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BUDGET BATTLES A Breakdown of the Key Battles in the Budget War


BUDGET PROCESS A Visual Timeline of the Budget Process


BUDGET BREAKDOWN A Visual of Where Your Money Goes


FY12 PRESIDENT’S BUDGET Key Points and Reforms


FY12 HOUSE BUDGET Key Points and Reforms


DEBT CEILING What it is, a Summary of the Debate, Why it Matters

GOV E R NM E N T OV E R SP E ND IN G by 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.


(AS OF JUNE 8, 2011)

NATI O NAL DEBT: $14.3 trillion PR OJE CTED F Y11 DEBT A S A P E R C E NTA GE O F GDP : 102 percent D E BT PER AMERIC AN: $46,580 D E BT PER HOUSEH OL D: More than $130,000 FY 10 FEDERAL DEF IC IT : $1.294 trillion FY 11 DEF IC IT TO DATE : $869.9 billion PR OJE CTED FY2 0 1 1 DE FIC IT: $1.399 trillion FY 11 INTEREST ON TH E DE BT TO DATE : $96 billion NUMB ER OF MONTH S IN TH E R E D: 32 HIG HEST MONTHLY DEFIC IT O N R E C O R D: $223 billion in February 2011 PR OJE CTED DEFICIT TO TA L FO R 2 0 1 0 -2 0 1 9 : $7.992 trillion

TH E FE DE RAL B U DGET WAR: key battles 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 RESOLUTION As 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.

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 BUDGET The 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, editorial 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 Senate 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 Committee 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 INCREASE On 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.


(june 10) Currently, the Senate hasn't begun t he appropriations process.




(june 30)

Never happens.




FI SC A L Y EA R 201 2 B U D G E T: the president’s proposed budget

Each February, the President is required by law to submit a budget to Congress. 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 NUMBERS FY 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 SPENDING Definition: Mandatory Spending includes funding for programs that Congress is required to provide under law, like Social Security, Medicare, and Medicaid.

The President’s plan largely ignores Social Security and Medicaid reform, the largest driver of the country’s deficit spending and “calls on the Congress… [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 ignored Medicare reform. These two mandatory programs are the biggest drivers of U.S. debt. According to Obama’s budget, next fiscal year, Medicare and Social Security are projected to consume 32.9 percent of the budget. DISCRETIONARY SPENDING Definition: 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 10year 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 reformed 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.

F I SC A L Y EA R 2 01 2 B U D G E T: the house passed proposal

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 FACTS FY 2012 Total Spending: $3.5 trillion FY 2012 Deficit: $995 billion 2012 Debt (calendar year): $16.2 this year, and would continue to rise to $23.1 trillion by 2021   SPENDING REFORM Mandatory Spending (includes funding for programs that Congress is required to provide under law, like Social Security, Medicare, and Medicaid) 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).”

M E D I C A I D : Reforms Medicaid by reworking the program into a block grant-style system, which Ryan says will give states flexibility & save taxpayers $750 billion over 10-years. M E D I C A R E :   Preserves the Medicare system for current beneficiries & those near retirement. For those younger than 55, they would receive premium 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. R E G U L A R R E V I E W:  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). D I S C R E T I O N A RY S P E N D I N G . ( includes funding for programs through appropriations acts, like Defense and Veterans programs.) Freezes nondefense discretionary spending at Fiscal Year 2008 levels.   TAX REFORM Tax 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).


Washington is abuzz about our nation’s heavy debt burden and the impending 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 government, 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 billion 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 overspending. 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.

A June poll gauges the feelings of Am Washington’s current spending con

Amer icans w eigh in on


of Americans say it does not have to be raised SAY don’t raise

SAY SAY raise w/ raise spending w/o cuts


of Americans say it has to be raised

(if Congress doesn’t raise the ceiling)

66% SAY ( sm. businesses & avg. americans )

21% SAY

mericans on nundrum

n the de bt ceiling de bate

The Tarrance Group i s pleased to

well, why not?

present Public N otice with the key findings fro m a survey of N=804 registered “likely”


think Congress’ spending cuts will be too drastic

voters across the country. Interviews were conducted June 5-8, 2011, & the margin of er ro r


think Congress’ spending cuts won’t be drastic enough

on a sample of this type is +/- 3.5%

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?

54 PERCENT more likely

32 PERCENT less likely

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

Budget Briefing Booklet, Vol. 1  
Budget Briefing Booklet, Vol. 1  

A comprehensive look at where your tax dollars go. (1 of 3)