cbo briefing on the federal budget dec 4 2013
TRANSCRIPT
Congressional Budget Office
Overview of the Federal Budget
National Conference of State Legislatures Fall Forum
December 4, 2013
Jeff Holland Chief, Projections Unit
1 C O N G R E S S I O N A L B U D G E T O F F I C E
Budget Totals, 2009, 2013, 2015
Billions of Dollars Percentage of GDP Actual,
2009 Actual,
2013 2015 Actual,
2009 Actual,
2013 2015
Total Revenues 2,105 2,774 3,399 14.6 16.7 18.6
Total Outlays 3,518 3,454 3,777 24.4 20.8 20.7 _____________________________________________________________________________ _________________________________________________________________ _________________________________________________________________ ____________________________________________________________________ _________________________________________________________________ _________________________________________________________________
Total Deficit -1,413 -680 -378 -9.8 -4.1 -2.1
2 C O N G R E S S I O N A L B U D G E T O F F I C E
Upcoming Decisions Facing Lawmakers
■ Appropriations for fiscal year 2014 (January 2014)
■ Statutory limit on federal debt (February 2014)
■ Longer-term budget issues posed by the large current and projected federal debt and the implications of rising health care costs and the aging population
3 C O N G R E S S I O N A L B U D G E T O F F I C E
Federal Budget Deficits or Surpluses
(Percentage of gross domestic product)
1973 1978 1983 1988 1993 1998 2003 2008 2013 2018 2023-12
-8
-4
0
4
-12
-8
-4
0
4
Deficits
Surpluses Actual BaselineProjection
The deficit figure for 2013 comes from the Final Monthly Treasury Statement released on October 30, 2013.
4 C O N G R E S S I O N A L B U D G E T O F F I C E
Total Revenues and Outlays
(Percentage of gross domestic product before BEA revisions)
1973 1978 1983 1988 1993 1998 2003 2008 2013 2018 20230
14
16
18
20
22
24
26
-0
14
16
18
20
22
24
26
Revenues
Outlays
Average Revenues,1973 to 2012
(17.9%)
Average Outlays,1973 to 2012
(21.0%)
Actual Projected
5 C O N G R E S S I O N A L B U D G E T O F F I C E
Debt Held by the Public and Net Interest
(Billions of dollars)
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 20230
100
200
300
400
500
600
700
800
900
1,000
0
5,000
10,000
15,000
20,000
25,000
Debt Held by the Public(Right axis)
Net Interest(Left axis)
6 C O N G R E S S I O N A L B U D G E T O F F I C E
Revenues, by Major Source
(Percentage of gross domestic product)
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 20220
2
4
6
8
10
12
0
2
4
6
8
10
12Actual Projected
Social Insurance(Payroll) Taxes
Other Revenue Sources
IndividualIncome Taxes
CorporateIncome Taxes
7 C O N G R E S S I O N A L B U D G E T O F F I C E
Selected Major Tax Expenditures in 2012, Compared with Other Categories of Revenues and Outlays
(Percentage of gross domestic product before BEA revisions)
IndividualIncome Taxes
SocialInsurance
Taxes
Corporate IncomeTaxes and
Other Revenues
Selected MajorTax Expenditures
Medicare Defense Social Security0
2
4
6
8
0
2
4
6
8
IndividualIncome Tax
Expenditures
Payroll TaxExpenditures
Revenues Outlays
8 C O N G R E S S I O N A L B U D G E T O F F I C E
Effect of Selected Major Tax Expenditures, 2013 to 2022
9 C O N G R E S S I O N A L B U D G E T O F F I C E
Projected Spending for Major Budget Categories
(Percentage of gross domestic product before BEA revisions)
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 20230
1
2
3
4
5
6
7
0
1
2
3
4
5
6
7
Major Health Care Programs
Social Security
Other Mandatory Spending
DefenseDiscretionary Spending
NondefenseDiscretionary Spending
Net Interest
10 C O N G R E S S I O N A L B U D G E T O F F I C E
Federal Debt Held by the Public Under CBO’s Extended Baseline
(Percentage of gross domestic product)
11 C O N G R E S S I O N A L B U D G E T O F F I C E
The Projection of Debt
■ Current debt is very high by historical standards.
■ Discretionary spending is projected to decline to historically low levels.
■ The 10-year horizon does not fully reflect long-term pressures.
12 C O N G R E S S I O N A L B U D G E T O F F I C E
Why Does Rising Federal Debt Matter?
■ Tax revenues are used to pay interest rather than to finance current programs.
■ Crowding out of saving and investment lowers future output and income relative to what would otherwise occur.
■ The ability of the government to respond to future challenges is reduced.
■ The risk of a sharp jump in interest rates (perhaps related to flight from U.S. Treasuries or U.S. assets more generally) is heightened.
13 C O N G R E S S I O N A L B U D G E T O F F I C E
Population Age 65 or Older as a Share of the Population Ages 20 to 64
(Percent)
2000 2005 2010 2015 2020 2025 2030 20350
10
20
30
40
0
10
20
30
40Actual Projected
14 C O N G R E S S I O N A L B U D G E T O F F I C E
Spending for Social Security Under CBO’s Extended Baseline
(Percentage of gross domestic product)
2000 2005 2010 2015 2020 2025 2030 20350
1
2
3
4
5
6
7
0
1
2
3
4
5
6
7Actual Projected
15 C O N G R E S S I O N A L B U D G E T O F F I C E
Federal Spending on Major Health Care Programs, by Category, Under CBO’s Extended Baseline
(Percentage of gross domestic product)
16 C O N G R E S S I O N A L B U D G E T O F F I C E
Spending and Revenues Under CBO’s Extended Baseline
(Percentage of gross domestic product)
2038
2013
Average,1973–2012 4.2
4.9
6.2
2.7
4.6
8.0
11.2
10.0
7.1
2.2
1.3
4.9
2038
2013
Average,1973–2012 20.4
20.8
26.2
17.4
17.0
19.7
-3.0
-3.9
-6.4
Social SecurityMajor Health CarePrograms
Other NoninterestSpending Net Interest
Total Outlays Total Revenues Deficit
17 C O N G R E S S I O N A L B U D G E T O F F I C E
Conclusion
Given the aging of the population and rising costs for health care, attaining a sustainable federal budget will require the United States to deviate from the policies of the past 40 years in at least one of the following ways:
■ Raise federal revenues significantly above their average share of GDP
■ Make major changes to Social Security and federal health care programs
■ Pursue some combination of the two approaches