The FY 2015 "Budget": The Proposals and Real Reform

The FY 2015 “Budget”

The Proposals and Real Reform

Dr. Jason J. Fichtner

Senior Research Fellow

Mercatus Center

April 15, 2014

What we’re going to discuss today:

• Where we are: CBO baseline – past, present and future

• FY15 “budgets”

• What’s driving our fiscal condition

• The real bottom line

• Let’s discuss budget process reform

Overview

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CBO’s Baseline Projection - 2012

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CBO’s Baseline Projection - 2013

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FY 2014 Budget Deal

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CBO’s Baseline Projection - 2014

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0

5

10

15

20

25

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1974 1979 1984 1989 1994 1999 2004 2009 2014 2019 2024

perc

en

tag

e o

f G

DP

Total Revenues and Outlays, 1974–2024

Actual Projected

Outlays

Revenue

Source: CBO ( February 2014).

FY 2015 “Budgets”

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U.S. Government Debt

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The True Picture of U.S. Debt - Unfunded Liabilities

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The Real Source of the Problem

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Defense and Non-Defense Spending Squeezed as

Autopilot Programs Explode

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Medicare/Medicaid and Social Security

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Medicare Costs Over Time

State and Federal Medicaid Spending

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Social Security Trust Funds Annual Cash Flows

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Social Security Trust Fund Exhaustion

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Interest Costs Crowd Out Other Government Spending

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A Huge Deficit Would Remain, Even If Any One of

These Steps Were Taken:

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Source: Office of Management and Budget, The New York Times

Based on fiscal year 2010 appropriations and disclosure reports from members

of Congress who received spending earmarks for special projects.

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Can We Grow Our Way Out of Debt

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How Can We Balance the Budget

Budget Policy is Backwards – Opposite of Family Budgeting – Policy drives Budget; Not Budget drives Policy

Entitlements take up 2/3 of Budget – not much discretionary budgeting left

If Congress wants to spend…it will spend

Budget Games: PAYGO / CUTGO – 2nd best solutions

Scorecard to Zero

Emergency Spending

Phase-In, Phase-Out, Expiration

Earmarks

Balanced Budget Amendment?

Need for 2-Year Budget?

Truth in Accounting?

Bring Back Earmarks?

Sunsets?

Budget for Entitlements?

Revisit 1974 Budget Act?

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Observations and Possible Reforms

Previous Capitol Hill Campus Events on the Budget by Dr. Fichtner

2011: http://mercatus.org/video/making-federal-budget

2012: http://mercatus.org/video/behind-numbers-understanding-presidents-fy-2013-budget-submission-congress

2013: http://mercatus.org/podcast/2013/04/30/fy-2014-budget-proposals-and-where-we-go-here (podcast)

All Videos: http://mercatus.org/video/author/1000998

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Any Questions???

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