020911 fiscal solutions tour austin tx

Comeback America: The Nation’s Fiscal Challenge and A Way Forward

Fiscal Solutions TourAustin, TX

February 9, 2011

David M. WalkerFounder and CEO

The Comeback America Initiativeand

Former Comptroller General of the United States

Changes in Spending

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Defense Per Capita Medicare Per Capita Social Security Per Capita

SOURCES: OMB, The Budget, Historical Tables, Table 3.1 - Outlays by Superfunction and Function;

BLS, Inflation Calculator; U.S. Census Bureau

Defense, Social Security, & Medicare Spending Per Capita

More on Autopilot

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Historical Receipts & Outlays

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Receipts per capita Outlays per Capita

SOURCES: OMB Historical Tables, Table 1.3 - Summary Receipts, Outlays, and Surpluses or Deficits (-) in Current Dollars;

Bureau of Labor Statistics, and U.S. Census Bureau. Compiled by TCAII.

Historical Debt Burdens

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Democrat Controlled Congress Republican Controlled Congress Split Congress

As of 12/31/2010 $45,426

Party of the President

Federal Debt Per Capita & The Political Party In Power

SOURCES: U.S. Census Bureau, U.S. Department of Treasury, U.S. Bureau of Labor Statistics, U.S. House, and U.S. Senate. Compiled by TCAII

NOTE: All amounts are adjusted for inflation and in 2010 Dollars. Federal Debt is the total public debt outstanding and intragovernmental holdings.

End of WW2 $ 22,183

Federal Debt Per Capita & The Political Party In Power

SOURCES: U.S. Census Bureau, U.S. Department of Treasury, U.S. Bureau of Labor Statistics, U.S. House, and U.S. Senate. Compiled by TCAII

NOTE: All amounts are adjusted for inflation and in 2010 Dollars. Federal Debt is the total public debt outstanding and intragovernmental holdings.

Comparative Debt Burdens

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Our Fiscal Future

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Impact of Health Reform

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Future Debt Burdens

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Growing Foreign Dependency

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Key Systemic Challenges

• Expansion of government at all levels

• Health Care Costs

• Retirement Income Costs

• Disability and Welfare Related Costs

• Critical Infrastructure Needs

• Education Costs

• Corrections Costs

• Outdated and Inadequate Revenue Systems

• Myopia, tunnel vision, special interests and self-interest.

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Federal:• Implement statutory budget controls that address discretionary and mandatory

spending as well as tax preferences in order to stabilize our debt/ GDP at a reasonable level

• Achieve Social Security reform that makes the program solvent, sustainable, secure and more savings oriented

• Reduce the rate of increase in health care costs and more effectively target related taxpayer subsidies and tax preferences

• Ensure that all future health care reforms adequately consider coverage, cost quality and personal responsibility

• Pursue comprehensive tax reform that makes the system more streamlined, understandable, equitable and competitive while also generating adequate revenues

A Way Forward

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A Way Forward - Continued

• Review, re-prioritize and re-engineer the base of the federal government, including national security strategies, to focus on the future, eliminate waste, generate real results and ensure sustainability

• Ensure that we have process that will enable us to achieve the above objectives within a reasonable period of time

State and Local:• Reform pension and health systems to make them reasonable, affordable and

sustainable

• Review, re-prioritize and re-engineer the base of government.

• Pursue comprehensive tax reform in coordination with the federal government.

• Consider an exchange of primary roles, functions and revenue sources as part of a new federalism or devolution effort (e.g., health care, education, infrastructure)

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• Calendar 2011

Tough 2011 and 2012 Budgets (Short-Term) Earmarks Moratorium (Short-Term) Selected Pay and Hiring Freezes (Short-Term) Leading By Example (Short-Term) Statutory Budget Controls (Structural) Transformation and Accountability Task Force (Structural)

• 2011 – 2013

Congressional Hearings Citizen Education/Engagement

• 2013 -?

Role and Size of Government (Structural) Health Care Coverage Reform and Cost Controls (Structural) Comprehensive Tax Reform (Structural) Comprehensive Social Security Reform (Structural)

A Phased Approach

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Recessions

SOURCE: OMB, The Budget, Historical Tables, Table 7.3 - Statutory Limits on Federal Debt; Bureau of Labor Statistics, Inflation Calculator;

NBER, US Business Cycle Expansions and Contractions.

Statutory Debt Ceiling

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We must raise the debt ceiling. The Real Questions are:

• How much it should be raised?, and

• What conditions should be attached to any increase in the debt ceiling limit?

The Debt Ceiling Debate

Given the deteriorating financial condition of the federal government and rising concern regarding spending , deficits and debt, the following conditions are illustrative of the types of conditions that should be considered:

• Short-term Spending:

Agreeing to cut discretionary spending, excluding war costs, to fiscal 2008 levels adjusted for inflation and population growth over 2-3 years.

• Structural Deficits: Enacting tough but realistic statutory budget controls that could include:

meaningful PAYGO rules on the spending and tax side;

tough but realistic discretionary spending caps, and;

specific debt/GDP targets that begin in 2013-2014 with automatic enforcement mechanisms (e.g., spending cuts and tax surcharges).

The Debt Ceiling Debate - Continued