1. U.S. Government Budget
Why can’t we balance it?

2. What is a Budget?
Income Expenses

3. The Government Budget Government Revenue Government Spending
All Gov’t Expenses
Taxes

4. Budget Handout

5. Deficit vs. Debt
Deficit: how much more Government spends than it receives in tax revenue over 1- year
$649 Billion
Debt: total amount Government owes (has borrowed)
$18.4 Trillion

6. Balancing the Budget? 17.8 Trillion = GDP = C + I + G + (X-M)
Total Spending: $3.6 Trillion
Total Revenue $3.0 Trillion
Total Deficit: $649 Billion
Total Debt: $18.4 Trillion
17.8 Trillion = GDP = C + I + G + (X-M)

7. Government Spending (2014)
Social Security %
Medicare %
Medicaid %
Interest on Debt 6.3%
Defense Spending %
Homeland Security 1.0%
Education %
Other
Total %
46% of Budget
23% of Budget

8. What are Entitlements? Social Security, Medicare & Medicaid

9. THANK
YOU!

11. Wake-Up Call Video

12. What are Entitlements? Social Security, Medicare & Medicaid

13. US Demographics America’s population is aging
smaller young (echoboomer) generation
Babyboomers beginning to retire
By in 4 Americans will be over 65
Average life span has risen
77 years men, 81 years women
why: advances in medical technology, nutrition, etc…
This FACT ensures that entitlement spending will increase a rapidly growing rate

14. Entitlement Spending Includes- Social Security, Medicare & Medicaid
Citizens are “entitled” to benefits at 65 years of age
Largest part of Government budget
Consumes approximately 46% of budget in 2014!
Projected to 60%-75% by 2040!

15. Growth of Entitlement Spending.
1964 .
1984
2004* 9%
19%
Defense
Social Security
Medicare & Medicaid
Net interest
All other spending
*Current services estimate.
Source: Budget of the United States Government, FY 2005, Office of Management and Budget.

16. Entitlement Reform? .

17. Interest on Gov’t debt
The government sells bonds to pay for deficit spending
Interest payments on bonds are 6% of budget today
could rise to 15% by 2020
Entitlements & interest on debt alone could reach 75-90% of budget by 2040!

18. Growing Entitlement Spending

19. Kicking the Can Down the Road

20. Problems increase as the Babyboomers Retire!
Social Security
Problems increase as the
Babyboomers Retire!
Medicare
spending
Medicare problem
5 times bigger!

21. USA spends 16% of GDP
11% of GDP for other countries

22. Cyclical vs. Structural Problems
Cyclical economic issues are related to the business cycle & “fix themselves” as the economy recovers
Example: Unemployment during a recession goes away at the peak
Structural economic issues need policy changes to correct
Example: low performing public schools in cities (think Oakland, New York, etc…)
Structural economic issues are significantly more problematic than Cyclical economic issues

23. 2-Types of Gov’t Deficits
Cyclical deficit: Portion of deficit attributable to a slowdown in the business cycle (during recession)
Cyclical deficits “self regulate” or fix themselves as economy recovers
Structural deficit: occurs with the economy at full potential output (peak of business cycle, high GDP)
Structural deficits remain even at the peak of a business cycle

24. Entitlement Worksheet

25. Changing Entitlements Social Security, Medicare & Medicaid

27. Balancing the Budget?
“The only real question” is whether adjustments to taxes and spending
will come from a “careful and deliberative process” or from a “rapid
and painful response to a looming or actual fiscal crisis,”
Ben Bernanke
2010

28. Boomerang Kids