3. Table of Contents
Section
Debt and Deficits I
Spending II
Revenues III
Health Care IV
Personal Finances V
4.
5. Section I: Debt and Deficits
Page
Debt held by the public:1800-2010 (percentage of GDP) 1
Debt held by the public: projections through 2080 under current policies (percentage of
GDP) 2
Composition of the total debt: debt held by the public and intragovernmental debt
(current dollars and percentage of GDP) 3
U.S. public debt including state and local debt (percentage of GDP): 1980-2020 4
U.S. public debt levels compared to other countries (percentage of GDP) 5
Historical deficits: 1800-2010 (percentage of GDP) 6
Deficits: projections through 2080 under current policies (percentage of GDP) 7
Impacts of alternative assumptions on projections of the long-term fiscal gap 8
Little impact on the projected gap between spending and revenues if tax cuts expire and
troops are withdrawn from Iraq and Afghanistan (percentage of GDP) 9
The projected, widening gap between spending and revenues (percentage of GDP) 10
Waiting to close the fiscal gap, by using spending cuts or tax increases alone, would lead
to more and more difficult choices in the future 11
Projected growth in spending by category compared with projected revenues through
2040 (percentage of GDP) 12
6. Section I: Debt and Deficits (continued)
Page
Projected growth in spending by category compared with projected revenues through
2040 if interest rates increase by 2 percent (percentage of GDP) 13
Historical Treasury interest rates 14
Impact on projected cost of net interest of a 2 percent increase in interest rates 15
Growth in U.S. dependency on foreign lenders to finance the public debt 16
Largest foreign holders of Treasury securities (February 2010) 17
Foreign purchases of Treasury securities by maturity 18
Historical and projected U.S. net external debt (percentage of GDP) 19
Growth in foreign purchases of Treasury Inflation Protect Securities 20
Fiscal Exposures (75-year present value in trillions of dollars) 21
7. Since 1800, U.S. debt held by public has exceeded 60% of
GDP only during World War II
120
WWII
100
Percentage of GDP
80
TARP &
Recession
60
Great
Depression
40 Civil War WWI
20
0
1800 1830 1860 1890 1920 1950 1980 2010
NOTE: Debt held by the public refers to all federal debt held by individuals, corporations, state or local governments, and foreign entities.
SOURCES: Data from the Congressional Budget Office, Long‐Term Budget Outlook: June 2009; the Government Accountability Office, The
Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update, alternative simulation using Congressional Budget Office
assumptions. Compiled by PGPF.
1-Debt and Deficits
8. Future U.S. debt held by the public is projected to soar if
current policies remain unchanged
1,400
1,197%
Actual Projected 896%
1,200
Percentage of GDP
652%
1,000
457%
800
303%
600
187%
60 %
400 of GDP 110%
200
0
1990 2000 2010 2020 2030 2040 2050 2060 2070 2080
NOTE: Debt held by the public refers to all federal debt held by individuals, corporations, state or local governments, and foreign entities.
SOURCES: Data from the Congressional Budget Office, Long‐Term Budget Outlook: June 2009; the Government Accountability Office, The
Federal Government’s Long‐Term Fiscal Outlook, January 2010 Update, alternative simulation using Congressional Budget Office
assumptions. Compiled by PGPF.
2-Debt and Deficits
9. The total debt includes debt held by the public (domestic and foreign
investors) and debt the government owes to various government
programs*
14
$ 12.9 Trillion
12
Trillions of Dollars
Intragovernmental Debt
$4.5 (31%)
10 Debt Held by the Public
8 89 %
$ 5.6 Trillion of GDP
6
4 $2.2 (23%) $8.4 (58%)
57 %
2 $3.4 (35%) of GDP
0
2000 April 30, 2010
*Intragovernmental debt refers to Treasury securities held by federal trust funds (e.g., Social Security and Medicare) and other
government accounts. Debt held by the public refers to any federal debt held by individuals, corporations, state or local governments,
and foreign entities.
NOTE: Totals may not add due to rounding.
SOURCES: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget: February 2010, Historical
Tables; and the Department of Treasury, Daily Treasury Statement (April 30, 2010). Compiled by PGPF.
3-Debt and Deficits
10. Within 10 years, the total public debt in the U.S. (including state
and local government held debt) is projected to reach Greece’s
current debt level
140
120
Percentage of GDP
100
80
60
40
20
0
1980 1990 2000 2010 2020
NOTES: Projected state and local government debt was assumed to be held constant as a percent of the economy at the average of years
2000 to 2009 (14.4%). Public debt here refers to all federal debt held by individuals, corporations, state or local governments, and
foreign entities, in addition to state and local government debt.
SOURCES: Data from the Federal Reserve, Flow of Funds Accounts of the United States; the Government Accountability Office, The
Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update, alternative simulation using Congressional Budget Office
assumptions; and the Congressional Budget Office, Long‐Term Budget Outlook, June 2009. Compiled by PGPF.
4-Debt and Deficits
11. Public debt levels in the U.S are comparable to some of the
most financially troubled countries in Europe
2008 2009 2010
140
120
Percentage of GDP
100
80
60
40
20
0
Greece Italy Portugal Ireland Spain United United
Kingdom States
NOTE: All 2009 and 2010 numbers are projections. Public debt here refers to state and local governmental debt as well as debt held by
the public, or all federal debt held by individuals, corporations, state or local governments, and foreign entities.
SOURCE: International data from the International Monetary Fund. U.S. data from the Federal Reserve, Flow of Funds Accounts of the
United States; and the Office of Management and Budget, The 2011 Budget: Historical Tables. Compiled by PGPF.
5-Debt and Deficits
12. Up until the Great Depression, the U.S. experienced more
budget surpluses than deficits
35
WWII
Deficits (+) and Surpluses (‐)
30
as a Percentage of GDP
25 Great
Depression
20
WWI
15
Civil War
10
5
0
‐5
1800 1830 1860 1890 1920 1950 1980 2010
SOURCES: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February
2010; the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update, alternative
simulation using Congressional Budget Office assumptions; and the Historical Statistics of the United States, Millennial Edition Online,
Cambridge 2006. Compiled by PGPF.
6-Debt and Deficits
13. Under current policies, federal deficits are projected to more than
double as a percentage of GDP even after the economy recovers
80
Deficits (+) and Surpluses (‐)
Actual Projected
70 57%
as a Percentage of GDP
60 44%
50
33%
40
24% 74%
30
16%
20 10%
10
0
‐10
1990 2000 2010 2020 2030 2040 2050 2060 2070 2080
NOTE: Current policy estimates assume extension of the 2001 and 2003 tax cuts, alternative minimum tax (AMT) exemption amount is
indexed to inflation, Medicare physician payments are not reduced, and discretionary spending grows with GDP.
SOURCES: Data the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February 2010;
and the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update, alternative
simulation using Congressional Budget Office assumptions. Compiled by PGPF.
7-Debt and Deficits
14. Using alternative assumptions would affect projections of the
long-term fiscal gap
Alternative Alternative Alternative
Baseline Assumptions
Baseline and alternative Health Care Productivity Immigration
assumptions used in
projections of the fiscal gap:
10
Fiscal Gap as a Percentage of GDP
Excess health care cost 9
growth: Baseline Health
care costs per person 8
grow 2% faster than GDP 7
per capita; alternatives
are 1% and 0.5%. 6
5
Productivity: Baseline
output per hour increases 4
by 2.3% percent per year;
alternatives are 2.8% and 3
1.8% 1.0
2 1.8% 0.7
2.0% Mil. 1.3
1% 2.3% 2.8% Mil.
Immigration: Baseline is 1 0.5% Mil.
1 million immigrants per
year; alternatives are 1.3 0
million and 0.7 million. Excess Health Care Cost Productivity Growth Rate of Immigration
Growth
NOTE: The fiscal gap refers to the increase in taxes or reduction in non‐interest spending required to keep the debt‐to‐GDP ratio stable
over the next 75 years.
SOURCE: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytical Perspectives,
February 2010. Compiled by PGPF.
8-Debt and Deficits
15. Elimination of Bush tax cuts and withdrawal of troops from Iraq and
Afghanistan would have a small impact on the long-term fiscal gap
40
Historical Projected
Primary Spending 0.7% GDP
35 difference
(excluding net interest)
in 2080
30
Percentage of GDP
25
20 1.8% GDP
difference
15 Revenues in 2080
10 Primary Spending
Revenues
5 Tax cuts expire on schedule
End deployment to Iraq and Afghanistan
0
1990 2000 2010 2020 2030 2040 2050 2060 2070 2080
SOURCE: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February
2010; the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010, alternative simulation
based on Congressional Budget Office assumptions; and the Congressional Budget Office, Budget Outlook: January 2010. Compiled by
PGPF.
9-Debt and Deficits
16. Over three quarters of the long-term budget gap in 2080 is caused by
escalating projected interest costs assuming the baseline interest rate
of 5.0%
100
90 Historical Projected
80 Total Spending
Percentage of GDP
70
60 Primary Spending Net Interest 74% of
(excluding net interest) 57% of
50 GDP
GDP
40
30
20
10 Revenues
0
1960 1980 2000 2020 2040 2060 2080
SOURCES: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February
2010; and the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010, alternative
simulation based on Congressional Budget Office assumptions. Compiled by PGPF.
10-Debt and Deficits
17. If we wait to close the fiscal gap, by using spending cuts or revenue
increases alone, we would face more and more difficult choices in the
future
35
Revenue Increase Spending Cuts
30
64%
25 Revenue
Percentage of GDP
50% 48% Increase
20 36 % Revenue Spending
Spending Increase Cuts
Cuts
15
10
5
0
2010 2030
NOTE: Spending refers to non-interest spending. The amounts shown are the non-interest spending cuts or revenue increases from the
projected levels required to close the projected fiscal gap by using only one or the other, not both. The fiscal gap refers to the reduction in
spending or increase in revenues required to keep debt-to-GDP no higher than the 2010 level in 2085.
SOURCE: Data from the Congressional Budget Office, Long-Term Budget Outlook, June 2009. Compiled by PGPF.
11-Debt and Deficits
18. Without reforms, within 12 years, future revenues will only cover
Social Security, Medicare, Medicaid and interest on the debt assuming
the baseline interest rate of 5.0%
50
45
Discretionary
40 Spending
Revenue 9 %
Percentage of GDP
35
2 % Other Mandatory
30 9 %
Medicare &
25 2 % 11% Medicaid
9 %
20 9 % 9%
2 % 6% Social Security
15
4 % 6%
6%
10 5% Net Interest
5% 14%
5 5% 1% 9%
5%
0
2010 2020 2030 2040
SOURCE: Data from the Government Accountability Office The Federal Government’s Long‐Term Fiscal Outlook: January 2010, alternative
simulation using Congressional Budget Office assumptions. Compiled by PGPF.
12-Debt and Deficits
19. Without fiscal reforms, federal interest costs alone would consume all
projected revenues by 2040 if baseline interest rates rise 2 percent to
7.0%. (The historical interest rate since 1980 is 6.4%.)
50
45 Discretionary
9 %
40 Spending
Revenue 2 %
Percentage of GDP
35 Other Mandatory
9 %
30 11% Medicare &
2 % Medicaid
25 9 %
9% 6% Social Security
20 9 % 2 %
15 4 % 6% 6%
10 5% 5% 20 % Net Interest
5 5% 12 %
2% 7 %
0
2010 2020 2030 2040
NOTE: The projections use implied CBO interest rates through 2020, and an interest rate of 5.0 percent thereafter. A 2 percent rate
increase would be within historic range for Treasury interest rates.
SOURCE: Data from the Government Accountability Office The Federal Government’s Long‐Term Fiscal Outlook: January 2010, alternative
simulation using Congressional Budget Office assumptions. Compiled by PGPF.
13-Debt and Deficits
20. Current Treasury interest rates are low by historical standards
16
3‐ Month
14 10‐Year
12 30‐Year
Average
Interest Rate
10 Interest Rate:
6.5% over past
8 30 years
6
4
2
0
1980 1985 1990 1995 2000 2005 Apr‐06
NOTE: The U.S. Treasury Department did not offer 30‐year bonds between 2003 and 2006.
SOURCE: Data from the Federal Reserve Statistical Release, Table H.15, Selected Interest Rates, Historical Data, accessed April 14, 2010.
Complied by PGPF.
14-Debt and Deficits
21. A rate increase of just two percent from baseline levels of 5.0
percent have a dramatic effect on interest costs
25
Additional Interest from
20 Rate Increase from 5.0% to
7.0%
Percentage of GDP
5.7%
Baseline Net Interest
of
15 GDP
10 14.1%
of
GDP
5
0
2010 2015 2020 2025 2030 2035 2040
NOTE: The projections use implied CBO interest rates through 2020, and an interest rate of 5.0 percent thereafter.
SOURCE: Data from the Government Accountability Office The Federal Government’s Long‐term Fiscal Outlook: January 2010, alternative
simulation using Congressional Budget Office assumptions. Compiled by PGPF.
15-Debt and Deficits
22. U.S. dependency on foreign lenders to finance the public debt has
risen sharply
1970 1990 2010 est.
Total Debt: $283 billion Total Debt: $2,412 billion Total Debt: $8,387 billion
Foreign Holdings: Foreign Holdings:
Foreign Holdings: 19% 47%
5%
NOTE: 2010 data reflects debt levels through February 2010.
SOURCES: Data for 1970 and 1990 from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytical
Perspectives, February 2010. Data for 2010 from Department of Treasury, Daily Treasury Statement (February 26, 2010) and Treasury
International Capital Reporting System, April 15, 2010 release. Compiled by PGPF.
16-Debt and Deficits
23. Foreign holdings of U.S. Treasury securities are concentrated among
a few countries
Total Foreign
February 2010 Holdings: 47%
Holdings Holdings
(in billions of (as a percent of
Country U.S. dollars) total U.S. debt)
China $877.5 11%
Japan $768.5 10%
United Kingdom $233.5 3%
Oil Exporters $218.8 3%
Brazil $170.8 2%
All other countries $1,483.1 19%
NOTE: U.S. debt here refers to debt held by the public, or all federal debt held by individuals, corporations, state or local governments,
and foreign entities. All numbers reflect debt levels as of December 2009.
SOURCES: Data from the United States Treasury, Treasury International Capital System, Major Holders of Treasury Securities, April 30,
2010. U.S. debt is debt held by the public, U.S. Treasury, Debt to the Penny, February 26, 2010. Compiled by PGPF.
17-Debt and Deficits
24. Foreign purchases of marketable Treasury securities are
overwhelmingly in shorter maturities, indicating sizeable interest-rate
risk upon rollover
1,200
Billions of Constant 2009 Dollars
30 years 10 Years
1,000
2‐7 Years 1 year or less
800 635
600
400 340
451
200
104 5 182 22 33
0 46 8
2001 2002 2003 2004 2005 2006 2007 2008 2009
NOTE: Purchases reflect gross foreign purchases of bills (4‐week, 13‐week, 26‐week, 52‐week, and cash‐management bills); notes (2‐
year, 3‐year, 5‐year, 7‐year, and 10‐year) and bonds (30‐year). Data excludes sales of Treasury Inflation Protected Securities (TIPS), and
also is not net of sales.
SOURCE: Data from the U.S. Treasury, Office of Debt Management, Investor Class Auction Allotments. Compiled by PGPF.
18-Debt and Deficits
25. By itself, the U.S. net external debt projection is unsustainable under
baseline assumptions and worse if fiscal conditions erode
160
Actual Projected
140 133%
120 “The projected path is so
Cline Baseline Projection unsustainable and
Percentage of GDP
100 dangerous that a crisis
80 Cline Fiscal Erosion would virtually be certain to
64%
Scenario
60 occur long before the U.S.
Historical Data
reached such a painful
40 point of reckoning.”
20
William Cline,
0
Peterson Institute for
‐20 International Economics
‐40
1980 1990 2000 2010 2020 2030
NOTE: Displays U.S. net international investment position: a positive number means external
liabilities are greater than external assets.
SOURCE: Bureau of Economic Analysis and William Cline, “Long‐term Fiscal Imbalances, U.S.
External Liabilities, and Future Living Standards,” in C. Fred Bergsten, ed., The Long‐term
International Economic Position of the United States, Peterson Institute for International
Economics, 2009. Compiled by PGPF.
19-Debt and Deficits
26. Growth in purchases by foreign investors of Treasury Inflation
Protected Securities (TIPS) reflect concern about U.S. inflation
outlook
35
Billions of Constant 2009 Dollars
30
25 190%
$29.2 billion
increase Or 6.4% of foreign
20 purchases of long-term
Treasury securities
15
10
$10.1 billion
Or 5.1% of foreign
5 purchases of long-term
Treasury securities
0
2000‐2004 2005‐2009
NOTES: Purchases only reflect gross foreign purchases (they exclude gross sales of TIPS by foreign investors). Data reflects TIPS with
maturities of 5, 10, 20 and 30 years; and total long‐term Treasury security purchases reflect securities with maturities of 5‐7, 10, and 30
years. Treasury Inflation Protected Securities were first offered in 1997.
SOURCE: Data from the U.S. Treasury, Office of Debt Management, Investor Class Auction Allotments. Compiled by PGPF.
20-Debt and Deficits
27. Major Fiscal Exposures: Another measure of the federal
government’s fiscal condition
In Trillions of Dollars
2000 2009
Explicit liabilities $6.9 $14.1
Publicly held debt 3.4 7.6
Military & civilian pensions & retiree health 2.8 5.3
Other Major Fiscal Exposures 0.7 1.3
Commitments & contingencies 0.5 2.0
E.g., Pension Benefit Guaranty Corporation, undelivered orders
Social insurance promises 13.0 45.8
Future Social Security benefits 3.8 7.7
Future Medicare benefits 9.2 38.2
Future Medicare Part A benefits 2.7 13.8
Future Medicare Part B benefits 6.5 17.2
Future Medicare Part D benefits -- 7.2
Total $20.4 $61.9
NOTE: Numbers may not add due to rounding. Estimates for Medicare and Social Security benefits are from the Social Security and Medicare Trustees
reports, which are as of January 1, 2009 and show social insurance promises for the next 75 years. Future liabilities are discounted to present value
based on a real interest rate of 2.9% and CPI growth of 2.8%. The totals do not include liabilities on the balance sheets of Fannie Mae, Freddie Mac, and
the Federal Reserve. Assets of the U.S. government not included. Does not include civil service and military retirement funds, unemployment insurance
and debt held by other government accounts outside of Social Security and Medicare.
SOURCE: Data from the Department of Treasury, 2009 Financial Report of the United States Government. Compiled by PGPF.
21-Debt and Deficits
28.
29. Section II: Spending
Page
Federal spending: 1900‐2080 (percentage of GDP) 1
Composition of federal spending: 1970, 2010 (est.), and 2040 (est.) 2
Composition of federal spending in 2010 (excluding stimulus package) 3
Historical spending for R&D: 1965‐2009 (percent of total spending) 4
International comparison of countries with highest military expenditure in 5
2008
Historical spending growth by major category: 1950‐2010 (percentage of 6
GDP)
Timeline of when projected net interest costs will exceed areas of spending 7
and revenue
Projected growth in Medicare, Medicaid and Social Security: 2010‐2080 8
(percentage of GDP)
Contributing factors in projected growth for Medicare, Medicaid and Social 9
Security: 2010‐2080 (percentage of GDP)
Historical Social Security trust fund cash flows: 1936‐2009 (percentage of 10
GDP)
30. Section II: Spending(continued)
Page
Projected Social Security trust fund cash flows: 1970‐2080 (percentage of GDP) 11
Impacts of raising taxable maximum income for payroll taxes on Social Security 12
trust fund cash flows: 2010‐2080 (percentage of GDP)
Impacts of balancing Social Security benefits and receipts on the long term fiscal 13
gap: 1990‐2080 (percentage of GDP)
31. Federal spending is projected to soar far above its 50-year
average of 20.5 percent of GDP if current policies remain
unchanged
100
Historical Projected
90
80
Percentage of GDP
70 62%
60
50 42% 2080
40 92% of
28 % GDP
30
20
10
0
1900 1920 1940 1960 1980 2000 2020 2040 2060 2080
SOURCES: Data from the Historical Statistics of the United States, Millennial Edition Online, Cambridge 2006, the Office of
Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February 2010, and the Government
Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook, January 2010 Update, alternative simulation using
Congressional Budget Office assumptions. Compiled by PGPF.
1-Spending
32. Mandatory programs − including Social Security, Medicare, Medicaid
and other entitlement programs − and interest costs are taking over
more and more of the federal budget
Total Total Total
Mandatory Net Interest Mandatory Net Mandatory
38% 7% 62% Interest 82%
5%
Discretionary
18%
Mandatory
Net Interest
Programs Discretionary
Mandatory 35%
31% Discretionary 38%
62% Programs
Mandatory
57%
Programs
47%
Total Spending 1970: Total Spending 2010: Total Spending 2040:
$900 Billion $3.5 Trillion (est.) $12.3 Trillion (est.)
(Constant 2009 Dollars) (Constant 2009 Dollars) (Constant 2009 Dollars)
SOURCES: Data derived from the Office of Management and Budget, FY 2011 Budget, Historical Tables, February 2010; and the
Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook, January 2010 Update, alternative simulation
using Congressional Budget Office assumptions. Calculated by PGPF.
2-Spending
33. Nondefense discretionary includes many programs that could
promote future economic growth
2010 (est.)
Net Interest
6% Defense Education
19% 4%
Transportation
3%
Health* 2%
Other
20%
Mandatory All Other Programs
55% 11%
NOTES: *Discretionary health programs include National Institutes of Health, Center for Disease Control and Prevention, & Indian Health Service.
Spending excludes the 2009 Stimulus package and emergency funding for activities in Iraq and Afghanistan. R&D investment spending over the last
decade has been about 3.1% of GDP, or 15% of the budget, and makes up a large part of non‐defense discretionary spending.
SOURCE: Data from the Congressional Budget Office The Budget and Economic Outlook: Fiscal Years 2010 to 2020, January 2010. Compiled by PGPF.
3-Spending
34. Growth in entitlements has already crowded out important investments
such as federal spending for R&D, which has dropped by more than
half as a percent of total spending since the late 1960s
35
As a Percentage of Total Spending
30
25 52% decrease
since late 60s
20
15
10
5
0
1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009
NOTE: Research and development includes spending in major public physical capital, education and training. The top sources of
allocations of R&D in the U.S. are Defense systems development, the National Institutes of Health (NIH), education, transportation,
NASA, Nuclear Security Administration (NSA), National Science Foundation (NSF),the Defense Advanced Research Projects Agency
(DARPA), and the Air Force, Army, and Navy.
SOURCE: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February
2010. Compiled by PGPF.
4-Spending
35. U.S. spending on defense exceeds the next largest fourteen defense
budgets combined in 2008
700
$581 billion Australia $607 billion
600
Spain
Canada
500 Brazil
In billions of dollars
India
Saudi Arabia South Korea
400 Italy U.S.A.
Japan
300 Germany
Russia
200
UK
100 France
China
0
SOURCE: Data from Stockholm International Peace Research Institute, 15 Major Spender Countries in 2008. Compiled by PGPF.
5-Spending
36. Growth in Social Security, Medicare and Medicaid have more
than offset declines in defense since the late 1960s
30
25
Percentage of GDP
20 Net Interest
15 All Other Programs
10 Medicare & Medicaid
Social Security
5
Defense
0
1950 1960 1970 1980 1990 2000 2010
SOURCE: Data from the Office of Management and Budget, FY 2011 Budget, Historical Tables, February 2010. Compiled by PGPF.
6-Spending
37. Unless current polices change, net interest costs are projected
to exceed total federal revenues in 2046
Projected net interest will exceed….. In year
Medicaid spending, 1.7% of GDP 2012
Defense spending, 3.6% of GDP* 2017
Medicare spending, 3.9% of GDP 2018
Social Security, 5.4% of GDP 2022
Total Revenues, 18.1% of GDP 2046
*Assumes that troops in Iraq and Afghanistan would be reduced to only 60,000 troops by 2015, and that projected defense
spending would grow at the same rate as GDP thereafter.
NOTE: Net Interest already exceeds most federal budget functions including Science, Space and Technology (250),
Transportation (400), and Education (500). The projections use implied CBO interest rates through 2020, and an interest
rate of 5.0 percent thereafter. If interest rates rise, projected interest costs will exceed projected program costs earlier.
SOURCES: Data from the Congressional Budget Office, Analysis of the President’s Budget: March 2010 and Government
Accountability Office The Federal Government's Long‐Term Fiscal Outlook: January 2010 Update. Compiled by PGPF.
7-Spending
38. Social Security, Medicare and Medicaid, the three largest
entitlement programs, are projected to more than double as a
percentage of GDP under current policies
30%
25%
4 %
Percentage of GDP
of GDP
20%
Medicaid
15% 14% 24 %
2% of GDP of GDP
Medicare of
10% GDP
3% of GDP
5% 6%
5% of GDP Social Security of GDP
0%
2010 2020 2030 2040 2050 2060 2070 2080
Fiscal Year
SOURCE: Data from the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update,
alternative simulation using Congressional Budget Office Assumptions. Compiled by PGPF.
8-Spending
39. Aging drives most of the projected cost growth in Social Security,
Medicare and Medicaid until 2054. After that year, excess cost growth of
health spending takes over as the leading driver of cost growth.
25
Sources of Projected Growth in Social Security,
Medicare and Medicaid as Percentage of GDP
2054
20 8 %
Effect of Excess Health
of GDP
Care Cost Growth
15 4.8%
6%
Effect of Aging
4.8% of GDP
10
In the Absence of
5 Aging and Excess
9%
Health Care Cost 8.9%
Growth
of GDP
0
2010 2020 2030 2040 2050 2060 2070 2080
Fiscal Year
NOTE: “Excess health care cost growth” is the amount growth in age‐ adjusted health care costs per person exceeds the growth in per
capita GDP.
SOURCE: Data from the Congressional Budget Office, The Long‐Term Budget Outlook, June 2009. Compiled by PGPF.
9-Spending
40. Since its inception, the Social Security program has experienced more
surpluses than deficits
1.0
Social Security Cash Surpluses (+) and
Deficits (‐) as a Percentage of GDP
0.8
0.6
0.4
0.2
0.0
‐0.2
‐0.4
1936 1945 1954 1963 1972 1981 1990 1999 2008
NOTE: Excludes interest earnings.
SOURCE: Data from the Office of Management and Budget, FY 2011 Budget, Historical Tables, February 2010. Compiled by PGPF.
10-Spending
41. In the future, persistent cash deficits are projected for Social Security
1.5 2000 Social Security Surplus
0.9 % of GDP ($114 Billion*)
Social Security Surpluses /Deficits In Percent of GDP
1 2040 Social Security Deficit
2080 Deficit
1.3 % of GDP ($342 Billion*) 1.4% of
GDP
0.5 ($700
Billion*)
0
‐0.5
‐1
‐1.5
‐2
1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080
* In 2009 Dollars.
NOTE: CBO projections show negative cash deficits in 2010 and 2011. Excludes interest earnings.
SOURCE: Data from the Social Security Administration, Provisions Affecting Payroll Tax Rates: 2009. Compiled by PGPF.
11-Spending
42. Raising the taxable maximum wage level subject to payroll
taxes would somewhat increase Social Security cash receipts
and reduce projected deficits
1.0
Social Security Surpluses and Deficits In
Savings when raising the
taxable maximum wage level
0.5
Percent of GDP
0.0
‐0.5
‐1.0
15%
decrease
‐1.5
2010 2020 2030 2040 2050 2060 2070 2080
NOTE: : Assumes that wage cap for payroll taxes will be raised to include 90 percent of total covered earnings, from $106,800 to
$181,500 in 2010. More recent projections show negative cash deficits in 2010 and 2011.
SOURCE: Data from the Social Security Administration, Provisions Affecting Payroll Tax Rates: 2009. Compiled by PGPF.
12-Spending
43. Balancing Social Security benefits and receipts would have a small
impact on the long term fiscal gap
40
Historical Projected
Primary Spending 1.3% of
35 GDP
(excluding net interest)
Change
30
Percentage of GDP
15.6%
25 of GDP
Gap
20
15
Revenues
10 Primary Spending
5 Revenues
0
1990 2000 2010 2020 2030 2040 2050 2060 2070 2080
NOTE: Balancing Social Security is defined as having Social Security benefit payments no higher than Social Security payroll tax receipts.
SOURCE: Data from the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010; CBO
Analysis of America’s Future Act of 2010. Compiled by PGPF.
13-Spending
44.
45. Section III: Revenues
Page
Composition of revenues: 2010 1
Composition of revenues: 1935‐2020 (percentage of GDP) 2
Federal revenues: 1970‐2030 (percentage of GDP) 3
Impact on the projected deficit of restoring pre‐2001 tax rates (percentage of GDP) 4
Impact on projected federal revenues of extending 2001 and 2003 tax cuts (percentage of GDP) 5
Top 5 most expensive tax expenditures 6
Top 5 corporate tax expenditures 7
Relative size of the top 5 tax expenditures to large spending areas 8
Median household income tax rates by quintile (percentage of total income) 9
Median individual income tax rates by quintile (percentage of total income) 10
46. Section III: Revenues (continued)
Page
Share of pre‐tax income and total federal taxes by quintile 11
Share of pre‐tax income for high and low income households 12
International comparison of tax burdens 13
47. Individual income and payroll taxes comprise most of federal
receipts
2010: Total Revenues
$2,177 billion
Corporate Income Excise
Taxes 3%
7% Payroll Taxes 40%
Estate and Gift 1%
Other Customs Duties 1%
9%
Miscellaneous
Individual Income 4%
Taxes
43%
SOURCE: Data from the Congressional Budget Office, Preliminary Analysis of the President’s Budget, March 2010. Compiled by PGPF.
1-Revenues
48. The composition of federal revenues has been relatively constant
since the mid-1970s
25 Current Law
Actual
Projection*
20 1%
Percentage of GDP
2%
Other Receipts
15
Corporate 6%
Income Taxes
10 Social Insurance Taxes
5 11%
Individual Income Taxes
0
1935 1945 1955 1965 1975 1985 1995 2005 2015
* The “Current Law Projection” assumes that the 2001 and 2003 tax cuts expire as scheduled.
SOURCES: Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February 2010, and
Congressional Budget Office, Analysis of the President’s Budgetary Proposals for FY 2011, March 2010. Compiled by PGPF.
2-Revenues
49. Since 1970, federal revenues have averaged 18 percent of
GDP and will return to about that level if the 2001 and 2003 tax
cuts are extended
22
Actual GAO Projected*
20 40‐Year Average
Percentage of GDP
18
16
14
0
12
1970 1980 1990 2000 2010 2020 2030
*Projections assume the 2001 and 2003 tax cuts are extended and the alternative minimum tax (AMT) exemption amount is adjusted to
inflation.
SOURCES: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February
2010, and the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update. Compiled by
PGPF.
3-Revenues
50. Restoring pre-2001 tax rates on households earning over
$250,000 will have a small impact on projected deficits.
6
5
Percentage of GDP
4
OMB Baseline Deficit
3
5.1% 5.5%
5.1%
4.7% Deficit if Upper‐Income Tax
2 3.9%
3.4% Provisions in FY11 Budget
are Implemented *
1 Deficit if 2001 and 2003
Tax Cuts to Expire for
0 Everyone
2015 2020
SOURCE: Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, February 2010.
* Includes expanding/reinstating income tax rates, reinstating the personal exemption phase‐out and limitation on itemized
deductions, and imposing a 20 percent tax rate on capital gains and dividends for taxpayers with income over $250,000 (married) and
$200,000 (single).
4-Revenues
51. Extending the 2001 and 2003 tax cuts would reduce federal
revenues by $2.7 trillion between 2011 and 2020
5,000
4,500
4,000
Billions of Dollars
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Revenues Under Current Law Baseline Revenues with Tax Cuts *
SOURCE: Data from the Congressional Budget Office, Analysis of the President’s Budget: March 2010 and The Budget and Economic
Outlook, January 2010. Compiled by PGPF.
* Includes interactive effects of extending the tax cuts (EGTRRA and JGTRRA) and indexing the AMT (Alternative Minimum Tax)
5-Revenues
52. Tax expenditures, deductions, credits, and other special provisions
total an estimated $1 trillion annually and provide substantial benefits
that are not counted in the budget
Tax Revenue Lost
Top 5 Tax Expenditures
(FY2010)
1. Exclusion of employer provided health insurance from taxable
$262 billion
income.*
2. Exclusion of pension contributions and earnings.** $122 billion
3. Deduction of mortgage‐interest on a primary residence. $92 billion
4. Deduction of non‐business state and local taxes (includes
$53 billion
income, property and sales taxes)
5. Capital gains (except agriculture, timber, iron ore, and coal).*** $45 billion
Total of Top 5 $573 billion
* Includes the exclusion from payroll taxes and income taxes.
** Includes employer pension plans, employee and employer contributions to 401k plans, IRAs, and Keough plans.
*** In addition, the biodiesel producer tax credit results in a $200 million reduction in excise tax receipts in 2010.
NOTE: Numbers may not add due to rounding.
SOURCE: Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytic Perspectives, February 2010.
6-Revenues
53. The top 5 corporate tax expenditures, deductions, credits and other
special provisions are relatively small compared to the largest tax
expenditures
Tax Revenue Lost
Top 5 Corporate Tax Expenditures
(FY2010)
1. Deferral of income from controlled foreign corporations $31 billion
2. Deduction for U.S. production activities $8.8 billion
3. Credit for increasing research activities $5.8 billion
4. Deferred taxes for financial firms on certain income earned
$5.5 billion
overseas
5. Credit for low‐income housing investments $ 5.4 billion
Total of Top 5 $56.4 billion
NOTE: Numbers may not add due to rounding.
SOURCE: Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytic Perspectives, February 2010.
7-Revenues
54. The value of the five largest tax expenditures is sizeable
relative to major spending programs in 2010
$800
$700
Billions of Dollars
$600
$500
$400
$300
$200
$100
$0
Top 5 Tax Medicare Social Security Defense
Expenditures
NOTE: Health Insurance, Retirement Saving, Mortgage Interest, and State & Local taxes are categories of spending that reduce taxable
income.
SOURCE: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytic Perspectives, February
2010.
8-Revenues
55. The U.S. tax system has progressive attributes: effective
median tax rates rise with income (households by income
quintile in 2010)
30
25 27.9%
Percent of Income
20 22.2%
18.7%
15
15.5%
10
5 7.9%
1.3%
0
Lowest Second Middle Fourth Top Top 1%
Quintile Quintile Quintile Quintile Quintile $532,500+
Less than $17,800‐ $34,800‐ $63,400‐ $104,200+
$17,800 $34,800 $63,400 $104,200
NOTE: Effective federal tax rate is calculated as total federal taxes paid divided by cash income. Federal taxes include individual and
corporate income tax, and payroll taxes for Social Security and Medicare.
SOURCE: Data from the Tax Policy Center. Compiled by PGPF.
9-Revenues
56. Effective median individual income tax rates are negative or
zero for households with incomes below $34,800
20 18.8%
Percentage of Total Income
15
10.8%
10
6.4%
5 3.2%
0%
0
‐5
‐4.2%
‐10
Lowest Quintile Second Quintile Middle Quintile Fourth Quintile Top Quintile Top 1%
<$17,800 $17,800‐ $34,800‐ $63,400‐ $104,200+ $532,500+
$34,800 $63,400 $104,200
SOURCE: Data from the Tax Policy Center. Compiled by PGPF.
10-Revenues
57. High-income households earn a disproportionate share of pre-tax
income and pay a disproportionate share of total federal taxes
100 Top 0.5%
(15% ) Top 0.5%
90 (23% )
80
70 55% Top Quintile
69% $67,400+
60
Percent
Fourth Quintile
50 $45,200‐$67,399
40
20% Middle Quintile
30 $30,500‐$45,199
20 17%
13% Second Quintile
$17,900‐$30,499
10 8% 9% 4%
1% Lowest Quintile
0 4% Less than$17,900
Share of Total Pre‐Tax Income Share of Total Federal Taxes
NOTE: Data for 2005 in 2005 dollars.
SOURCE: Congressional Budget Office, Historical Effective Tax Rates: 1979‐ 2005: Additional Data on Sources of Income and High‐Income
Households December 2008. Compiled by PGPF.
11-Revenues
58. The share of total pre-tax income has increased for the wealthy but
decreased for low income households since 1980
16
14.6 %
Percentage of Total Pre‐Tax Income
14
Top 0.5%
12
Lowest Quintile
10
8
6.6 %
6 5.7 %
4.0 %
4
2
0
1980 2005
SOURCE: Data from Congressional Budget Office, Historical Effective Tax Rates, 1979 to 2005: Additional Data on Sources of Income and
High‐Income Households, December 2008. Compiled by PGPF.
12-Revenues
59. Total tax burdens are lower in the U.S. than many other industrial
countries
60
50
as a Percentage of GDP
48%
Total Tax Revenue
40 43%
30 36%
33%
28%
20
18%
10
0
Sweden France OECD ‐ Total Canada Mexico United
States
NOTE: Data for each country is as of 2007. OECD is the Organization of Economic Cooperation and Development. Total tax revenue
includes federal, state and local.
SOURCE: Data from OECD Statistics Extract. Compiled by PGPF.
13-Revenues
60.
61. Section IV: Health Care
Page
Federal health expenditures: 1960‐2040 (as percentage of GDP) 1
Growth in health care consumption per capita: 1990‐2030 (constant 2009 dollars) 2
Projected health care costs per capita: 2010‐2080 (constant 2009 dollars) 3
International comparison of health care costs (as percentage of GDP) 4
International comparison of health care costs per capita (U.S. dollars) 5
Selected US health outcomes ranked against other nations 6
International comparison of CT scanners per capita 7
International comparison of MRI units per capita 8
International comparison of angioplasty per 1,000 people 9
International comparison of coronary bypass operations per 1,000 people 10
Growth in U.S. population (65 and older) by age group 11
Comparison of U.S. health care costs per person by age group 12
62. Section IV: Health Care (continued)
Page
Composition of health care coverage, pre and post enactment of health care reform law 13
Comparison across U.S. states of Medicare costs per person 14
Portion of Medicare spending that go towards services in the last year of life 15
Comparison across U.S. states of number of visits to specialist by Medicare beneficiaries
in last two years of life 16
63. U.S. health expenditures are projected to soar to more than
one-third of the economy by 2040
40
Actual Projected
35 34 %
30 29 %
Percentage of GDP
25 22 %
20 17 %
15 13 %
12 %
10 8 %
7 %
5 %
5
0
1960 1970 1980 1990 2000 2010 2020 2030 2040
SOURCE: Data from the Congressional Budget Office, The Long‐Term Fiscal Outlook: June 2009. Compiled by PGPF.
1- Health Care
