Budget Briefing Booklet, Vol. 1

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VOL 1

WHAT’S INSIDE

GOVERNMENT OVERSPENDINGby the numbers

BUDGET BATTLESA Breakdown of the Key Battles in the Budget War

BUDGET PROCESSA Visual Timeline of the Budget Process

BUDGET BREAKDOWNA Visual of Where Your Money Goes

FY12 PRESIDENT’S BUDGETKey Points and Reforms

FY12 HOUSE BUDGETKey Points and Reforms

DEBT CEILINGWhat it is, a Summary of the Debate, Why it Matters

6

8

10

12

14

FACTSHEETS & INFOGRAPHICS

16

GOVERNMENT OVERSPENDINGby the numbers

The numbers say it all: Washington has spent its way into a fiscal crisis.

This unsustainable habit will have consequences on future generations

unless Congress can reach across the aisle, work together, & enact lasting

change.

KEY FACTS & FIGURES // (AS OF JUNE 8, 2011)

NATIONAL DEBT: $14.3 trillion

PROJECTED FY11 DEBT AS A PERCENTAGE OF GDP: 102 percent

DEBT PER AMERICAN: $46,580

DEBT PER HOUSEHOLD: More than $130,000

FY10 FEDERAL DEFICIT: $1.294 trillion

FY11 DEFICIT TO DATE: $869.9 billion

PROJECTED FY2011 DEFICIT: $1.399 trillion

FY11 INTEREST ON THE DEBT TO DATE: $96 billion

NUMBER OF MONTHS IN THE RED: 32

HIGHEST MONTHLY DEFICIT ON RECORD: $223 billion in February 2011

PROJECTED DEFICIT TOTAL FOR 2010-2019: $7.992 trillion

Today’s budget wars – throughout the nation, at all levels of government – are the result of decades of chronic overpromising and overspending. But while previous administrations have been able to both put off dealing with (or even publicly recognizing) the looming fiscal and economic crisis, the past years’ recession and still-slow economy has sped up our budgetary day of reckoning.

Amid several State budget showdowns, we gave you an overview of each State’s economic and fiscal condition. As Congress faces several budget showdowns of its own, we thought we’d provide you a quick guide to the key battles in this year’s federal budget war.

OVERVIEW

Fiscal Year 2011 Continuing Resolution

Fiscal Year 2012 Federal Budget

Debt Ceiling Increase  FISCAL YEAR 2011 CONTINUING RESOLUTIONAs Congress last year failed to pass a budget or single appropriations conference report, the federal government has been running on a series of temporary funding mechanisms, called  “continuing resolutions” or CRs, since the start of the current fiscal year that began on October 1.

THE FEDERAL BUDGET WAR:key battles

On April 15, the President signed a year-long CR that funds the government through the remainder of the fiscal year, which ends on September 30. This bill included $39.9 billion in cuts over last year’s spending levels. FISCAL YEAR 2012 FEDERAL BUDGETThe official kick off of the Fiscal Year 2012 budget season began with President Obama’s submission to Congress of his budget request for the coming year. The President’s budget did not propose significant spending reforms, and would lead to a $1.2 trillion deficit for FY 2012 alone.

Congress will not be let off the hook so easily. Economists, pundits, edito-rial boards, and even politicians themselves have demanded Congress work together to make the critical reforms necessary to reverse the nation’s dire fiscal and economic course.

Congress’s deadline to pass a budget is April 15, a date it frequently misses. The House voted on Congressman Paul Ryan’s (R-WI) budget proposal April 15, 2011. It passed by a vote of 235 – 193. The Sen-ate later rejected both President Obama’s and the House’s budgets even though, as of June 2011, it had not passed a budget bill of its own. When and if the Senate does pursue its own budget, the Senate Budget Commit-tee must approve the plan, and then it must pass out of the Senate. The two chambers must then conference the two plans, and pass the budget conference report. DEBT CEILING INCREASEOn May 16, 2011, the U.S. hit its $14.3 trillion debt ceiling. The U.S. has raised its debt ceiling 75 times since 1962, an average of 1.5 times every year. Congress last increased the debt limit in early 2010 and is now faced with doing so again. Three options are on the table: pass a straightforward increase in the debt limit; refuse to pass an increase in the debt limit and insist lawmakers cut spending enough to ensure the U.S. doesn’t exceed the limit; or pass an increase that includes cuts to future spending.

HOUSE APPROPRIATIONS

COMMITTEE REPORTS LAST

ANNUAL APPROPRIATION BILLS

(june 10)

HOUSE COMPLETE

ACTION ON ANN

APPROPRIAT

(june 30)

Currently, the Senate hasn't begun the

appropriations process.Never happens.

MPLETES

TION ON ANNUAL

ATIONS BILLS

Each February, the President is required by law to submit a budget to Con-gress. This budget serves as a starting point for the Budget Committees in the House and Senate as they develop their budgets.

PRESIDENTIAL BUDGETING

1. Key Facts: The Numbers 2. Mandatory Spending 3. Discretionary Spending 4. Tax Reform

KEY FACTS: THE NUMBERSFY 2012 Total Spending: $3.7 trillion FY 2012 Deficit: $1.2 trillion 2012 Debt (end of calendar year): $16.4 trillion this year, & would continue to rise to $27.6 trillion by 2021

MANDATORY SPENDINGDefinition: Mandatory Spending includes funding for programs that Con-gress is required to provide under law, like Social Security, Medicare, and Medicaid.

FISCAL YEAR 2012 BUDGET:

the president’s proposed budget

The President’s plan largely ignores Social Security and Medicaid reform, the largest driver of the country’s deficit spending and “calls on the Con-gress… [to] work in a bipartisan fashion to strengthen Social Security for years to come.” The President laid out a very basic framework for Social Security reform, which lacked any meaningful details. With the exception of addressing the Medicare doc-fix for two-years, the budget virtually ig-nored Medicare reform.

These two mandatory programs are the biggest drivers of U.S. debt. Ac-cording to Obama’s budget, next fiscal year, Medicare and Social Security are projected to consume 32.9 percent of the budget.

DISCRETIONARY SPENDINGDefinition: Discretionary Spending includes funding for programs through appropriations acts, like Defense and Veterans programs.

THE PRESIDENT’S PLAN FOR DISCRETIONARY SPENDING PROPOSES:

1. Freezing non-security discretionary spending for five years. The non-partisan CBO estimates that the President’s policies would generally keep discretionary spending flat over a 10- year period.

2. Freezing civilian worker pay for two-years.

3. 200 terminations/reductions in programs.

4.“New discipline in defense spending.”

5. Eliminating earmarks.

TAX REFORM Individual Tax Rates and Estate Tax: Proposes allowing “the 2001 and 2003 high-income and estate tax cuts to expire.”

Corporate Income Tax: Suggests that the corporate tax structure be re-formed since it is the highest in the industrialized world and is marred with potentially ineffective credits and loopholes.

AMT Reform: Limit the impact of the Alternative Minimum Tax for two-years by limiting tax deductions for the rich.

The House of Representatives, led by Chairman Paul Ryan, passed its Fiscal Year 2012 budget on April 15, 2011. The Ryan budget failed in the Senate on a procedural vote on May 25, 2011. As of June 2011, the Senate has not produced a budget, although they are required to do so by law.

OVERVIEW Key Facts Spending Reform Tax Reform

KEY FACTSFY 2012 Total Spending: $3.5 trillionFY 2012 Deficit: $995 billion2012 Debt (calendar year): $16.2 this year, and would continue to rise to $23.1 trillion by 2021 

SPENDING REFORMMandatory Spending (includes funding for programs that Congress is required to provide under law, like Social Security, Medicare, and Medic-aid) proposes reform to Medicare and Medicaid, two of the three largest entitlement programs; fails to propose significant reform to Social Security; instead calls for a trigger that would require the President to submit a plan for reform if Social Security is found “not sustainable (pp 47).”

FISCAL YEAR 2012 BUDGET: the house passed proposal

MEDICAID:   Reforms Medicaid by reworking the program into a block grant-style system, which Ryan says will give states flexibility & save taxpay-ers $750 billion over 10-years.

MEDICARE:   Preserves the Medicare system for current beneficiries & those near retirement. For those younger than 55, they would receive pre-mium support. Since these proposed changes would not go into effect for quite some time, significant changes in entitlement spending would not be seen for over a decade.

REGULAR REVIEW:  Takes mandatory spending programs off “autopilot” & requires regular review of these spending programs. The non-partisan Congressional Budget Office, the official scorekeepers of Congress, generally determines how much legislative proposals cost over a ten-year timeframe. Since Ryan’s most significant policy reforms would occur beyond this ten-year time frame, CBO prepared a report for Paul Ryan (at his request) regarding his Medicare and Medicaid proposals. These are the most significant reforms suggested in Ryan’s budget. CBO found that Ryan’s entitlement proposals “…would substantially reduce spending…” for mandatory programs (other than Social Security) over the long-term (pp. 15).

DISCRETIONARY SPENDING.( includes funding for programs through appropriations acts, like Defense and Veterans programs.) Freezes non-defense discretionary spending at Fiscal Year 2008 levels. 

TAX REFORMTax Rates: Cuts the top personal income tax rate from 35 percent to 25 percent and the corporate tax rate from 35 to 25 percent.

EDITOR’S NOTE: WHERE DID WE GET THESE NUMBERS?

Unlike President Obama’s budget proposal, which was scored by CBO in April 2011, Ryan’s

budget proposal was not scored by CBO with the exception of the impact of Medicare and

Medicare programs over the long-term. If Ryan’s budget is scored by CBO, we will update

those numbers here. As it is now, the facts and figures contained in Ryan’s budget represent

his own economic assumptions and estimating techniques (with the general exception of the

Medicare and Medicaid reforms).

RAISING THE FEDERAL DEBT CEIL ING

Washington is abuzz about our nation’s heavy debt burden and the im-pending debate regarding the debt ceiling. Many in Washington insist that the debt limit must be raised, or the United States will default and send our economy into a downward spiral. But are these predictions based on facts?

WILL WASHINGTON DEFAULT? History Will Washington Default if We Do Not Raise the Debt Limit? The Real Risk

HISTORY

The debt ceiling, which is the legal limit on borrowing by the federal govern-ment, was created to control and limit Washington’s spending and debt. It hasn’t worked.

Since 1940, lawmakers have increased the debt ceiling 100 times. And as spending exploded over the last decade, the ceiling has been raised 10 times.

This overspending has saddled taxpayers with a debt of more than $14 trillion, which is nearly the size of our entire economy.

WILL WASHINGTON DEFAULT IF WE DON’T RAISE THE DEBT LIMIT?

Yes and No. Washington could actually hold off on raising the debt limit for months, before default or being unable to repay our lenders becomes a serious risk. Like a person with credit card debt, our government won’t default on its debt so long as it can continue to pay the interest payments on that debt.

And the US’s $2.2 trillion in tax revenue more than covers the $200 bil-lion in interest owed this year. If Washington had to, they could pay for all of its bills for months by doing things like selling unused assets, shifting cash around and borrowing money from the Fed that doesn’t count toward the debt ceiling.

THE REAL RISK

But, that’s only a band-aid to buy us time for real reform—and it hides the real problem. Revenue still only covers 60 percent of the total bill. Unless spending is cut, we risk defaulting under an excessive debt burden.

The debt ceiling keeps increasing because of years of government over-spending. Spending has increased well above its healthy historic average and, without reform, will shoot up dramatically.

If we really want to prevent more debt ceiling increases and defaulting on our debt, Washington should worry less about whether we have to raise the ceiling in the next few weeks.

SAYdon’t raise

SAYraise w/

spendingcuts

A June poll gauges the feelings of Americans on Washington’s current spending conundrum

of Americans say it has to be raised

SAYraise w/o

Amer icans w eigh in on the de

48%

of Americans say it does not have to be raised

42%

66% SAY 21% SAY

(if Congress doesn’t raise the ceiling)

( sm. businesses & avg. americans )

A June poll gauges the feelings of Americans on Washington’s current spending conundrum

The Tarrance Group

is pleased to

present Public Notice with the key

findings fro m a

survey of N=804

registered “likely”

voters across the

country. Interviews

were conducted June 5-8, 2011, &

the margin of er ro r

on a sample of this

type is +/- 3.5%

eigh in on the de bt ceiling de bate

well, why not?

31% think Congress’spending cuts will be too drastic

62%think Congress’ spending cuts won’t be drastic enough

54 PERCENTmore likely

32 PERCENTless likely

Would you be more likely or less likely to support your member of Congress if he or she supports raising the Federal government’s debt limit if significant spending cuts were put in place?

For more information on the facts that affect your pocketbook, visit us at:

thepublicnotice.org