and debt challenges facing the

country According to David Stockman

OMB Director under President Reagan

post-1980 Republican ideology embraces

the idea that the economy will outgrow the

deficit if plied with enough tax cuts[94]

Former President George W Bush

exemplified this ideology when he wrote in

2007 it is also a fact that our tax cuts

have fueled robust economic growth and

record revenues[95]

However as described




in the tax policy section of this article multiple studies by economists across the political spectrum and several

government organizations argue that tax cuts increase deficits and debt[9]

[96]

Further the GAO has estimated that double-digit GDP growth would be required for the next 75 years to outgrow

the projected increases in deficits and debt GDP growth averaged 32 during the 1990s Because mandatory

spending growth rates will far exceed any reasonable growth rate in GDP and the tax base the GAO concluded that

the US cannot grow its way out of the problem

[97]

Fed Chair Ben Bernanke stated in April 2010 Unfortunately we cannot grow our way out of this problem No

credible forecast suggests that future rates of growth of the US economy will be sufficient to close these deficits

without significant changes to our fiscal policies[98]

Polls

According to a CBS NewsNew York Times poll in July 2009 56 of people were opposed to paying more taxes to

reduce the deficit and 53 were also opposed to cutting spending According to a Pew Research poll in June 2009

there was no single category of spending that a majority of Americans favored cutting Only cuts in foreign aid (less

than 1 of the budget) polled higher than 33 Economist Bruce Bartlett wrote in December 2009 Nevertheless I

cant really blame members of Congress for lacking the courage or responsibility to get the budget under some

semblance of control All the evidence suggests that they are just doing what voters want them to do which is

nothing[99]

A BloombergSelzer national poll conducted in December 2009 indicated that more than two-thirds of Americans

favored tax increases on the rich (individuals making over $500000) to help solve the deficit problem Further an

across-the-board 5 cut in all federal discretionary spending would be supported by 57 this category is about 30

of federal spending Only 26 favored tax increases on the middle class and only 23 favored reducing the growth

rate in entitlements such as Social Security[100]

[101]

A Rasmussen Reports survey in February 2010 showed that only 35 of voters correctly believe that the majority of

federal spending goes to just defense Social Security and Medicare Forty-four percent (44) say it rsquos not true and20 are not sure

[102]A January 2010 Rasmussen report showed that overall 57 would like to see a cut in

government spending 23 favor a freeze and 12 say the government should increase spending Republicans and

unaffiliated voters overwhelmingly favor spending cuts Democrats are evenly divided between spending cuts and a

spending freeze[103]

According to a Pew Research poll in March 2010 31 of Republicans would be willing to decrease military

spending to bring down the deficit A majority of Democrats (55) and 46 of Independents say they would accept

cuts in military spending to reduce the deficit[104]

Proposed solutions

Solution strategies

In January 2008 then GAO Director David Walker presented a strategy for addressing what he called the federal

budget burning platform and unsustainable fiscal policy This included improved financial reporting to better

capture the obligations of the government public education improved budgetary and legislative processes such as

pay as you go rules the restructure of entitlement programs and tax policy and creation of a bi-partisan fiscal

reform commission He pointed to four types of deficits that comprise the problem budget trade savings and

leadership[105]

Economist Paul Krugman wrote in February 2011 What would a serious approach to our fiscal problems involve I

can summarize it in seven words health care health care health care revenueLong-run projections suggest that

spending on the major entitlement programs will rise sharply over the decades ahead but the great bulk of that rise

will come from the health insurance programs not Social Security So anyone who is really serious about the budget




should be focusing mainly on health care[by] getting behind specific actions to rein in costs[106]

Economist Nouriel Roubini wrote in May 2010 There are only two solutions to the sovereign debt crisis mdash raise

taxes or cut spending mdash but the political gridlock may prevent either from happeningIn the US the average tax

burden as a share of GDP is much lower than in other advanced economies The right adjustment for the US would

be to phase in revenue increases gradually over time so that you dont kill the recovery while controlling the growth

of government spending

[107]

David Leonhardt wrote in The New York Times in March 2010 For now political leaders in both parties are still in

denial about what the solution will entail To be fair so is much of the public What needs to happen Spending will

need to be cut and taxes will need to rise They wonrsquot need to rise just on households making more than $250000

as Mr Obama has suggested They will probably need to rise on your household however much you makeA

solution that relied only on spending cuts would dismantle some bedrock parts of modern American societyA

solution that relied only on taxes would muzzle economic growth[108]

Fed Chair Ben Bernanke stated in April 2010 Thus the reality is that the Congress the Administration and the

American people will have to choose among making modifications to entitlement programs such as Medicare and

Social Security restraining federal spending on everything else accepting higher taxes or some combination

thereof[98]

Journalist Steven Pearlstein argued in May 2010 for a comprehensive series of budgetary reforms These included

Spending caps on Medicare and Medicaid gradually raising the eligibility age for Social Security and Medicare

limiting discretionary spending increases to the rate of inflation and imposing a value-added tax[109]

National Research Council strategies

During January 2010 the National Research Council and the National Academy of Public Administration reported a

series of strategies to address the problem They included four scenarios designed to prevent the public debt to GDP

ratio from exceeding 60

1 Low spending and low taxes This path would allow payroll and income tax rates to remain roughlyunchanged but it would require sharp reductions in the projected growth of health and retirement programs

defense and domestic spending cuts of 20 percent and no funds for any new programs without additional

spending cuts

2 Intermediate path 1 This path would raise income and payroll tax rates modestly It would allow for some

growth in health and retirement spending defense and domestic program cuts of 8 percent and selected new

public investments such as for the environment and to promote economic growth

3 Intermediate path 2 This path would raise income and payroll taxes somewhat higher than with the previous

path Spending growth for health and retirement programs would be slowed but less than under the other

intermediate path and spending for all other federal responsibilities would be reduced This path gives higher

priority to entitlement programs for the elderly than to other types of government spending4 High spending and taxes This path would require substantially higher taxes It would maintain the projected

growth in Social Security benefits for all future retirees and require smaller reductions over time in the growth

of spending for health programs It would allow spending on all other federal programs to be higher than the

level implied by current policies[110]

[111]

CBO budget options reports

The CBO provided a two-volume report discussing the cost and revenue impact of various budget options during

2008 and 2009[112]

[113]

The CBO also estimated in 2007 that allowing the 2001 and 2003 income tax cuts to expire

on schedule in 2010 would reduce the annual deficit by $200ndash 300 billion[114]

In addition CBO reported that annual

defense spending has increased from approximately $300 billion in 2001 (when the budget was last balanced) to$650 billion in 2009

[115]




Republican proposals

Rep Paul Ryan (R) has proposed the Roadmap for Americas Future which is a series of budgetary reforms His

January 2010 version of the plan includes partial privatization of Social Security the transition of Medicare to a

voucher system discretionary spending cuts and freezes and tax reform[116]

A series of graphs and charts

summarizing the impact of the plan are included[117]

Economists have both praised and criticized particular features

of the plan

[118]

[119]

The CBO also did a partial evaluation of the bill

[120]

The Center for Budget and PolicyPriorities (CBPP) was very critical of the Roadmap

[121]Rep Ryan provided a response to the CBPPs analysis

[122]

The Republican Party website includes an alternative budget proposal provided to the President in January 2010 It

includes lower taxes lower annual increases in entitlement spending growth and marginally higher defense

spending than the Presidents 2011 budget proposal[123]

During September 2010 Republicans published A Pledge

to America which advocated a repeal of recent healthcare legislation reduced spending and the size of government

and tax reductions[124]

The NYT editorial board was very critical of the Pledge stating [The Pledge] offers a

laundry list of spending-cut proposals none of which are up to the scale of the problem and many that cannot be

taken seriously[125]

Fiscal reform commission

President Obama established a budget reform commission the National Commission on Fiscal Responsibility and

Reform during February 2010 The Commission shall propose recommendations designed to balance the budget

excluding interest payments on the debt by 2015 This result is projected to stabilize the debt-to-GDP ratio at an

acceptable level once the economy recovers The Commissions report is due by December 1 2010[126]

The Commission released a draft of its proposals on November 10 2010 It included various tax and spend

adjustments to bring long-run government tax revenue and spending into line at approximately 21 of GDP For

fiscal year 2009 tax revenues were approximately 15 of GDP and spending was 24 of GDP The Co-chairs

summary of the plan states that it

bull Achieves nearly $4 trillion in deficit reduction through 2020 via 50+ specific ways to cut outdated programs and

strengthen competitiveness by making Washington cut and invest not borrow and spend

bull Reduces the deficit to 22 of GDP by 2015 exceeding Presidentrsquos goal of primary balance (about 3 of GDP)

bull Reduces tax rates abolishes the alternative minimum tax and cuts backdoor spending (eg mortgage interest

deductions) in the tax code

bull Stabilizes debt by 2014 and reduces debt to 60 of GDP by 2024 and 40 by 2037

bull Ensures lasting Social Security solvency prevents projected 22 cuts in 2037 reduces elderly poverty and

distributes burden fairly[127]

The Center on Budget and Policy Priorities evaluated the draft plan praising that it puts everything on the table but

criticizing that it lacks an appropriate balance between program cuts and revenue increases[128]




Total outlays in recent budget submissions

Annual US spending 1930-2014 alongside US GDP for comparison

bull 2012 United States federal budget -

$37 trillion (submitted 2011 by

President Obama)



President Obama)



President Obama)



President Bush)


$29 trillion (submitted 2007 byPresident Bush)

bull 2007 United States federal budget - $28 trillion (submitted 2006 by President Bush)






bull 2001 United States federal budget - $19 trillion (submitted 2000 by President Clinton)


bull 1999 United States federal budget - $17 trillion (submitted 1998 by President Clinton)bull 1998 United States federal budget - $17 trillion (submitted 1997 by President Clinton)



The Presidents budget also contains revenue and spending projections for the current fiscal year the coming fiscal

years as well as several future fiscal years In recent years the Presidents budget contained projections five years

into the future The Congressional Budget Office (CBO) issues a Budget and Economic Outlook each January and

an analysis of the Presidents budget each March CBO also issues an updated budget and economic outlook in

August

Actual budget data for prior years is available from the Congressional Budget Office[129]

and from the Office of

Management and Budget (OMB)[130]




Basic budget terms (based on GAO Glossary)

Appropriations Budget authority to incur obligations and to make payments from the Treasury for specified

purposes

Budget Authority Authority provided by federal law to enter into financial obligations that will result in immediate

or future outlays involving federal government funds

Outlay The issuance of checks disbursement of cash or electronic transfer of funds made to liquidate a federal

obligation The term outlays is usually synonymous with expenditure or spending

The amount of budget authority and outlays for a fiscal year usually differ because budget authority from a previous

fiscal year in some cases can be used for outlays in the current fiscal year Some military and some housing

programs have multi-year appropriations in which budget authority is specified for several coming fiscal years

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pdf)[3] http www law cornell edu uscode 31 1105 html

[4] The Federal Credit Reform Act was passed as part of the Omnibus Budget Reconciliation Act of 1990 (PL 101-508)

[5] A bill can also be enacted by a Congressional override of a presidential veto or is automatically enacted if the president takes no action

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[14] 4 Akerlof G Arrow K J Diamond P Klein L R McFadden D L Mischel L Modigliani F North D C Samuelson P A

Sharpe W F Solow R M Stiglitz J Tyson A D amp Yellen J (2003) Economistsrsquo Statement Opposing the Bush Tax Cuts (http

www epi org publications entry econ_stmt_2003 ) (PDF) Retrieved 2007-10-13

[15] Krugman Paul (2007) The Conscience of a Liberal WW Norton Company Inc ISBN 978-0-393-06069-0

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www

cbo

gov

ftpdocs

106xx

doc10640

10-2009-MBR

pdf)[45] Anthony Cordesman and Erin Fitzgerald Resourcing for Defeat Center for Strategic and International Studies 2009 http csis org

publication resourcing-defeat-0


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opds122010 pdf)

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our_work_report_detail aspxid=59098)

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id=3262)

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[62] Charlie Rose-Interview with Economists Stiglitz and Feldstein-January 2009 (http www charlierose com view interview 9899)

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[64] Kidd Thomas S USA Today http blogs usatoday com oped 2006 08 hooked_on_hando html Retrieved May 26 2010[65] Harvard Briefing Paper (http www law harvard edu faculty hjackson Earmarks_16 pdf)

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improper-payments-elimination-and-recovery-act-cutting-waste-and-fraud-government)

[69] IOUSA Movie Byte Sized-You Tube Excerpt - Quote About 26 Minutes In (http www youtube com watchv=O_TjBNjc9Bo)

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[71] 2010 Budget (http www gpoaccess gov usbudget fy10 pdf fy10-newera pdf)

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12-19-Reid_Letter_Managers_Correction_Noted pdf)




[74] NYT-Holtz-Eakin Op Ed-The Real Arithmetic of Healthcare Reform-March 2010 (http www nytimes com 2010 03 21 opinion

21holtz-eakin html)

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html)

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2009-11-19-boyd-state_budgets_health_care_NAPA pdf)

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2011 the-world-wonders-can-states-go-bankrupt php)

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20050414 default htm) Federalreservegov Retrieved 2009-02-27

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pdf trans_annual09_fax pdf)

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2007-04-20-4155011268_x

htm)[87] Fareed Zakaria GPS-Paul Volcker Interview-February 2010 (http transcripts cnn com TRANSCRIPTS 1002 14 fzgps 01 html)

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[89] Charlie Rose Show-Peter Orszag Interview-November 3 2009 (http www charlierose com download transcript 10697)

[90] Zakaria GPS-February 21 2010 (http transcripts cnn com TRANSCRIPTS 1002 21 fzgps 01 html)

[91] Zakaria GPS-April 42010 (http transcripts cnn com TRANSCRIPTS 1004 04 fzgps 01 html)

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[94] NY Times-David Stockman-Four Defamations of the Apocalypse-August 2010 (http www nytimes com 2010 08 01 opinion

01stockman htmlpagewanted=all)

[95] Washington Post-A Heckuva Claim-January 2007 (http www washingtonpost com wp-dyn content article 2007 01 05

AR2007010501801 html)

[96] CBO-Analyzing the Economic and Budgetary Effects of a Ten Percent Cut in Income Tax Rates-December 2005 (http www cbo gov

ftpdocs 69xx doc6908 12-01-10PercentTaxCut pdf)

[97] GAO US Fiscal Briefing 108 (http www gao gov cghome d08446cg pdf)

[98] Ben Bernanke-Speech before the National Commission on Fiscal Responsibility and Reform-April 2010 (http www federalreserve gov

newsevents speech bernanke20100427a htm)

[99] Bartlett-Forbes-Not Another Budget Commission-December 2010 (http www forbes com 2009 12 17

budget-commission-deficit-opinions-columnists-bruce-bartlett html)

[100] Americans want government to spend for jobs send bill to rich (http www bloomberg com apps newspid=20601087amp

sid=awkrRPMONDW8amp pos=9)

[101] BloombergSelzer-Poll Data Detail (http media bloomberg com bb avfile rkt5pqJYr5tM)

[102] Rassmussen Reports-February 2010 (http www rasmussenreports com public_content politics general_politics february_2010

just_35_realize_most_federal_spending_goes_to_national_defense_social_security_medicare)

[103] Rassmussen Reports-January 28 2010 (http www rasmussenreports com public_content politics obama_administration

january_2010 9_expect_obama_s_spending_freeze_to_have_big_impact_on_deficit)[104] Pew Research-Deficit Concerns Rise but Solutions are Elusive-March 2010 (http pewresearch org pubs 1519

deficit-concerns-rise-little-support-for-spending-cuts)

[105] GAO-US Financial Condition and Fiscal Future Briefing-David Walker-January 2008 (http www gao gov cghome d08446cg pdf)

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ref=opinion)

[107] Gulfnews-Nouriel Roubini-US Faces Inflation or Default-May 2010 (http gulfnews com business opinion

us-faces-inflation-or-default-1 622397)

[108] Leonhardt-NYT-The Perils of Pay Less Get More-March 16 2010 (http www nytimes com 2010 03 17 business economy

17leonhardt htmlhp)

[109] Washington Post-Steven Pearlstein-Solving the Deficit Problem Requires an Open Mind Common Sense and Courage-May 2010 (http

www washingtonpost com wp-dyn content article 2010 05 11 AR2010051105000 html)

[110] (http www8 nationalacademies org onpinews newsitem aspxRecordID=12808)

[111] Fiscal Reform Commission-Testimony of Rudolph Penner-April 2010 (http www fiscalcommission gov files

fiscal_commission_penner_testimony pdf)




[112] CBO Budget Options-Volume 1 Healthcare-December 2008 (http www cbo gov doc cfmindex=9925)

[113] CBO Budget Options-Volume 2-August 2009 (http www cbo gov ftpdocs 102xx doc10294 08-06-BudgetOptions pdf)

[114] CBO-Analysis of Presidents Budget for FY2008-March 2007-Table 1-3 Page 6 (http www cbo gov ftpdocs 78xx doc7878

03-21-PresidentsBudget pdf)

[115] CBO-Historical Tables-Table F-7 (http www cbo gov ftpdocs 108xx doc10871 historicaltables pdf)

[116] Republican Website-Roadmap for Americas Future (http www roadmap republicans budget house gov )

[117] Roadmap for Americas Future-Charts amp Graphs-February 2010 (http www roadmap republicans budget house gov plan charts

htm)

[118] Washington Post-Robert Samuelson-Paul Ryans Lonely Challenge-February 2010 (http www washingtonpost com wp-dyn content

article 2010 02 12 AR2010021202382 htmlhpid=opinionsbox1)

[119] Forbes-Bartlett-Paul Ryans Budgetary Holy Grail-February 2010 (http www forbes com 2010 02 11

cut-spending-taxes-budget-medicare-paul-ryan-opinions-columnists-bruce-bartlett html)

[120] CBO-Ryan Roadmap Letter-January 2010 (http www cbo gov ftpdocs 108xx doc10851 01-27-Ryan-Roadmap-Letter pdf)

[121] CBPP-Ryan Bill Analysis-March 10 2010 (http www cbpp org files 3-10-10bud pdf)

[122] Paul Ryan-Response to CBPP Study-March 11 2010 (http www roadmap republicans budget house gov News DocumentSingle

aspxDocumentID=175628)

[123] GOP Solutions for America-Budget-Retrieved September 2010 (http www gop gov solutions budget)

[124] Republican Party-A Pledge to America-September 2010 (http pledge gop gov )

[125] NYT Editorial-The GOPs Pledge-September 25 2010 (http www nytimes com 2010 09 26 opinion 26sun1 htmlsrc=meamp

ref=general)[126] Fiscal Reform Commission-Executive Order-February 18 2010 (http budget senate gov democratic documents 2010 2010fiscal eo

pdf)

[127] Nation Commission-Co-Chairs Report Draft-November 102010 (http www fiscalcommission gov sites fiscalcommission gov files

documents CoChair_Draft pdf)

[128] CBPP-Bowles Simpson Plan Evaluation-November 162010 (http www cbpp org cms index cfmfa=viewamp id=3325)

[129] Historical budgets (http www cbo gov budget historical shtml) from the Congressional Budget Office

[130] Office of Management and Budget website (http www omb gov)

External links

bull NYT-2011 Budget Interactive Graphic-February 2010 (http www nytimes com interactive 2010 02 01 us

budget

html)bull Death and Taxes 2009 (http www wallstats com deathandtaxes resource ) A visual representation of the

2009 United States federal discretionary budget

bull Columbia University selective guide for research on the US Federal budget process (http www columbia

edu cu lweb indiv usgd budget html)

bull FederalSpendingorg Federal Contracts and Grants (http www fedspending org )

bull Historical budget statistics (http www gpoaccess gov usbudget fy09 pdf hist pdf)

bull The Project on Middle East Democracys May 2008 Report on the Presidents Budget Request for FY09 for

Democracy Governance and Human Rights in the Middle East (http pomed org fy-09-budget-request-report)

bull FY 2009 Omnibus Budget (http publicservice evendon com OmniApprop2009M htm) Passed by the House

25Feb2009bull FY 2010 Budget Proposal (http publicservice evendon com FY2010BudgetM htm) Submitted by The

President 26Feb2009

bull Brookings Institution - Auerbach amp Gale - An Update on the Economic and Fiscal Crises 2009 and Beyond -

September 2009 (http www brookings edu papers 2009 06_fiscal_crisis_gale aspx)

bull Gale amp Auerbach (Brookings) - Analysis of 2010 Budget (http www taxpolicycenter org UploadedPDF

411843_economic_crisis pdf)

bull NYT-Warren Buffet-Op Ed-The Greenback Effect (http www nytimes com 2009 08 19 opinion 19buffett

html)

bull Federal Budget Experts (http www whorunsgov com Issues Federal_budget ) at WhoRunsGov at The

Washington Post




Chart talk examples

One of the best ways to understand the long-term budget risks is through helpful charts The following sources

contain charts and commentary

bull GAO Fiscal Briefing by David Walker (http www gao gov cghome d08446cg pdf)

bull Perot Charts (http perotcharts com challenges )

bull The Heritage Foundations Budget Chart Book (http www heritage org budgetchartbook )

bull Peter G Peterson Foundation Citizens Guide (http www pgpf org ~ media PGPF Media PDF 2010 05

PGPF_CitizensGuide_2010 ashxpid=4F7D605D-BE87-4B20-A867-EA24ACB761C8)

bull IOUSA Movie - 30 Minute You Tube Summary-Narrated by Former GAO Director David Walker (http

www iousathemovie com )

Budget games and simulations

bull American Public Media has developed a budget game that allows players to select various policy choices and

measure the effect on key economic variables It is available at APM-Budget Hero Game (http marketplace

publicradio org features budget_hero )

bull Committee for a Responsible Federal Budget-Stabilize the Debt Simulator (http crfb org stabilizethedebt )



Article Sources and Contributors 23

Article Sources and ContributorsUnited States federal budget Source httpenwikipediaorgwindexphpoldid=419654930 Contributors 2rock A little insignificant AaronSw Aaustin Adoniscik Ageekgal

Ahoerstemeier Akadonnew Alansohn Alfie66 Alpha Quadrant (alt) AndrewGioia Antony-22 Anwar saadat Art LaPella Australian cowboy AutoGeek Bar berio Basel Maven Beland

Ben76266 Bento00 Calatayudboy CapitalR Carmichael95 Chris the speller Ckatz Crohnie Cst17 D6 Daniel Pritchard Dcmacnut Decltype Detah DickClarkMises Dthomsen8

Duffman894 Eastlaw Elderp Enon Excirial Failure2002 Farc aster Flyboy121 Footwarrior Gfenno Giraffedata Grampion76 GregorB Grittsu Ground Zero Gudeldar Gvotno

IntrigueBlue JaGa JamesMLane Jamesdowallen Jatkins Jfree dom007 Joetheguy John Broughton Jojhutton Jsg278 KGasso Kalmia Kborer King of Hearts Kingturtle Kslays Kurieeto

LaceyLoftin Levineps Lifthrasir1 LilHelpa M3taphysical Markles MaryD99 Maxis ftw Mibs Michael Keenan Mikael Haumlggstroumlm Miss Madeline Mluehrmann Mnm628 Morphh

Mtalleyrand NawlinWiki Nick Number Nononsenseplease Nsaa Ottre Oxymoron83 Pacomartin Pharaoh of the Wizards Pinkkeith Psoreilly RnB Razorflame Rich FarmbroughRightCowLeftCoast Rjwilmsi Ronhjones Rricci Sardonicone Sebmol Sicjedi Skeejay Sonia South Bay Spencerk Stevewiki56 Student7 TastyPoutine Texture The Thing That Should Not

Be Theodork Thrillspillchill TimeClock871 TomCat4680 TomPointTwo Top-50-in-the-World-MBA Tulandro Van helsing VolatileChemical Votarys Wasted Time R WildRichLord Will

Pittenger WorthWhatPaid Zebov Zzyzx11 242 anonymous edits

Image Sources Licenses and ContributorsImageUS Federal Spending - FY 2007png Source httpenwikipediaorgwindexphptitle=FileUS_Federal_Spending_-_FY_2007png License GNU Free Documentation License

Contributors farcaster

ImageUS Federal Receipts - FY 2007png Source httpenwikipediaorgwindexphptitle=FileUS_Federal_Receipts_-_FY_2007png License Creative Commons Attribution-Sharealike

30 Contributors farcaster

ImageRevenue and Expense to GDP Chart 1993 - 2008png Source httpenwikipediaorgwindexphptitle=FileRevenue_and_Expense_to_GDP_Chart_1993_-_2008png License GNU

Free Documentation License Contributors UserFarcaster

FileEstimated Funding Gaps in Medicare and Social Security Programspng Source

httpenwikipediaorgwindexphptitle=FileEstimated_Funding_Gaps_in_Medicare_and_Social_Security_Programspng License GNU Free Documentation License Contributors

UserFarcaster

ImageGAO Slidepng Source httpenwikipediaorgwindexphptitle=FileGAO_Slidepng License Public Domain Contributors GAO Original uploader was Farcaster at enwikipedia

FileUS Defense Spending Trendspng Source httpenwikipediaorgwindexphptitle=FileUS_Defense_Spending_Trendspng License GNU Free Documentation License Contributors

UserFarcaster

FileDiscretionary Spending by Dpt - 2010Epng Source httpenwikipediaorgwindexphptitle=FileDiscretionary_Spending_by_Dpt_-_2010Epng License GNU Free Documentation

License Contributors UserFarcaster

FileDeficits vs Debt Increases - 2009png Source httpenwikipediaorgwindexphptitle=FileDeficits_vs_Debt_Increases_-_2009png License GNU Free Documentation License

Contributors Farcaster (talk) 1759 17 October 2009 (UTC) Original uploader was Farcaster at enwikipedia

FileImpact of Bush Tax Cut Extensionpng Source httpenwikipediaorgwindexphptitle=FileImpact_of_Bush_Tax_Cut_Extensionpng License Public Domain Contributors

UserFarcaster

File2010 Budget - Deficit and Debt Increasespng Source httpenwikipediaorgwindexphptitle=File2010_Budget_-_Deficit_and_Debt_Increasespng License GNU Free Documentation

License Contributors Farcaster (talk) 1854 1 Marc h 2009 (UTC) Original uploader was Farcaster at enwikipedia

FileUS Trade Deficit Dollars and GDPpng Source httpenwikipediaorgwindexphptitle=FileUS_Trade_Deficit_Dollars_and__GDPpng License unknown Contributors -

ImageGrowth Rates GDP vs Entitlementspng Source httpenwikipediaorgwindexphptitle=FileGrowth_Rates_GDP_vs_Entitlementspng License unknown Contributors GAO

ImageUS Federal Outlay and GDP linear graphsvg Source httpenwikipediaorgwindexphptitle=FileUS_Federal_Outlay_and_GDP_linear_graphsvg License Creative Commons

Zero Contributors UserXp84

License

Creative Commons Attribution-Share Alike 30 Unportedhttp creativecommons org licenses by-sa 3 0




Budget principles

The US Constitution (Article I section 9 clause 7) states that [n]o money shall be drawn from the Treasury but in

Consequence of Appropriations made by Law and a regular Statement and Account of Receipts and Expenditures of

all public Money shall be published from time to time

Each year the President of the United States submits his budget request to Congress for the following fiscal year as

required by the Budget and Accounting Act of 1921 Current law (31 USC sect 1105 [3](a)) requires the president to

submit a budget no earlier than the first Monday in January and no later than the first Monday in February

Typically presidents submit budgets on the first Monday in February The budget submission has been delayed

however in some new presidents first year when previous president belonged to a different party

The federal budget is calculated largely on a cash basis That is revenues and outlays are recognized when

transactions are made Therefore the full long-term costs of entitlement programs such as Medicare Social Security

and the federal portion of Medicaid are not reflected in the federal budget By contrast many businesses and some

foreign governments have adopted forms of accrual accounting which recognizes obligations and revenues when

they are incurred The costs of some federal credit and loan programs according to provisions of the Federal Credit

Reform Act of 1990 are calculated on a net present value basis[4]

Federal agencies cannot spend money unless funds are authorized and appropriated Typically separate

Congressional committees have jurisdiction over authorization and appropriations The House and Senate

Appropriations Committees currently have 12 subcommittees which are responsible for drafting the 12 regular

appropriations bills that determine amounts of discretionary spending for various federal programs Appropriations

bills must pass both the House and Senate and then be signed by the president in order to give federal agencies legal

authority to spend[5]

In many recent years regular appropriations bills have been combined into omnibus bills

Congress may also pass special or emergency appropriations Spending that is deemed an emergency is

exempt from certain Congressional budget enforcement rules Funds for disaster relief have sometimes come from

supplemental appropriations such as after Hurricane Katrina In other cases funds included in emergency

supplemental appropriations bills support activities not obviously related to actual emergencies such as parts of the2000 Census of Population and Housing Special appropriations have been used to fund most of the costs of war and

occupation in Iraq and Afghanistan so far

Budget resolutions and appropriations bills which reflect spending priorities of Congress will usually differ from

funding levels in the presidents budget The president however retains substantial influence over the budget process

through his veto power and through his congressional allies when his party has a majority in Congress

Federal budget data

Several government agencies provide budget data These include the Government Accountability Office (GAO) the

Congressional Budget Office the Office of Management and Budget (OMB) and the US Treasury Department

CBO publishes The Budget and Economic Outlook in January which is typically updated in August It also publishes

a Monthly Budget Review OMB which is responsible for organizing the Presidents budget presented in February

typically issues a budget update in July GAO and Treasury issue Financial Statements of the US Government

usually in the December following the close of the federal fiscal year which occurs September 30 There is a

corresponding Citizens Guide a short summary The Treasury Department also produces a Combined Statement of

Receipts Outlays and Balances each December for the preceding fiscal year which provides detailed data on

federal financial activities

Historical tables within the Presidents Budget (OMB) provides a wide range of data on Federal Government

finances Many of the data series begin in 1940 and include estimates of the Presidentrsquos Budget for 2009ndash 2014

Additionally Table 11 provides data on receipts outlays and surpluses or deficits for 1901ndash 1939 and for earliermulti-year periods This document is composed of 17 sections each of which has one or more tables Each section










product)[6]









taxes (9)[7]








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The US defense




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budget experts[74]

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The Economic




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The trade deficit




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balance[87]












Deficit



















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discouraged




















record revenues[95]







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Polls







nothing[99]






[101]










Proposed solutions

Solution strategies






leadership[105]














[107]










thereof[98]










spending cuts











[111]



2008 and 2009[112]

[113]





[115]











of the plan

[118]

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President Obama)



President Obama)



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gov

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[56] Congressional Budget Office-The Budget and Economic Outlook-August 2010-Table 17 on 4 (http www cbo gov ftpdocs






id=3262)
















[73] CBO Letter to Senator Harry Reid-December 19 2009 See Table 1 and Page 16 (http www cbo gov ftpdocs 108xx doc10868






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product)[6]









taxes (9)[7]








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deficits[9]




[11]

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[13]














income[14]





















deficit[19]



increases[20]



Tax expenditures


















Economist







A comparison








































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and 12 of GDP[37]




[39]







Other spending









The US defense




4 of GDP[42]








81 increase[43]















bills[45]

























As a result nearly













(1998ndash 2001)[52]











January 18 2010[54]
















public






































[59]

Stimulus packages
















Earmarks



In some












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(Table S-8)[71]

[72]







budget experts[74]

State finances







services[76]









[79]













The Economic




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The trade deficit




[85]USA Today













balance[87]












Deficit



















your friends[90]
















otherwise occur


discouraged




















record revenues[95]







[96]





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Polls







nothing[99]






[101]










Proposed solutions

Solution strategies






leadership[105]














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thereof[98]










spending cuts











[111]



2008 and 2009[112]

[113]





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of the plan

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income[14]





















deficit[19]



increases[20]



Tax expenditures


















Economist







A comparison








































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and 12 of GDP[37]




[39]







Other spending









The US defense




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As a result nearly













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[59]

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balance[87]












Deficit



















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otherwise occur


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record revenues[95]







[96]





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Polls







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[101]










Proposed solutions

Solution strategies






leadership[105]














[107]










thereof[98]










spending cuts











[111]



2008 and 2009[112]

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[118]

[119]


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August









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References



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international cfm)





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html239829)






[41] GAO-2009 Financial Statements of the US Government - 5 (http www gao gov financial fy2009 09stmt pdf)



June 21 2009



www

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gov

ftpdocs

106xx

doc10640

10-2009-MBR











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id=3262)






















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President 26Feb2009






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Chart talk examples



































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License












Economist







A comparison








































[30]

































and 12 of GDP[37]




[39]







Other spending









The US defense




4 of GDP[42]








81 increase[43]















bills[45]

























As a result nearly













(1998ndash 2001)[52]











January 18 2010[54]
















public






































[59]

Stimulus packages
















Earmarks



In some












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(Table S-8)[71]

[72]







budget experts[74]

State finances







services[76]









[79]













The Economic




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The trade deficit




[85]USA Today













balance[87]












Deficit



















your friends[90]
















otherwise occur


discouraged




















record revenues[95]







[96]





[97]




Polls







nothing[99]






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Proposed solutions

Solution strategies






leadership[105]














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2008 and 2009[112]

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[115]











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[118]

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[30]

































and 12 of GDP[37]




[39]







Other spending









The US defense




4 of GDP[42]








81 increase[43]















bills[45]

























As a result nearly













(1998ndash 2001)[52]











January 18 2010[54]
















public






































[59]

Stimulus packages
















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In some












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[72]







budget experts[74]

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services[76]









[79]













The Economic




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The trade deficit




[85]USA Today













balance[87]












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your friends[90]
















otherwise occur


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record revenues[95]







[96]





[97]




Polls







nothing[99]






[101]










Proposed solutions

Solution strategies






leadership[105]














[107]










thereof[98]










spending cuts











[111]



2008 and 2009[112]

[113]





[115]











of the plan

[118]

[119]


[120]



[122]




































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[114] CBO-Analysis of Presidents Budget for FY2008-March 2007-Table 1-3 (http www cbo gov ftpdocs 78xx doc7878





htm)













pdf)






External links


budget











President 26Feb2009






html)


Washington Post




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Other spending









The US defense




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81 increase[43]















bills[45]

























As a result nearly













(1998ndash 2001)[52]











January 18 2010[54]
















public






































[59]

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balance[87]












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your friends[90]
















otherwise occur


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record revenues[95]







[96]





[97]




Polls







nothing[99]






[101]










Proposed solutions

Solution strategies






leadership[105]














[107]










thereof[98]










spending cuts











[111]



2008 and 2009[112]

[113]





[115]











of the plan

[118]

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President 26Feb2009






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As a result nearly













(1998ndash 2001)[52]











January 18 2010[54]
















public






































[59]

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In some












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(Table S-8)[71]

[72]







budget experts[74]

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[85]USA Today













balance[87]












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otherwise occur


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[96]





[97]




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[101]










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leadership[105]














[107]










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spending cuts











[111]



2008 and 2009[112]

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[115]











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References



01-12-10bud




























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June 21 2009



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President 26Feb2009






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[59]

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In some












[67]






























(Table S-8)[71]

[72]







budget experts[74]

State finances







services[76]









[79]













The Economic




force[82]







The trade deficit




[85]USA Today













balance[87]












Deficit



















your friends[90]
















otherwise occur


discouraged




















record revenues[95]







[96]





[97]




Polls







nothing[99]






[101]










Proposed solutions

Solution strategies






leadership[105]














[107]










thereof[98]










spending cuts











[111]



2008 and 2009[112]

[113]





[115]











of the plan

[118]

[119]


[120]



[122]




































President Obama)



President Obama)



President Obama)



President Bush)


















August









purposes








References



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June 21 2009



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Earmarks



In some












[67]






























(Table S-8)[71]

[72]







budget experts[74]

State finances







services[76]









[79]













The Economic




force[82]







The trade deficit




[85]USA Today













balance[87]












Deficit



















your friends[90]
















otherwise occur


discouraged




















record revenues[95]







[96]





[97]




Polls







nothing[99]






[101]










Proposed solutions

Solution strategies






leadership[105]














[107]










thereof[98]










spending cuts











[111]



2008 and 2009[112]

[113]





[115]











of the plan

[118]

[119]


[120]



[122]




































President Obama)



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August









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2007-04-20-4155011268_x











AR2007010501801 html)


















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(Table S-8)[71]

[72]







budget experts[74]

State finances







services[76]









[79]













The Economic




force[82]







The trade deficit




[85]USA Today













balance[87]












Deficit



















your friends[90]
















otherwise occur


discouraged




















record revenues[95]







[96]





[97]




Polls







nothing[99]






[101]










Proposed solutions

Solution strategies






leadership[105]














[107]










thereof[98]










spending cuts











[111]



2008 and 2009[112]

[113]





[115]











of the plan

[118]

[119]


[120]



[122]




































President Obama)



President Obama)



President Obama)



President Bush)


















August









purposes








References



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June 21 2009



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2007-04-20-4155011268_x











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President 26Feb2009






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The trade deficit




[85]USA Today













balance[87]












Deficit



















your friends[90]
















otherwise occur


discouraged




















record revenues[95]







[96]





[97]




Polls







nothing[99]






[101]










Proposed solutions

Solution strategies






leadership[105]














[107]










thereof[98]










spending cuts











[111]



2008 and 2009[112]

[113]





[115]











of the plan

[118]

[119]


[120]



[122]




































President Obama)



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References



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your friends[90]
















otherwise occur


discouraged




















record revenues[95]







[96]





[97]




Polls







nothing[99]






[101]










Proposed solutions

Solution strategies






leadership[105]














[107]










thereof[98]










spending cuts











[111]



2008 and 2009[112]

[113]





[115]











of the plan

[118]

[119]


[120]



[122]




































President Obama)



President Obama)



President Obama)



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August









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References



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[96]





[97]




Polls







nothing[99]






[101]










Proposed solutions

Solution strategies






leadership[105]














[107]










thereof[98]










spending cuts











[111]



2008 and 2009[112]

[113]





[115]











of the plan

[118]

[119]


[120]



[122]




































President Obama)



President Obama)



President Obama)



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August









purposes








References



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[107]










thereof[98]










spending cuts











[111]



2008 and 2009[112]

[113]





[115]











of the plan

[118]

[119]


[120]



[122]




































President Obama)



President Obama)



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August









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References



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President 26Feb2009






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of the plan

[118]

[119]


[120]



[122]




































President Obama)



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August









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References



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[73] CBO Letter to Senator Harry Reid-December 19 2009 See Table 1 and (http www cbo gov ftpdocs 108xx doc10868






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United States Federal Budget

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