National Conference of State Legislatures Fall Forum, By Jeff Holland, Chief, Projections Unit

1. Congressional Budget Office
December 4, 2013
Overview of the Federal Budget
National Conference of State Legislatures Fall Forum
Jeff Holland
Chief, Projections Unit

2. Budget Totals, 2009, 2013, 2015
Billions of Dollars
Actual,
2009
Total Revenues
Total Outlays
Actual,
2013
2,105
Percentage of GDP
2015
Actual,
2009
Actual,
2013
2015
2,774
3,399
14.6
16.7
18.6
Total Deficit
3,518
3,454
3,777
24.4
20.8
20.7
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-1,413
-680
-378
-9.8
-4.1
-2.1
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3. 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
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4. Federal Budget Deficits or Surpluses
(Percentage of gross domestic product)
4
4
Actual Baseline
Projection
Surpluses
0
0
-4
-4
Deficits
-8
-12
-8
1973
1978
1983
1988
1993
1998
2003
2008
2013
2018
2023
-12
The deficit figure for 2013 comes from the Final Monthly Treasury Statement released on October 30, 2013.
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5. Total Revenues and Outlays
(Percentage of gross domestic product before BEA revisions)
26
26
Actual Projected
Average Outlays,
1973 to 2012
(21.0%)
24
24
Outlays
22
22
20
20
18
18
16
16
Average Revenues,
1973 to 2012
(17.9%)
14
0
1973
1978
1983
1988
1993
1998
Revenues
2003
2008
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14
2013
2018
-0
2023
4

6. Debt Held by the Public and Net Interest
(Billions of dollars)
25,000
1,000
900
20,000
800
700
Debt Held by the Public
(Right axis)
15,000
600
500
10,000
400
Net Interest
(Left axis)
300
5,000
200
100
0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
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2022
2023
0
5

7. Revenues, by Major Source
(Percentage of gross domestic product)
12
Actual
12
Projected
10
10
Individual
Income Taxes
8
8
6
6
Social Insurance
(Payroll) Taxes
4
4
Corporate
Income Taxes
2
2
Other Revenue Sources
0
2000
2002
2004
2006
2008
2010
2012
2014
2016
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2018
2020
2022
0
6

8. Selected Major Tax Expenditures in 2012, Compared with
Other Categories of Revenues and Outlays
(Percentage of gross domestic product before BEA revisions)
8
8
Revenues
Outlays
6
6
Payroll Tax
Expenditures
4
4
Individual
Income Tax
Expenditures
2
0
2
Individual
Income Taxes
Social
Insurance
Taxes
Corporate Income
Taxes and
Other Revenues
Selected Major
Tax Expenditures
Medicare
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Defense
Social Security
0
7

9. Effect of Selected Major Tax Expenditures, 2013 to 2022
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10. Projected Spending for Major Budget Categories
(Percentage of gross domestic product before BEA revisions)
7
7
6
5
4
3
6
Major Health Care Programs
Defense
Discretionary Spending
4
3
Nondefense
Discretionary Spending
Other Mandatory Spending
2
Net Interest
1
0
2012
5
Social Security
2013
2014
2015
2016
2
1
2017
2018
2019
2020
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2021
2022
0
2023
9

11. Federal Debt Held by the Public Under CBO’s
Extended Baseline
(Percentage of gross domestic product)
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12. 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.
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13. 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.
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14. Population Age 65 or Older as a Share of the Population
Ages 20 to 64
(Percent)
40
Actual
40
Projected
30
30
20
20
10
10
0
2000
2005
2010
2015
2020
2025
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2030
2035
0
13

15. Spending for Social Security Under CBO’s
Extended Baseline
(Percentage of gross domestic product)
7
Actual
7
Projected
6
6
5
5
4
4
3
3
2
2
1
1
0
2000
2005
2010
2015
2020
2025
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2030
2035
0
14

16. Federal Spending on Major Health Care Programs, by
Category, Under CBO’s Extended Baseline
(Percentage of gross domestic product)
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17. Spending and Revenues Under CBO’s Extended Baseline
(Percentage of gross domestic product)
Major Health Care
Programs
Social Security
Average,
1973–2012
4.2
2013
4.9
2038
Other Noninterest
Spending
11.2
2.7
10.0
4.6
6.2
8.0
Total Outlays
7.1
Total Revenues
20.4
17.4
2013
20.8
17.0
26.2
2.2
1.3
4.9
Deficit
Average,
1973–2012
2038
Net Interest
19.7
-3.0
-3.9
-6.4
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18. 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
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