Source: Congressional Budget Office, Pub. No. 3187, January 2009
The sharp downturn in housing markets across the country, which undermined the solvency of major financial institutions and severely disrupted the functioning of financial markets, has led the United States into a recession that will probably be the longest and the deepest since World War II. The Congressional Budget Office (CBO) anticipates that the recession–which began about a year ago–will last well into 2009.
Under an assumption that current laws and policies regarding federal spending and taxation remain the same, CBO forecasts the following:
• A marked contraction in the U.S. economy in calendar year 2009, with real (inflation-adjusted) gross domestic product (GDP) falling by 2.2 percent.
• A slow recovery in 2010, with real GDP growing by only 1.5 percent.
• An unemployment rate that will exceed 9 percent early in 2010.
• A continued decline in inflation, both because energy prices have been falling and because inflation excluding energy and food prices–the core rate–tends to ease during and immediately after a recession; for 2009, CBO anticipates that inflation, as measured by the consumer price index for all urban consumers (CPI-U), will be only 0.1 percent.
• A drop in the national average price of a home, as measured by the Federal Housing Finance Agency’s purchase-only index, of an additional 14 percent between the third quarter of 2008 and the second quarter of 2010; the imbalance between the supply of and demand for housing persists, as reflected in unusually high vacancy rates and a low volume of housing starts.
• A decrease of more than 1 percent in real consumption in 2009, followed by moderate growth in 2010; the rise in unemployment, the loss of wealth, and tight consumer credit will continue to restrain consumption– although lower commodity prices will ease those effects somewhat.
• A financial system that remains strained, although some credit markets have started to improve; it is too early to determine whether the government’s actions to date have been sufficient to put the system on a path to recovery.
Source: U.S. Census Bureau, Press release, CB08-146, October 2, 2008
The federal government allocated $2.56 trillion in domestic spending for fiscal year 2007, up 4.4 percent from the prior year, according to the U.S. Census Bureau. This and additional important information on federal funding is included in two new reports being released today. The Consolidated Federal Funds Report: 2007 provides a broad overview of how and where the federal government distributes funds. Statistics are broken out by federal department and agency, as well as by state, county and subcounty area. The second report, Federal Aid to States for Fiscal Year 2007, contains data on federal grants to state and local governments.
Retirement and disability payments to individuals accounted for $783 billion (more than 30 percent) of total federal spending. Of that amount, 80 percent, or $623 billion, went to Social Security recipients. Social Security was composed of retirement insurance payments ($369 billion), survivors insurance ($113 billion), disability insurance ($105 billion) and supplemental security income payments ($36 billion).
Nearly half of all domestic government spending (excluding interest on the federal debt) went to Social Security, Medicare and Medicaid, accounting for $1.22 trillion. The one-year increase in spending for these three programs was approximately $198 for every person in the United States.
Source: Richard Kogan and Gillian Brunet, Center on Budget and Policy Priorities, September 12, 2008
From the summary:
The federal budget is projected to run a $546 billion deficit in 2009, compared with the $710 billion surplus that budget experts projected for 2009 back when President Bush took office nearly eight years ago. This $1.3 trillion deterioration in the nation’s fiscal finances for 2009 can be seen by comparing estimates that the Congressional Budget Office (CBO) released this week with those that CBO released in January 2001.
Source: Gillian Reynolds, Elizabeth Bell, Rebecca L. Clark, Rosalind E. Berkowitz, Christopher Spiro, Urban Institute, July 2, 2008
From the abstract:
“Kids’ Share 2008: How Children Fare in the Federal Budget” tracks trends in federal spending on children from 1960 through 2018. The primary data source used is the Budget of the United States Government, Fiscal Year 2009 and past years dating back to 1960. For most of the 100 or so major children’s programs examined, expenditure data are taken from the budget for the second fiscal year after the desired year to get an “actual” expenditure amount rather than an estimate-e.g., using the FY2009 budget to get the actual expenditure for 2007-because the budget for a given year includes estimates for that year and the previous year and actual data for earlier years. We draw heavily from the Appendix to the Federal Budget, one of the annual budget volumes, for expenditure data for individual programs. In most cases, the budget provides outlays for individual programs. In cases where a single outlay figure is given for a group of programs of interest, we assumed that the relationship between outlays (the amount spent) and obligations (the amount appropriated) is the same for all programs within a group: the obligation figure for the individual program was multiplied by the total outlay figure for the group and then divided by the total obligation figure. We also had to look elsewhere when a program was not broken out as a line-item that year but was lumped in with other programs.
ISource: Peter R. Orszag, CBO Testimony, before the Committee on the Budget, U.S. House of Representatives, July 16, 2008
The rate of growth in health care costs is the most important factor influencing the federal government’s long-term fiscal situation. The Congressional Budget Office (CBO) projects that, without any changes in federal law, total spending on health care will rise from 16 percent of the gross domestic product (GDP) in 2007 to 25 percent in 2025 and 49 percent in 2082, and net federal spending on Medicare and Medicaid will rise from 4 percent of GDP to almost 20 percent over the same period. Many of the other factors that will play a key role in determining future fiscal conditions–including the actuarial deficit in Social Security and a decision about extending the 2001 and 2003 tax legislation past its scheduled expiration in 2010–pale by comparison over the long term with the impact and challenges of containing growth in the cost of federal health insurance programs.
Source: Henry Aaron, Nancy Altman, Kenneth Apfel, James Blum, J. Bradford DeLong, Peter Diamond, Robert Greenstein, James Horney, Richard Kogan, Jack Lew, Marilyn Moon, Van Doorn Ooms, Uwe Reinhardt, Charles Schultze, Robert Solow, Paul Van de Water, Center on Budget and Policy Priorities, July 2008
Sixteen leading economists and budget experts issued a major critique of a recent proposal to address future federal budget deficits through radical changes in budget procedures for Social Security, Medicare, and Medicaid. They believe there are better ways to begin tackling projected deficits, which they describe in their critique.
• Executive summary
• Press release
Source: Government Accountability Office, GAO-08-912T, June 17, 2008
GAO was asked to provide its views on the long-term fiscal outlook. This statement addresses four key points: (1) the federal government’s long-term fiscal outlook is a matter of utmost concern; (2) this challenge is driven primarily by health care cost growth; (3) reform of health care is essential but other areas also need attention which requires a multipronged solution; and (4) the federal government faces increasing pressures yet a shrinking window of opportunity for phasing in needed adjustments.
Source: Peter Orszag, Congressional Budget Office, Statement at the Health Reform Summit of the Committee on Finance, United States Senate, June 16, 2008
The single most important factor influencing the federal government’s long-term fiscal balance is the rate of growth in health care costs. The Congressional Budget Office (CBO) projects that, without any changes in federal law, total spending on health care will rise from 16 percent of the gross domestic product (GDP) in 2007 to 25 percent in 2025 and 49 percent in 2082, and net federal spending on Medicare and Medicaid will rise from 4 percent of GDP to almost 20 percent over the same period. Many of the other factors that will play a key role in determining future fiscal conditions–including the actuarial deficit in Social Security and a decision about extending the 2001 and 2003 tax legislation past its scheduled expiration in 2010–pale by comparison over the long term with the impact and challenges of containing growth in the cost of federal health insurance programs.
The Long-Term Budget Outlook and Options for Slowing the Growth of Health Care Costs
Source: Peter Orszag, Congressional Budget Office, Testimony before the Committee on Finance, United States Senate, June 17, 2008
Source: Rudolph G. Penner, Urban Institute, June 13, 2008
From the abstract:
The unified budget of the U. S. government is, in most respects, a cash budget. It is somewhat biased against public investment, because the benefits of such investments accrue over a period of time whereas the cash outlay is immediate. This testimony looks at options for directing more funds to highways, mass transit, and other public investments. It examines higher fuel taxes, tolls and congestion fees; capital budgeting; infrastructure banks; a capital revolving fund; public-private partnerships; and approaches to improving the efficiency of current grants and subsidies. It concludes that tolls and congestion fees are very promising as are public-private partnerships. A capital revolving fund would be useful for agencies that only invest occasionally. A capital budget and infrastructure banks are less desirable.
Source: U.S. Governmental Accountability Office, May 29, 2008
The federal government will need to make the most of its resources to meet the emerging challenges of the 21st century. As new priorities emerge, policymakers have demonstrated interest in user fees as a means of financing new and existing services. User fees can be designed to reduce the burden on taxpayers to finance the portions of activities that provide benefits to identifiable users above and beyond what is normally provided to the public. By charging the costs of those programs or activities to beneficiaries, user fees can also promote economic efficiency and equity. However, to achieve these goals, user fees must be well designed.
GAO was asked to study how user fee design characteristics may influence the effectiveness of user fees. Specifically, GAO examined how the four key design and implementation characteristics of user fees–how fees are set, collected, used, and reviewed–may affect the economic efficiency, equity, revenue adequacy, and administrative burden of cost-based fees. GAO reviewed economic and policy literature on federal and nonfederal user fees, including prior GAO work, and used relevant case examples to illustrate different types of design elements and the impacts they may have.
Full report (PDF)