Individual Income Taxes 2010 Solutions

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




                           THE CONCORD COALITION
                                 www.concordcoalition.org




                                                             THE CONCORD
www.concordcoalition.org
                                                             COALITION
                  Composition of Projected FY 2010 Federal Government
                                  Revenues and Outlays
                                 (Deficit: $1.35 Trillion)


                      Interest

                    Domestic*

                                                                                                              Estate & Gift Taxes
                                                                                                              ($21 billion)
                     Defense
                                                                                                               Other Taxes
                       Other                                                                                   Corporate Taxes
                  Entitlements
                                                                                                               Social
                                                                                                               Insurance
                     Medicare                                                                                  Taxes
                   & Medicaid
                                                                                                               Individual
                      Social                                                                                   Income
                     Security                                                                                  Taxes

                              Outlays: $3.52 trillion                            Revenue: $2.18 trillion
 *Includes all appropriated domestic spending such as education, transportation, homeland security, housing
 assistance, and foreign aid.
 Source: CBO January 2010.
                                                                                                      THE CONCORD
www.concordcoalition.org
                                                                                                      COALITION
                           Mandatory spending is consuming a
                              growing share of the budget

                      1970                             1990              2010


               62%                 31%               40%         45%   39%        55%

                                        7%
                                                           15%          6%



                Mandatory                              Net Interest          Discretionary


Source: Congressional Budget Office, January 2010.

                                                                        THE CONCORD
www.concordcoalition.org
                                                                        COALITION
                         Current Policy Trends Lead to Large Sustained Deficits
                                                         Fiscal Years 2011-2020



                                                                                                  -$6.0 Trillion Deficit
 Billions of Dollars




                                                                             -$14.6 Trillion Deficit




                       CBO March 2010 Baseline
                       The Concord Coalition Plausible Baseline adds in the effects of the new Health Care Reform law
                       and assumes that discretionary spending grows at the rate of nominal GDP, that war costs slow
                       gradually, that Medicare physician payment cuts are postponed, and that all expiring tax
                       provisions (including those from the 2009 stimulus package) are extended with AMT relief.
 Source: Congressional Budget Office, March 2010 and Concord Coalition analysis.
                                                                                                           THE CONCORD
www.concordcoalition.org
                                                                                                           COALITION
                                   Federal Spending vs. Revenues as a
                                    Percent of GDP (FY 1980-2020)
                         CBO January Baseline Compared to the President’s Budget


                                                                                                    Actual              Projected

                                                                    Average outlays: 21.0%
 Percentage of GDP




                                            Average revenues: 18.3%




                                        CBO Jan. 2010 Baseline                                               President’s Budget

Source: Congressional Budget Office, January 2010 and Office of Management and Budget, Feb. 2010.
                                                                                                                   THE CONCORD
www.concordcoalition.org
                                                                                                                   COALITION
                                Debt Held by the Public as a Percent of GDP
                                                            1940-2040


                                                                        Actual   Projected
       As a Percentage of GDP




                                      World War II
                                       108.6%                            2010
                                                                        63.6%




Source: GAO Analysis, September 2009 and OMB Historical Tables 2010.
                                                                                   THE CONCORD
www.concordcoalition.org
                                                                                   COALITION
                           Percent of Debt Held by the Public
                                 Owned by Foreigners
                                                             (1987-2009)




Source: United States Treasury Department, Treasury Bulletin, December 2009.
                                                                               THE CONCORD
www.concordcoalition.org
                                                                               COALITION
                           Interest Costs Go Through The Roof
 Billions of Dollars




Source: Congressional Budget Office, Jan. 2010 and Office of Management and Budget, Feb. 2010.
                                                                                                 THE CONCORD
www.concordcoalition.org
                                                                                                 COALITION
                           Social Security, Medicare, Medicaid and Interest
                         Consume All Federal Revenues in Less Than 15 Years
            Percentage of Revenues




                                                                   Year

                                        Social Security, Medicare and Medicaid   Interest

Source: Government Accountability Office, February 2010.
                                                                                 THE CONCORD
www.concordcoalition.org
                                                                                 COALITION
                                                    America’s Population is Aging
                                                         Population age 65 and Over
        Percentage of Population Aged 65 and Over




                                                                        Year



Source: Social Security and Medicare Trustees’ Report, May 2009.
                                                                                      THE CONCORD
www.concordcoalition.org
                                                                                      COALITION
                                   Health Care Costs are Rising Faster
                                           Than the Economy
                                              Historic Level of
                                              Federal Spending
       Percentage of GDP




                                     Historic Level of
                                     Federal Revenues




                           Assumes that health care cost growth will not exceed GDP growth.
                           Assumes that health care cost growth continues at the average rate for the past 40 years (2.5
                           percentage points greater than GDP growth.)
                           Assumes that health care cost growth rate declines to 1.0 percentage point greater than GDP growth—
                           consistent with the assumption used by the Medicare Trustees.
Source: Congressional Budget Office, June 2009.
                                                                                                           THE CONCORD
www.concordcoalition.org
                                                                                                           COALITION
                                  Defense Discretionary Spending as a
         As a Percentage of GDP
                                          Percentage of GDP




 Source: Congressional Budget Office, January 2010.
                                                                 THE CONCORD
www.concordcoalition.org
                                                                 COALITION
             Projected Growth in Entitlement Spending far
                    Greater than Defense Spending




Source: Government Accountability Office and Congressional Budget Office.
                                                                            THE CONCORD
www.concordcoalition.org
                                                                            COALITION
                      Medicare Costs Soar in the Coming Decades




                                                      Calendar Year

                          General Revenues required to fund the program

                          Income from dedicated taxes, premiums, and state transfers
 Source: Medicare Trustees’ Report, May 2009.
                                                                                       THE CONCORD
www.concordcoalition.org
                                                                                       COALITION
                                               Social Security and Medicare Part A Cumulative Cash
                                                                Surpluses and Deficits
                                                         In Constant 2009 Dollars — 2009 through 2085



                                                      $147 Billion: Cumulative
        In Billions of Constant 2009 Dollars




                                                      Social Security Cash Surplus
                                                                                               -$28 Trillion: Cumulative
                                                                                               Social Security Cash Deficits


                                                                                              -$58 Trillion: Cumulative
                                                                                              Medicare Part A Cash Deficits




                                                -86 Trillion: Cumulative Social Security
                                                and Medicare Part A Cash Deficits



                                               2010     2020       2030      2040      2050      2060       2070      2080
                                                                              Calendar Year



 Source: Social Security Trustees’ Report—May 2009 (Intermediate Projections)
                                                                                                           THE CONCORD
www.concordcoalition.org
                                                                                                           COALITION
          Current fiscal policy is on an unsustainable path
                                               Federal Outlays as a Percentage of GDP




                                                                                                 Interest




                                                                                                All Other


                                                                                                Medicaid
                           Average tax revenue
                                                                                               Medicare


                                                                                            Social Security




Source: Government Accountability Office, February 2010.
                                                                                        THE CONCORD
www.concordcoalition.org
                                                                                        COALITION
                           Why Deficits Matter

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



                                                 THE CONCORD   17
www.concordcoalition.org
                                                 COALITION
                           Other Costs of Deficits

   • Deficits raise uncertainty about future policies
   • Deficits reduce the government’s flexibility for dealing
     future contingencies and crises
   • Deficits undermine budget discipline




                                                     THE CONCORD   18
www.concordcoalition.org
                                                     COALITION
                           Popular Myths that Impede Action


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



                                                       THE CONCORD
www.concordcoalition.org
                                                       COALITION
                           Key Points of Agreement
   Members of the Fiscal Wake-Up Tour do not necessarily agree on the ideal
 levels of spending, taxes and debt, but we do agree on the following key points:

      • Current fiscal policy is unsustainable
      • There are no easy solutions, such as cutting waste fraud
        and abuse or growing our way out of the problem.
      • Finding solutions will require bipartisan cooperation and
        a willingness to discuss all options.
      • Public engagement and understanding is vital in finding
        solutions.
      • This is not about numbers. It is a moral issue.

                                                            THE CONCORD
www.concordcoalition.org
                                                            COALITION

				
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