The Federal Budget Picture SHAI AKABAS, ASSOCIATE DIRECTOR OF - PowerPoint PPT Presentation

The Federal Budget Picture SHAI AKABAS, ASSOCIATE DIRECTOR OF ECONOMIC POLICY

A Little About BPC

BPC has tackled many critical issues over the past seven years 3 Debt Reduction Democracy Governors’ BPCAN Task Force Project Council Created Homeland Security Project Housing Commission 2010 Leaders’ Project on 50 Funders 2011 Prevention Initiative Health Care 40 Staff 50 Funders $21M 44 Staff 2009 $19M National Financial Regulatory 33 Funders Transportation Policy Reform Initiative 40 Staff 2012 Project 100 Funders $24M 62 Staff CPR $21M Foreign Policy 15 Funders 2008 Immigration Project 30 Staff 2013 Task Force $24M 150 Funders BPC CEO Health 89 Staff Formed and 14 Projects 1 Funder Innovation 2007 $22M 15 Staff Council 2014 Energy 1 Project Project $11M

4 BPC Programs in 2015 National Energy and Economic Governance Security Health Program Infrastructure Policy Program Program Program Program Commission on Economic Foreign Policy Political Health Project Energy Project Policy Project Project Reform Financial Health Regulatory Homeland Democracy Innovation Reform Security Project Project Initiative Initiative Nutrition & Housing Prevention Governors’ Initiative Initiative Council Immigration Task Force Retirement Security and Personal Savings Last updated 3/27/2015

The Economy – Not Back Yet

ECO CONOM NOMY Y STIL ILL L PE PERF RFORMIN ORMING BE BELOW LOW PO POTENT TENTIAL IAL 6 20 20 Actual ual Projection jection 18 18 ars Potential Po ntial GDP 09 Dollar 16 16 Real GDP ns of 2009 14 14 lions Trilli 12 12 10 10 2005 2005 2008 2008 2011 2011 2014 2014 2017 2017 2020 2020 N OTE : Axis does not start at zero. S OURCE : CBO Budget and Economic Outlook, 2015

The Federal Budget – Present, Past, and Future

FEDERAL RAL SP SPENDI NDING NG BY M BY MAJOR AJOR CATEGORY GORY, , 20 2014 8 $4,000 $4,00 Net Interes erest, t, $229 29 Other Ot r Mandat dator ory $3 $3,00 ,000 Programs ams, , $420 20 ars Major r Health th ions of Dollar Programs ams, , $831 $2,00 $2,000 Billions Social al Security rity, , $845 45 Non-Defe efense nse $1,00 $1,000 Discre reti tionar onary, , $583 83 Defense se Discre reti tionar onary, , $596 96 $0 $0 N OTE : Figures are net of offsetting receipts. S OURCE : CBO Budget and Economic Outlook, 2015

HI HISTORICAL ORICAL TRE RENDS NDS IN IN FEDERAL RAL SP SPENDING NDING 9 100% 100% Net Interes erest 90% 90% 80% 80% nding al Spending Other r Mandat ator ory 70% 70% Health th Programs ams eral 60% 60% al Feder Social al Security rity 50% 50% nt of Total 40% 40% Percent 30% 30 Discre reti tionar onary y 20% 20% Pe Spending nding 10% 10% 0% 0% 1965 1965 1972 1972 1979 1979 1986 1986 1993 1993 2000 2000 2007 2007 2014 2014 N OTE : Figures are net of offsetting receipts. S OURCE : CBO Budget and Economic Outlook, 2015

PR PROJE JECT CTED D FEDERAL RAL SP SPENDI NDING NG AS AS % O % OF GDP 10 10 10 All Othe her r Federal Spending nding 8 Social ial Security urity nt of GDP 6 Major or Health th Programs Percent 4 Pe Net Interes erest 2 0 2014 2014 2019 2019 2024 2024 2029 2029 2034 2034 2039 2039 N OTE : Figures are net of offsetting receipts. S OURCE : CBO Long Term Budget Outlook, 2014

HE HEAL ALTHCARE THCARE AN AND SO SOCI CIAL AL SE SECUR CURIT ITY Y GROW OW 11 QUI UICK CKLY Y BE BECAUSE USE OF AGIN ING G PO POPULA PULATION TION 10 10 All Othe her r Federal Spending nding 8 So Socia ial l Se Security ity nt of GDP 6 Percent Majo jor Health th Progra ograms ms 4 Pe Net Interes erest 2 0 2014 2014 2019 2019 2024 2024 2029 2029 2034 2034 2039 2039 N OTE : Figures are net of offsetting receipts. S OURCE : CBO Long Term Budget Outlook, 2014

NET IN INTERES REST T GROWS OWS AS AS IN INTERES EREST T RA RATES ES RE RETURN URN 12 TO NORM RMAL AL 10 10 8 All Othe her r Federal Spending nding Social ial Security urity nt of GDP 6 Major or Health th Programs Percent 4 Pe Net t Int nterest 2 0 2014 2014 2019 2019 2024 2024 2029 2029 2034 2034 2039 2039 N OTE : Figures are net of offsetting receipts. S OURCE : CBO Long Term Budget Outlook, 2014

PR PROJE JECT CTION ION ERR RRORS RS CAN AN BE BE SI SIGNI NIFIC FICANT ANT 13 $450 $450 $400 $400 $350 $3 50 2010 Proj ojection ection of Net Interes erest t Costs ts $300 $300 ars ions of Dollar Total al Savings ings: : $352 2 billion ion $250 $250 Billions $200 $200 Actual ual Net Intere rest t Costs ts $150 $150 $100 $100 $50 $50 $0 $0 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 S OURCE : CBO Budget and Economic Outlooks, 2010 and 2015

CU CURR RRENT NT LAW W RE REVENU NUE E WI WILL BE BE TOO O LOW LOW 14 Revenue Revenues averaged 20% of GDP when the budget last balanced… …but are projected 21% 21% 20.6 .6% to average just over 18% in the next ten 19.9 .9% 19.8 .8% 20% 20% years. 19.5 .5% 19% 19% 18.1% 1% 18% 18% 17% 17 16% 16% 1998 1998 1999 1999 2000 2000 2001 2001 2015-2025 2015-20 Avera Average ge N OTE : Axis does not start at zero. S OURCE : CBO Long Term Budget Outlook, 2015

THE HE BOTT TTOM OM LIN INE: : GROWING OWING DEBT BT 15 160 160 Actual ual Projecte jected 120 120 100% % of GDP Debt Held by the Publi lic 80 80 40 40 0 1975 1975 1985 1985 1995 1995 2005 2005 2015 2015 2025 2025 2035 2035 2045 2045 2055 2055 S OURCE : CBO Long-Term Budget and Economic Outlook

Upcoming Issues: Highway Trust Fund

OVERV RVIEW IEW OF HI HIGHW HWAY Y TRUS UST T FUN UND HEADER GOES HERE 17 Funds infrastructure and construction • Provides funding for highway and transit programs in • the form of reimbursements to states Multiple accounts • Highway Account • Mass Transit Account • Main source of revenue is the gas tax •

OVERV RVIEW IEW OF HI HIGHW HWAY Y TRUS UST T FUN UND HEADER GOES HERE 18 Highway user taxes (e.g., “gas tax”) have been • extended through September 30, 2016 Most budget authority in form of contract authority – • authority to incur obligations in advance of appropriations Obligation limits, usually set in the annual • appropriations acts, govern how much contract authority can be used in a given year

CB CBO PR PROJECT JECTS S LAR ARGE GE SH SHORTF TFAL ALL 19 Projections of Highway Trust Fund 70 60 Outlays 50 Billions of Dollars CUMULATIVE SHORTFALL: $166 Billion 40 Revenues and Interest 30 20 10 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Fiscal Year SOURCE: Congressional Budget Office

WHAT’S CAUSING THE LONG -TE TERM RM PR PROBLEM? BLEM? 20 1. Gas tax has not increased since 1993 2. Americans driving less per person 3. Vehicles becoming more efficient Transfers from general funds have filled the gap •

IM IMMEDI EDIATE TE PR PROBLEM BLEMS 21 Highway bill authorization expires 5/31/2015 • No cost to reauthorize • Summer FY 2015, HTF insufficient to meet • obligations DoT will reduce reimbursements for state infrastructure projects • House and Senate budgets light on solutions for HTF • “Deficit - neutral reserve fund for transportation” • Want to stop transfers that close gap in funding •

TRUS UST T FUN UND NEARI ARING NG EXHA HAUS USTI TION ON 22

PR PROPOSED POSED SO SOLUTIONS UTIONS 23 UPDATE Act (Rep. Blumenauer (D-OR)) • Doubles gas tax • Gas Tax Replacement Act (Rep. Huffman (D-CA)) • Replace with lifecycle carbon emissions tax • Grow America 2.0 (President Obama) • Taxes on corporate profits held abroad • Repatriation Tax Holiday (Sen. Boxer (D-CA), Sen. • Paul (R-KY)) 6.5% corporate tax on money brought home • Prominent Republicans against raising gas tax • Including Rep. Ryan (R-WI), Sen. Hatch (R-UT) •

Upcoming Issues: Debt Limit

DEBT BT LIM IMIT IT BA BASI SICS CS 25 The debt limit is:  the maximum amount that Treasury is allowed to borrow;  set by statute (Congress must act to change it); and  covers most debt issued, whether held by the public (such as  Treasury bills and savings bonds) or intragovernmental (such as debt held by the Social Security trust funds). The debt limit was temporarily suspended from  February 18, 2014 until March 16, 2015, when it will be reinstated at a higher level than before. Total public debt subject to limit is about $18.1  trillion.  In comparison, the U.S. gross domestic product (GDP) was $17.4 trillion at the end of 2014. Sources: Daily Treasury Statement and Bureau of Economic Analysis

RE REACH CHIN ING THE HE DEBT BT LIM IMIT IT – WH WHAT IT IT MEAN ANS 26 Layers of Defense Against Default The Treasury Department has multiple means that can be used to pay the nation’s bills. If the debt limit is reached and policymakers do not act in time, however, all of these layers of defense will be breached and the nation will default on its obligations. ISSUE NEW DEBT TO THE PUBLIC IN TRADITIONAL MANNER Debt Limit Reached EXTRAORDINARY MEASURES EM Exhausted DAILY REVENUE AND CASH ON HAND The X Date DEFAULT ON FINANCIAL OBLIGATIONS