Obama' Budget Plan: HIGH UNEMPLOYMENT, HIGH TAXES, US BANKRUPTCY, 14.3 TRILLION DEBT

8/7/2019 Obama' Budget Plan: HIGH UNEMPLOYMENT, HIGH TAXES, US BANKRUPTCY, 14.3 TRILLION DEBT

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2010BudgetChart

BookThe Federal Budget in Pictures


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214 Massachusetts Avenue, NE Washington, D.C. 20002 (202) 546-4400 heritage.org

The Thomas A. Roe Institute for Economic Policy Studies

2010 Budget Chart BookThe Federal Budget in Pictures


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PageFEDERAL SPENDING

Federal Spending per Household Is Skyrocketing .................................................................................................2

Federal Spending Is Growing Faster Than Federal Revenue .................................................................................3Recent Spending Hikes Are Not Limited to Temporary Emergencies ....................................................................4Federal Spending Grew More Than Eight Times Faster Than Median Income .....................................................5Federal Spending Is Outpacing Infation ...............................................................................................................6Mandatory Spending Has Increased Nearly Five Times Faster Than Discretionary Spending ...............................7Entitlement Spending and Interest Payments Are Squeezing Out Other Programs ..............................................8Total Government Spending Has More Than Doubled Since 1965 .......................................................................9Deense Spending Has Declined While Entitlement Spending Has Increased .....................................................10Obamas Budget Would Reduce National Deense Spending ..............................................................................11

Earmark Spending Continues Despite Change in Congressional Leadership ......................................................12FEDERAL REVENUE

Taxes per Household Have Risen Dramatically ...................................................................................................14The Top 10 Percent o Earners Paid 71 Percent o Federal Income Tax...............................................................15Federal Government Revenues Have More Than Tripled Since 1965 .................................................................16Federal Revenues by Source ................................................................................................................................17Recession Pushes Current Tax Receipts Below Historical Average .......................................................................18Income Tax Receipts Stay Constant Even as Tax Rates Decline ...........................................................................19

Corporate Income Tax Receipts Stay Constant Even as Tax Rates Decline ..........................................................20U.S. Top Corporate Tax Rate Exceeds the OECD Average ...................................................................................21Total Tax Burden Is Rising to Highest Level in History ........................................................................................22

Table of Contents


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vi

PageDEBT AND DEFICITS

Obamas Budget Would Send Federal Debt to Levels Not Seen Since World War II ...........................................24

Debt in Obamas Budget Exceeds Congressional Budget Oce Baseline .............................................................25National Debt Set to Skyrocket ............................................................................................................................26Obamas Budget Would Create Unprecedented Decits ......................................................................................27Federal Budget Decits Will Reach Levels Never Seen Beore in the U.S. ...........................................................28Entitlement Reorm Would Eliminate Long-Term Decits ..................................................................................29Net Interest Spending Will Quadruple over the Next Decade .............................................................................30The Monthly Interest Payment on the National Debt Is More Than Most Program Spending ............................31

ENTITLEMENTS

Entitlements Will Consume All Tax Revenues by 2052 .......................................................................................34Entitlement Spending Will More Than Double by 2050 .....................................................................................35Social Security Spending Will Soon Rise Rapidly ................................................................................................36Medicare and Medicaid Spending Will Rise with Increasing Health Care Costs..................................................37Entitlement Debt Dwars Other Spending, Including Bailouts ...........................................................................38Without Entitlement Reorm, Federal Spending Could Consume More than Two-Fiths o GDP by 2055 ........39Repealing Tax Cuts and Not Fixing AMT Will Not Balance the Budget ..............................................................40Paying or Entitlements with Tax Increases Would Cause Tax Rates to Double ..................................................41Balancing the Budget Would Cause Taxes to Skyrocket .....................................................................................42

Spending Cuts Alone Will Not Pay or Rising Entitlement Spending ..................................................................43The Roadmap or Americas Future Could Solve the Long-Term Budget Problem ..............................................44

Table of Contents


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Federal SpendingThe government is spending at unprecedented levels, posing an

expensive threat to limited government.


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heritage.org 2010 Budget Chart BookFederal Spending Chart 1

U.S. Census Bureau, White House Office of Management and Budget, and Congressional Budget Office.Source:

INFLATION-ADJUSTED DOLLARS (2009)

Inflation-AdjustedDollars(2009)

federal-spending-per-household

The ederal government is spending more on a per-household basis than ever beore.

Federal Spending per Household Is Skyrocketing

0

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$36,139$31,088

$11,337

ProjectedActual

$11,337


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White House Office of Management and Budget.Source:


Inflation-AdjustedBillionsofDollars(2009)

growth-federal-spending-revenue

Since 1965, taxes and spending have been rising. Federal revenues have dropped recently due tothe economic recession while spending has reached a record high.

Federal Spending Is Growing Faster Than Federal Revenue

0

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010(est.)

$1 trillion

$2 trillion

$3 trillion

$4 trillion

Est. 2010deficit:$1.54trillion

Revenue$2.15 trillion

$3.69 trillion

SpendingSpending


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Page4


Heritage Foundation calculations based on White House Office of Management and Budget data.Source:



federal-spending-hikes-not-temporary

The overall increase in base spending is a signicant budgetary concern. Recent bailouts and the stimulus wereexpensive, but they are a modest raction o the total budget. Even the global war on terrorism is just a smallsliver o spending.

Recent Spending Hikes Are Not Limited to Temporary Emergencies

0

1990 1995 2000 2005 2010 2015 2019

$1 trillion

$2 trillion

$3 trillion

$4 trillion

$5 trillion $4.3 trillion$4.0 trillion

$1.9 trillion

Base Spending(43% real growth

from 2009 to 2019)

$2.3 trillion

GlobalWar on Terrorism

Financial BailoutsFinancial Bailouts

2009 Stimulus Bill2009 Stimulus Bill


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U.S. Census Bureau and White House Office of Management and Budget.Source:

PERCENTAGE CHANGE OF INFLATION-ADJUSTED DOLLARS (2009)


growth-federal-spending

When ederal spending grows aster than peoples paychecks, the governments burden on taxpayers becomesgreater. Over the past ew decades, middle-income Americans earnings have risen 29 percent, while spending hasincreased 242 percent.

Federal Spending Grew More Than Eight Times FasterThan Median Income

0

1970 1975 1980 1985 1990 1995 2000 2005 2008

50%

100%

150%

200%

250%1970 $883 billion2008 $3,018 billion

+242%

1970 $39,4032008 $50,893

+29%Median

HouseholdIncome

Total Federal

Spending

MedianHousehold

Income

Total Federal

Spending


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White House Office of Management and Budget and Bureau of Labor Statistics.Source:

YEAR-TO-YEAR PERCENTAGE CHANGE

Year-to-YearPercentageChange

federal-spending-inflation

Prices normally rise year to year, but ederal spending has risen even aster, making it more costly than ever.Although spending grew substantially ater 9/11, less than hal o the increase is due to deense and homelandsecurity spending.

Federal Spending Is Outpacing Inflation

0

5%

10%

15%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

+17.9%

0.4%

+7.4%

+7.8%

+6.2%+7.4%

+7.9%

Federal Spending

Inflation

+9.3%+9.3%Average Change

in FederalSpending:

+5.6%

AverageChange inInflation:

+2.6%

Average Changein FederalSpending:

+5.6%

AverageChange inInflation:

+2.6%


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mandatory-discretionary-spending

Only one-third o the ederal budget, discretionary spending, is subject to required annual congressional debate.The remainder, mandatory spending, grows on autopilot and has increased nearly ve times aster thandiscretionary spending. Most o the current increase is due to stimulus and entitlement spending.

Mandatory Spending Has Increased Nearly Five Times FasterThan Discretionary Spending

0

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010(est.)

$0.5 trillion

$1.0 trillion

$1.5 trillion

$2.0 trillion

$2.5 trillion

$3.0 trillion

$3.5 trillion

MandatorySpending

DiscretionarySpending

$604 billion

$3.5 trillion


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Heritage Foundation calculations based on White House Office of Management and Budget data.Source:

PERCENTAGE OF GDP

PercentageofGDP

entitlement-interest-spending-squeezes-federal-spending

One way to control spending is to cap it as a share o GDP. Because interest must be paid and i entitlementspending increases automatically, caps would squeeze other spending. Even i deense spending is reduced,entitlement reorm is necessary or more budgetary fexibility.

Entitlement Spending and Interest PaymentsAre Squeezing Out Other Programs

0

5%

10%

15%

20%

25%

0

5%

10%

15%

20%

25%

MandatorySpending

Net Interest

DiscretionarySpending

MandatorySpending

Net Interest

Defense

Other Discretionary

2012 2015 2020 2012 2015 2020

SpendingCapped at22% GDP

1.0%

3.5%

CurrentSpending

6.6%


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U.S. Census Bureau, White House Office of Management and Budget, and 2010 Economic Report of the President.Source:

PER-HOUSEHOLD SPENDING, IN INFLATION-ADJUSTED DOLLARS (2009)


total-government-spending

State and local government spending imposes a signicant additional burden on taxpayers on top o ederal spending.

Total Government Spending Has More Than Doubled Since 1965

0

1965 1970 1975 1980 1985 1990 1995 2000 2005 2009

$10,000

$20,000

$30,000

$40,000

$50,000

$17,440

$47,000

State and LocalSpending

FederalSpending


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Page10



PERCENTAGE OF GDP

PercentageofGDP

defense-entitlement-spending

Spending on national deense, a core constitutional unction, has declined signicantly over time, despite wars inIraq and Aghanistan. Meanwhile, spending on the three major entitlementsSocial Security, Medicare, andMedicaidhas more than tripled and is rapidly crowding out other programs.

Defense Spending Has Declined While Entitlement SpendingHas Increased

2%

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

(est.)

4%

6%

8%

10%

NationalDefense

Entitlements(Social Security,

Medicare, Medicaid)

4.9%

9.9%

7.4%

2.5%

Nationalefense


Medicare, Medicaid)

..9

..9

.7

.2

1976 wasthe first yearentitlement

spendingexceededdefense

spending

1976 wasthe first yearentitlement

spendingexceededdefense

spending


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DEFENSE SPENDING AS A PERCENTAGE OF GDP

PercentageofGDP

obama-budget-defense-spending

Adequate unding is crucial or the military to ulll its constitutional duty to provide or the common deense. Yetdeense spending has allen below its 45-year historical average despite ongoing operations in Iraq and Aghanistan.

Obamas Budget Would Reduce National Defense Spending

0

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

2%

4%

6%

8%

10%

45-YearAverage: 5.3%

9.5%

6.2%

3.0%

4.9% 3.5%45-YearAverage:5.3%

.

6.2%

3.0%

.9 .3

Actual Projected


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Citizens Against Government Waste and Taxpayers for Common Sense.Source:

BillionsofDollarsandNumbers ofProjects

pork-barrel-earmarks

Despite pledges rom President Obama and congressional leaders to curtail earmark spending, the practice hascontinued at previous levels. The most recent spending bills included nearly 10,000 pork projects costingtaxpayers nearly $16 billion.

Earmark Spending Continues Despite Changein Congressional Leadership

0

$5

$10

$15

$20

$25

$30 billion

0

3,000

6,000

9,000

12,000

15,000$29 billion

$13.2billion

$15.9billion

1991 1995 2000 2005 20101991 1995 2000 2005 2010

13,997 earmarks 9,499

2,658

NUMBER OF EARMARKS COST OF EARMARKS


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Federal RevenueThe tax burden in America is climbing and will reach record levels

without policy changes.


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heritage.org 2010 Budget Chart BookFederal Revenue Chart 1




taxes-per-household

American households are sending more o their income to Washington, despite the economic downturn.

Taxes per Household Have Risen Dramatically

0

$5,000

1965 1970 1975 1980 1985 1990 1995 2000 2005 2009

$10,000

$15,000

$20,000

$25,000 $23,947 $16,543

$11,202$11,202 Current levels higher than 1992$16,357


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Internal Revenue Service.Source:

PERCENTAGE OF TOTAL INCOME TAXES (2007)

PercentageofTotalIncomeTaxes(2007)

top10-percent-income-earners

Top earners are the target or new tax increases, but the U.S. tax system is already highly progressive. The top1 percent o income earners paid 40 percent o all ederal income taxes in 2007, while the bottom 50 percentpaid only 3 percent. More than one-third o U.S. earners paid no ederal income tax at all.

The Top 10 Percent of Earners Paid 71 Percentof Federal Income Tax

This Levelof Income

Earners ...

... Paid ThisProportion of

the FederalIncome Tax

in 2007.

Bottom50%

3%

26%50%

11%

11%25%

15%

6%10%

11%

2%5%

20%

Top 1%

40%


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federal-government-revenues

Tax revenues have been rising historically despite a recent decline due to the recession. Income, capital gains,and corporate tax cuts in 2001 and 2003 helped revenues surge.

Federal Government Revenues Have More Than Tripled Since 1965

0

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

(est.)

$0.5 trillion

$1.0 trillion

$1.5 trillion

$2.0 trillion

$2.5 trillion

$3.0 trillion$2.15 trillion

$927.4 billion

$155.3 billion

Total Revenue

Corporate Taxes

IndividualIncome Taxes

IndividualIncome Taxes


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Congressional Budget Office.Source:

PERCENTAGE OF TOTAL FEDERAL REVENUE (2009)

PercentageofTotalFederalRevenue(2009)

federal-revenue-sources

Most ederal revenues come rom individuals. Personal income taxes provide the largest portion o total taxrevenues. Social Security and Medicare payroll taxes are the second-largest source.

Federal Revenues by Source

Individual($915.3 billion)

SocialInsurance

($890.9 billion)

Customs Duties, Misc.:3.5% ($74.2 billion)

Corporate: 6.6% ($138.2 billion)

Excise: 3.0% ($62.5 billion)

Estate and Gift: 1.1% ($23.5 billion)

43.5% 42.3%


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TAX RECEIPTS AS A PERCENTAGE OF GDP

PercentageofGDP

current-tax-receipts

The overall tax burden on Americans is measured as a share o gross domestic product (GDP). Since World War II,tax receipts have averaged around 18 percent o GDP. Due mainly to the recession, tax receipts have allen slightlybut are expected to surpass historical levels soon.

Recession Pushes Current Tax Receipts Below Historical Average

12%

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

(est.)

14%

16%

18%

20%

22%

20.4%

14.4%

20.6%

14.8%

TaxRevenue

TaxRevenue

30-YearAverage:18.2%30-YearAverage:18.2%


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White House Office of Management and Budget and the Tax Foundation.Source:

TAX RATES AND RECEIPTS AS A PERCENTAGE OF GDP

TaxRatesandReceipts asa PercentageofGDP

income-tax-receipts

Tax cuts can create incentives or individuals to generate more income, which generates more revenues. The mostdramatic decline in the top individual income tax rate, rom 70 percent to 28 percent, occurred during the Reagan

Administration, yet tax receipts remained relatively constant as a share o the economy.

Income Tax Receipts Stay Constant Even as Tax Rates Decline

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

(est.)

20%

40%

60%

80%

100%91%

70%

50%

39.6%

6.4%7.7%9.2%9.4%7.8%

Top IndividualTax Rate

35%

IndividualTax Receiptsas % of GDP

Top IndividualTax Rate

35%

IndividualTax Receiptsas % of GDP


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White House Office of Management and Budget and the Tax Foundation.Source:

TAX RATES AND RECEIPTS AS A PERCENTAGE OF GDP

TaxRatesand Receiptsasa PercentageofGDP

corporate-income-tax-receipts

Tax cuts create incentives or businesses to create more income, which generates more revenues. The top corporatetax rate was reduced sharply under President Reagan, rom 46 percent to 34 percent, yet receipts actually rose as ashare o the economy.

Corporate Income Tax Receipts Stay Constant Even asTax Rates Decline

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

(est.)

10%

20%

30%

40%

50%

60%

52%

4.1%

34% 35%

1.1%1.8%1.4%

Top CorporateTax Rate

CorporateIncome TaxReceipts as% of GDP

Top CorporateTax Rate

CorporateIncome TaxReceipts as% of GDP

46%46%


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Organisation for Economic Co-operation and Development.Source:

CORPORATE TAX RATES

CorporateTaxRates

corporate-tax-rate

High U.S. corporate tax rates make it dicult or businesses to compete internationally. While other countriesare reducing corporate tax rates, the U.S. has maintained a rate o 35 percent, the highest o any nation in theOrganisation or Economic Co-operation and Development (OECD).

U.S. Top Corporate Tax Rate Exceeds the OECD Average

23%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

24%

25%

26%

27%

28%

29%

30%

31%

32%

33%

34%

35%

36%

United States: 35%

Average

United States: 35%

Average

32.4%

26.3%

24.4% 24.2%

32.4%

26.3%

24.4% 24.2%ga e

26.3%

..24.4% 4.2


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Heritage Foundation calculations based on Congressional Budget Office and White House Office of Management and Budget data.Source:

TAX REVENUE AS A PERCENTAGE OF GDP

PercentageofGDP

total-tax-burden

Taxes are projected to increase rapidly under various policy scenarios. I the 2001 and 2003 tax cuts expire andmore middle-class Americans are required to pay the alternative minimum tax (AMT), taxes will reachunprecedented levels. The tax burden will climb even i those tax breaks are extended. President Obamas budget,which cuts some taxes and raises others, also increases the overall tax burden.

Total Tax Burden Is Rising to Highest Level in History

14%

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055

16%

18%

20%

22%

24%

Highest Tax Burden inU.S. History: 20.6%

Tax Cuts Expire ObamasBudget

ObamasBudget

Extend Tax Cutsand Fix AMT30-Year Historical

Tax Burden: 18.2%30-Year HistoricalTax Burden: 18.2%


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Debt and DefcitsExcessive spending has created record levels o decits and debt,

and the worst is yet to come.


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heritage.org 2010 Budget Chart BookDebt and Deficits Chart 1

Congressional Budget Office and White House Office of Management and Budget.Source:

DEBT AS A PERCENTAGE OF GDP

PercentageofGDP

obama-budget-skyrocketing-debt

In 2008, publicly held debt as a percentage o the economy (GDP) was 40.8 percent, nearly ve points below thepost-war average. Under President Obamas budget, this gure would more than double to 90 percent by 2020.Continued structural debt poses serious economic risks.

Obamas Budget Would Send Federal Debt to LevelsNot Seen Since World War II

0

20%

40%

60%

80%

100%

120%

1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

108.6%

90.0%

40.8%

08.6%

90.0%

.8

ObamasBudget


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Congressional Budget Office and White House Office of Management and Budget.Source:


PercentageofGDP

obama-debt-increase-above-CBO

Debt as a share o the economy is rising. Whether current law continues or Obamas budget is passed,the debt will be more than two-thirds o annual GDP in just 10 years.

Debt in Obamas Budget ExceedsCongressional Budget Office Baseline

20%

1980 1985 1990 1995 2000 2005 2010 2015 2020

30%

40%

50%

60%

70%

80%

90%

Actual

CurrentLawAverage, 19802009: 39.4%

Projected

ObamasBudget

67.5%

26.1%

90.0%


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Heritage Foundation compilations of data from U.S. Department of the Treasury, Institute for the Measurement of Worth(Alternative Fiscal Scenario), Congressional Budget Office, and White House Office of Management and Budget.

Source:


PercentageofGDP

national-debt-skyrocket

In the past, wars and the Great Depression contributed to rapid but temporary increases in the national debt.Over the next ew decades, runaway spending on Social Security, Medicare, and Medicaid will drive the debtto unsustainable levels.

National Debt Set to Skyrocket

0

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030

50%

100%

150%

200%

WorldWar I

The GreatDepression

WorldWar II

War onTerrorism

108.6%

WorldWar I

he Greatepression

WorldWar II

War onTerrorism

..

180.6%


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BUDGET DEFICITS AS A PERCENTAGE OF GDP, BY ADMINISTRATION

PercentageofGDP

budget-create-deficits

The President is responsible or submitting an annual budget to Congress and has the authority to veto legislationincluding irresponsible spending. Most Administrations ran small but manageable decits, but President Obama'sunprecedented budget decits pose serious economic risks.

Obamas Budget Would Create Unprecedented Deficits

8%

7%

6%

5%

4%

3%

2%

1%

0Kennedy Johnson Nixon Ford Carter Reagan Bush Clinton Bush Obama

1.0% 0.9%1.6%

3.5%

2.4%

4.3% 4.3%

0.1%

3.2%

7.8%(est.)


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Page28


Congressional Budget Office (Alternative Fiscal Scenario).Source:

PERCENTAGE OF GDP

PercentageofGDP

federal-budget-deficits

Recent budget decits have reached unprecedented levels, but the uture will be much worse. Unless entitlementsare reormed, spending on Social Security, Medicare, and Medicaid will drive decits to unsustainable levels.

Federal Budget Deficits Will Reach LevelsNever Seen Before in the U.S.

0

10%

1962 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

10%

20%

30%

40%

50%

45.3%

11.0%

2.2%

.

1..01

AverageHistorical

Deficit: 2.9%

AverageHistorical

Deficit: 2.9%


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SURPLUS/DEFICIT AS A PERCENTAGE OF GDP

PercentageofGDP

entitlement-reform-eliminates-deficits

In January 2010, Representative Paul Ryan (RWI) re-introduced the Roadmap or Americas Future, legislation thatwould improve Americas long-term budget situation by reorming entitlements. Compared to the current trajectory,the bill would eliminate long-term decits.

Entitlement Reform Would Eliminate Long-Term Deficits

50%

40%

30%

20%

10%

02009 2010 2020 2030 2040 2050 2060

2070 2080

11%

3.8%4.8%4.5%2.6%

0.6%

+1.9%+5%

2009 2010 2020 2030 2040 2050 2060 2070 2080

11% 12.1%

22.3%

34.9%

42.8%

10%

Rep. Ryans Roadmapfor Americas Future

CurrentProjections

7%7.6%7.4%

17.2%

28%

7%7.6%7.4%

17.2%

28%


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Page30





budget-net-interest-spending

As the national debt grows, interest payments will consume more and more o the ederal budget. Under thePresidents budget, the national debt would nearly double and real net interest costs would quadruple over thenext decade.

Net Interest Spending Will Quadruple over the Next Decade

0

1990 1995 2000 2005 2010 2015 2020

$200 billion

$400 billion

$600 billion

$800 billion $768.2 billion

$280.1 billion

$186.9 billion

.

8 . illi$ ob0 nl12

$186.9 billion

Actual Projected


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U.S. Department of the Treasury and White House Office of Management and Budget.Source:

2009 SPENDING, IN BILLIONS OF DOLLARS

BillionsofDollars

interest-spending

In 2009, the U.S. spent more on interest payments on the debt in one month than it spent on some ederaldepartments or the entireyear.

The Monthly Interest Payment on the National DebtIs More Than Most Program Spending

0

$10

$20

$30

$40

$50

$43.6 $42.6

$31.9

$14.3$10.0

Departmentof Education

Departmentof Housingand Urban

Development

Departmentof Homeland

Security

AverageMonthlyInterestPayment

DepartmentofAgriculture

Departmentof Labor

EnvironmentalProtection

Agency

. .

..

$27.0

$46.8

$27.0

$46.8


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EntitlementsSocial Security, Medicare, and Medicaid spending is about to

explode, placing enormous pressure on the budget.


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Page34

heritage.org 2010 Budget Chart BookEntitlements Chart 1


PERCENTAGE OF GDP

PercentageofGDP

entitlements-historical-tax-levels

I uture taxes are held at the historical average, spending on Medicare, Medicaid, and Social Security will consumeall revenues by 2052. Because entitlement spending is unded on autopilot, no revenue will be let to pay or othergovernment spending, including constitutional unctions such as deense.

Entitlements Will Consume All Tax Revenues by 2052

0

1965 1975 1985 1995 2005 2015 2025 2035 2045 2055 2065 2075 2083

5%

10%

15%

20%

25%

Medicare

Medicaid

2052: Entitlements 18.2% of GDP

2.7%

24.0%

SocialSecurity

30-Year AverageTaxRevenue: 18.2%

TaxRevenue

30-Year AverageTaxRevenue: 18.2%

TaxRevenue


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PERCENTAGE OF GDP

PercentageofGDP

entitlement-spending-double

Social Security, Medicare, and Medicaid spending will soar as 78 million baby boomers retire and health carecosts climb. Medicaid spending will more than double, and Medicare spending will more than triple.

Entitlement Spending Will More Than Double by 2050

0

5%

10%

15%

20%

SocialSecurity

Total

Medicaid

Medicare

1.5%

2.4%

4.2%

2005

8.1%

1.9%

3.1%

4.8%

2010

9.8%

2.1%

4.0%

5.3%

2020

11.4%

2.5%

5.9%

5.9%

2030

2.9%

7.7%

5.9%

2040

16.5%

3.2%

9.0%

5.7%

2050

17.9%

14.3%14.3%

P S i S i S i i S i i


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Page36



PERCENTAGE OF GDP

PercentageofGDP

social-security-spending

Although Social Security spending has remained relatively constant since the early 1980s, the approaching wave oretiring baby boomers will cause Social Security spending to skyrocket.

Social Security Spending Will Soon Rise Rapidly

0%

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080

1%

2%

3%

4%

5%

6%

7%

Actual Projected

4.4%

4.3%

6.0% 6.2%

1.7 percentage pointincrease from2009 to 2031

1.7 percentage pointincrease from2009 to 2031

PM di d M di id S di Will Ri


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P



PERCENTAGE OF GDP

PercentageofGDP

medicare-medicaid-spending

Health care costs are rising rapidly and have been growing aster than the economy over the past ew decades.As 78 million baby boomers retire, rising costs will cause Medicare and Medicaid spending to skyrocket.

Medicare and Medicaid Spending Will Risewith Increasing Health Care Costs

0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

(est.)

5%

10%

15%

20% 17.2%

4.7%4.7%

Medicaid

Medicare

All OtherHealth Care

10.8%

3.5%

2.9%

Page E titl t D bt D f Oth S di I l di B il t


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Page38


U.S. Depar tment of the Treasury, U.S. Government Accountabili ty Office, and Congressional Budget Office.Source:

UNFUNDED OBLIGATIONS

BillionsofDollars

unfunded-liabilities-entitlements

The nation cannot aord the Medicare and Social Security benets that have been promised to uture retirees. Theselong-term ununded obligations dwar spending on other expensive government programs, including the Troubled

Asset Relie Program (TARP) and the 2009 economic stimulus bill, and vastly outweigh the entire national debt.

Entitlement Debt Dwarfs Other Spending, Including Bailouts

$37.9 trillionMedicare

$7.7 trillionSocial Security

$12.4 trillion

TotalNational Debt

Stimulus

$862billion

NationalDefense

$714billion

TARP

$700billion

PWithout Entitlement Reform Federal Spending Could Consume


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P


Heritage Foundation calculations based on Congressional Budget Office data.Source:

PERCENTAGE OF GDP

PercentageofGDP

entitlements-consume-economy

I taxes are held at the historical average in the uture, the three major entitlementsSocial Security, Medicare, andMedicaidwill push spending levels to unsustainable levels. These programs must be reormed in order to improvethe long-term budget outlook.

Without Entitlement Reform, Federal Spending Could ConsumeMore than Two-Fifths of GDP by 2055

0

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055

10%

20%

30%

40%

NetInterest

Other

Defense

SocialSecurity

Medicaid

Medicare

41.0%

41.0%

30-Year HistoricalTax Revenue:

18.2%

30-Year HistoricalTax Revenue:

18.2%Deficit

spending

Page Repealing Tax Cuts and Not Fixing AMT


44/52

Page40


Congressional Budget Office (Extended Baseline Scenario).Source:

PERCENTAGE OF GDP

PercentageofGDP

repealing-tax-cuts

Even i the 2001 and 2003 tax cuts expire and middle-class taxpayers all prey to the alternative minimum tax, thebudget would not balance because spending is skyrocketing. Medicare, Medicaid, and Social Security are the maindrivers o uture spending and must be reormed in order to improve the long-term budget outlook.

Repealing Tax Cuts and Not Fixing AMTWill Not Balance the Budget

0

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055

5%

10%

15%

20%

25%

30%

35%

NetInterest

Other

Defense

SocialSecurity

Medicaid

Medicare

30-YearHistorical

Tax Revenue:18.2%

30-YearHistorical

Tax Revenue:18.2% Deficit spending

TaxRevenue

TotalSpending

TaxRevenue

TotalSpending

PPaying for Entitlements with Tax Increases Would Cause


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P



MARGINAL INCOME TAX RATES

MarginalIncomeTaxRates

entitlements-double-tax-rates

The costs o Medicare, Medicaid, and Social Security are rising substantially. Paying or this spending solely throughederal income tax increases would require more than doubling current tax rates, even or the lowest tax bracket.

Paying for Entitlements with Tax Increases Would CauseTax Rates to Double

0

20%

40%

60%

80%

100%

Lowest Bracket

2010 2050 2082 2010 2050 2082 2010 2050 2082 2010 2050 2082

10%19%

25% 25%

47%

63% 66%

88%

66%

88%

Middle Bracket Highest Bracket Corporate Taxes

35% 35%35% 35%

Page Balancing the Budget Would Cause Taxes to Skyrocket


46/52

g42


Heritage Foundation calculations based on Congressional Budget Office data (Alternative Fiscal Scenario).Source:

PERCENTAGE OF GDP

PercentageofGDP

balancing-budget

America is running massive decits, and a balanced budget requirement is oten considered a way to rein inred ink. Without spending cuts or entitlement reorms the level o taxes required to balance the budget wouldreach European levels.

Balancing the Budget Would Cause Taxes to Skyrocket

0

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055

5%

10%

15%

20%

25%

30%

All OtherSpending

SocialSecurity

Medicaid

Medicare

NetInterest

29.9%Actual Spending With BalancedBudget

Revenue

PSpending Cuts Alone Will Not Pay for Rising Entitlement Spending


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ANNUAL SPENDING (2010)

BillionsofDollars

spending-cuts

Spending cuts are oten considered as a way to pay or unaordable Social Security and Medicare benets. Butannual spending on entitlements is massive compared to other programs, including deense. Entitlements must bereormed to become aordable.

Spending Cuts Alone Will Not Pay for Rising Entitlement Spending

$1.4 trillion


Medicaid, Medicare)

$130billion

GlobalWaron Terrorism

$15.9billion

Porkearmarks

$18.3billion

NASA

Page The Roadmap for Americas Future Could Solve


48/52

44



PERCENTAGE OF GDP

PercentageofGDP

long-term-entitlement-spending

In January 2010, Representative Paul Ryan (RWI) re-introduced the Roadmap or Americas Future, acomprehensive bill that would reorm entitlements. According to the non-partisan Congressional Budget Oce,this bill would eliminate long-term decits and place the budget on a sustainable course.

The Roadmap for America s Future Could Solvethe Long-Term Budget Problem

0

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080

5%

10%

15%

20%

25%

30%

NetInterest

All OtherSpending

Entitlements

TaxRevenue

TaxRevenue


49/52

Authors

Nicola MooreAssistant Director

Thomas A. Roe Institute or Economic Policy Studies

Steve KeenResearch Assistant

Thomas A. Roe Institute or Economic Policy Studies

John FlemingSenior Data Graphics Editor


50/52

Technical Notes

The charts in this book are based primarily on data available as o March 2010 rom the Oce oManagement and Budget (OMB) and the Congressional Budget Oce (CBO). The charts using OMB datadisplay the historical growth o the ederal government to 2009 while the charts using CBO data display

both historical and projected growth rom as early as 1940 to 2083. Projections utilizing OMB data aretaken rom the White House FY 2011 budget.

The charts provide data on an annual basis except where computations are made or Administrationaverages. As a corollary, all spending and revenue data are based on a scal year. However, or the purposeo simplicity, they are treated as calendar years in the charts. Prior to 1976, the scal year was rom July1 to June 30. Following that year, the current ormat o October 1 to September 30 was implemented. Inthe charts, the transition is omitted or clarity. Also, in all charts in which spending or revenue is mea-

sured by taxpayer, taxpayers are counted as the number o individual income tax returns led (accordingto data rom the Internal Revenue Service) per year. Thus, married couples that both work but le a jointreturn are counted as a single combined-income unit. Most o the data are adjusted or infation in 2009dollars. Furthermore, specic inormation regarding data is indicated at the bottom o each chart.

Charts designating Presidential Administrations begin with the scal year in which the Administra-tion presented its rst budget. In the case o 2009, an atypical year in which much was spent beore theAdministrations rst scal year budget (FY 2010), all revenue and spending up to the CBO January 2009

Budget and Economic Outlook was attributed to President Bush. All revenue and spending thereater isattributed to President Obama.


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The Entitlements Initiative is one o 10 Transormational Initiatives making up The Heritage

Foundations Leadership or America campaign. For more products and inormation related to this initia-

tive or to learn more about the Leadership or American campaign, please visit heritage.org.

The Heritage Foundation is a research and educational institutiona think tankwhose mission isto ormulate and promote conservative public policies based on the principles o ree enterprise, limitedgovernment, individual reedom, traditional American values, and a strong national deense.

Our vision is to build an America where reedom, opportunity, prosperity, and civil society fourish. As

conservatives, we believe the values and ideas that motivated our Founding Fathers are worth conserving.As policy entrepreneurs, we believe the most eective solutions are consistent with those ideas and values.


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The Budget Chart Book is available at heritage.org/BudgetChartBook. Check out the ollowing eatures:

heritage.org/BudgetChartBook

Visit Us Online

214 Massachusetts Avenue, NE Washington, D.C. 20002 (202) 546-4400 heritage.org

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Obama' Budget Plan: HIGH UNEMPLOYMENT, HIGH TAXES, US BANKRUPTCY, 14.3 TRILLION DEBT

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