The Federal Budget in 2009 Kris Cox Center on Budget and Policy Priorities Pennsylvania Budget and Policy Center Budget Summit February 26, 2009

Composition of the Federal Budget in 2007 Source: Office of Management and Budget data.

Thank You Kris Cox Center on Budget and Policy Priorities

The Economic Recovery Package in Pennsylvania: Selected impacts on state and local budgets State Medicaid, FY09………………………………………………………$1,160 million Medicaid, FY09………………………………………………………$1,160 million Medicaid, FY10………………………………………………………$1,920 million Medicaid, FY10………………………………………………………$1,920 million Medicaid, FY11………………………………………………………$1,000 million Medicaid, FY11………………………………………………………$1,000 million “Fiscal Stabilization” – non-education (over 2 yrs) ……..$347 million “Fiscal Stabilization” – non-education (over 2 yrs) ……..$347 million State & school districts “Fiscal Stabilization” – education (over 2 yrs) $1,559 million “Fiscal Stabilization” – education (over 2 yrs) $1,559 million Special education and Title I (school districts) $970 million Special education and Title I (school districts) $970 million American Recovery and Reinvestment Act Signed into law February 17, 2009.

The Economic Recovery Package in Pennsylvania : Selected impacts on vulnerable families and individuals Unemployment insurance: Receive increased benefits ,056,058 workers Receive increased benefits ,056,058 workers Benefit from extended eligibility ,691 workers Benefit from extended eligibility ,691 workers Increased funding to support reforms $292 million Increased funding to support reforms $292 million Food stamps (SNAP): Additional funding for groceries $779 million Additional funding for groceries $779 million Number benefiting ,261,000 individuals Number benefiting ,261,000 individuals Child care: Additional funding (over 2 years) $60.1 million Additional funding (over 2 years) $60.1 million American Recovery and Reinvestment Act Signed into law February 17, 2009.

46 States Facing Budget Shortfalls

Source: CBPP projections as of February 9, 2009.

Poverty Is Likely to Reach a New High Number of poor families, in millions

Under Current Policies, Debt Will Reach 279 Percent of GDP in 2050 Source: CBPP projections based on Congressional Budget Office data and CBPP assumptions about the impact of the recession on the federal budget.

By 2031, “Big 3” Programs Plus Defense Would Consume All Federal Revenue Source: CBPP projections based on Congressional Budget Office data and CBPP assumptions about the impact of the recession on the federal budget.

Rising Health Costs, Not Demographics, are the Main Driver of Growth in the “Big Three” Source: CBPP projections based on Congressional Budget Office data.

Source: CBO Long-Term Projections, December 2007 Cost Growth in Medicare and Medicaid Mirrors Health Care System As a Whole

Medicare, Medicaid, and Social Security Expected to Rise Rapidly Source: CBPP projections based on Congressional Budget Office data.

Long-Term Fiscal Problem Not a General “Entitlement Crisis” Source: CBPP projections based on Congressional Budget Office data.

Health Care Cost Containment Would Shrink Debt Growth Source: CBPP projections based on Congressional Budget Office data and CBPP assumptions about the impact of the recession on the federal budget.

From Large Surpluses to Large Deficits in Just 6 Years Cumulative Surpluses/Deficits, Source: CBPP calculations based on Congressional Budget Office data. Surplus Deficit

Even Excluding Funding for the Wars, Regular Defense and Security Funding Has Grown While Domestic Discretionary Funding Has Hardly Increased Source: CBPP calculations based on OMB and CBO data. Defense totals exclude funding for the wars in Iraq and Afghanistan; domestic discretionary totals include emergency and supplemental funding. Share of the Economy

Last 26 Years Have Seen Rapid Income Growth at the Top, Virtually No Growth at the Bottom Source: CBPP calculations based on Congressional Budget Office data. Growth in average real pre-tax income,

The Expansion Was Weaker Than Average; Only Corporate Profits Grew Rapidly Average Real Growth, Expansion Average Real Growth, Other Post-World War II Expansions Source: CBPP calculations based on Commerce Department, Labor Department, and Federal Reserve data.

The Goal: Balanced Approach To Deficit Reduction Balanced approach: include revenue increases as well as spending cuts. Balanced approach was taken in 1990 and 1993 by Presidents Bush and Clinton.

Likely Consequences of Unbalanced Approach to Deficit Reduction Large program cuts over time. Federal government may be unable to fulfill some core functions. More costs shifted to states.

Tax Cuts Cost More Than Most Agency Budgets Source: CBPP calculations based on Office of Management and Budget, Congressional Budget Office, Joint Committee on Taxation, and Urban-Brookings Tax Policy Center data Agency Budgets, Tax Cuts in 2008

Financing the Federal Budget in 2007 Source: Congressional Budget Office.

“Everything Else”: Program Areas in the Remaining Fifth of the Budget Source: Office of Management and Budget data. 6% 3% Benefits for federal retirees and veterans Education 2% Scientific and medical research 2% Transportation infrastructure 1% Non-security international 3% All other