Why is our debt growing? Population aging More Medicare, Medicaid, Social Security spending In this GAO projection – 73% of every tax dollar would go to Medicare, Medicaid, Social Security and Interest payments
Source: CRS and OMB Mandatory Spending is Overwhelming the rest of the Budget
Fiscal Commission’s Report released 12/10 What have we done so far to reduce our Debt?
Debt Ceiling debate Summer of 2011 Budget Control Act passed Aug 2 Created a Congressional Joint Select Committee on Deficit Reduction - “Super Committee” Super Committee to propose further deficit reduction, with a stated goal of achieving at least $1.5 trillion over 10 years BCA has Statutory Caps for 2012 to 2021 – Security and Non Security If Congress spends above caps – OMB identifies sequestration levels Cuts $1.2 trillion in spending
This Time is Different: Eight Centuries of Financial Folly By Carmen Reinhart and Kenneth Rogoff What is a Reasonable Debt level for a developed country? Spoiler Alert -- 60%
Need to Build on our Glossary of Terms Four Categories of Federal Debt (1) Gross Federal Debt – sum of debt held by the public and held by government accounts (intragovernmental debt). (2) Debt held by the Public – federal debt held by individuals, corporations, state or local governments, foreign governments and central banks. (3) Debt held by Government Accounts – debt owed by the federal government to itself – mostly by trust funding including Social Security and Medicare. (4) Debt subject to Statutory Debt Limit – debt guaranteed as to principal and interest by the US – for example, does not include TVA, Postal Service debt
Point #1 Point #2 Point #3 Senate Budget Committee
Ben Bernanke is calling the end of ‘12 beginning of ‘13 a Fiscal Cliff because of multiple financial events: expiration of the 2001/03/10 tax cuts, winding down of certain jobs provisions, $1.2 trillion across-the-board “sequester,” immediate and steep reduction in Medicare physician payments (Doc Fix failed), the end of current AMT patches, and the need to once again raise the country’s debt ceiling. “ Together, these policies would reduce ten-year deficits by over $6.8 trillion relative to realistic current policy projections – enough to put the debt on a sharp downward path but in an extremely disruptive and unwise manner.” -- Committee for a Responsible Federal Budget “ Together, these policies would reduce ten-year deficits by over $6.8 trillion relative to realistic current policy projections – enough to put the debt on a sharp downward path but in an extremely disruptive and unwise manner.” -- Committee for a Responsible Federal Budget