Pgpf chart book 051310 final

The Financial Condition and Fiscal Outlook of the U.S. Government

May 13, 2010

Background Charts

The Foundation’s Research Team prepared this set of charts under the supervision of Susan Tanaka (former Associate Director and Senior Analyst, Congressional Budget Office, and Budget Examiner, Office of Management and Budget). Ann Futrell (former Analyst, Congressional Budget Office) directed the construction of the charts by Tim Roeper, Kristin Francoz, and Purnima Anand, and Natasha Caesar assisted with the Team’s efforts.

Table of ContentsSection

Debt and Deficits I

Spending II

Revenues III

Health Care IV

Personal Finances V

Section I: Debt and DeficitsPage

Debt held by the public:1800-2010 (percentage of GDP) 1

Debt held by the public: projections through 2080 under current policies (percentage of GDP) 2

Composition of the total debt: debt held by the public and intragovernmental debt (current dollars and percentage of GDP) 3

U.S. public debt including state and local debt (percentage of GDP): 1980-2020 4

U.S. public debt levels compared to other countries (percentage of GDP) 5

Historical deficits: 1800-2010 (percentage of GDP) 6

Deficits: projections through 2080 under current policies (percentage of GDP) 7

Impacts of alternative assumptions on projections of the long-term fiscal gap 8

Little impact on the projected gap between spending and revenues if tax cuts expire andtroops are withdrawn from Iraq and Afghanistan (percentage of GDP) 9

The projected, widening gap between spending and revenues (percentage of GDP) 10

Waiting to close the fiscal gap, by using spending cuts or tax increases alone, would leadto more and more difficult choices in the future 11

Projected growth in spending by category compared with projected revenues through 2040 (percentage of GDP) 12

Section I: Debt and Deficits (continued)

PageProjected growth in spending by category compared with projected revenues through2040 if interest rates increase by 2 percent (percentage of GDP) 13

Historical Treasury interest rates 14

Impact on projected cost of net interest of a 2 percent increase in interest rates 15

Growth in U.S. dependency on foreign lenders to finance the public debt 16

Largest foreign holders of Treasury securities (February 2010) 17

Foreign purchases of Treasury securities by maturity 18

Historical and projected U.S. net external debt (percentage of GDP) 19

Growth in foreign purchases of Treasury Inflation Protect Securities 20

Fiscal Exposures (75-year present value in trillions of dollars) 21

Since 1800, U.S. debt held by public has exceeded 60% of GDP only during World War II

0

20

40

60

80

100

120

1800 1830 1860 1890 1920 1950 1980 2010

Perc

enta

ge o

f GD

P

WWII

Civil War

TARP & Recession

Great Depression

WWI

NOTE: Debt held by the public refers to all federal debt held by individuals, corporations, state or local governments, and foreign entities. SOURCES: Data from the Congressional Budget Office, Long‐Term Budget Outlook: June 2009; the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update, alternative simulation using Congressional Budget Office assumptions. Compiled by PGPF.

1-Debt and Deficits

0

200

400

600

800

1,000

1,200

1,400

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Perc

enta

ge o

f GD

P

Actual Projected

303%

187%

110%

457%

652%

896%1,197%

Future U.S. debt held by the public is projected to soar if current policies remain unchanged

NOTE: Debt held by the public refers to all federal debt held by individuals, corporations, state or local governments, and foreign entities. SOURCES: Data from the Congressional Budget Office, Long‐Term Budget Outlook: June 2009; the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook, January 2010 Update, alternative simulation using Congressional Budget Office assumptions. Compiled by PGPF.

60 % of GDP

2-Debt and Deficits

The total debt includes debt held by the public (domestic and foreign investors) and debt the government owes to various government programs*

$3.4 (35%)

$8.4 (58%)$2.2 (23%)

$4.5 (31%)

0

2

4

6

8

10

12

14

2000 April 30, 2010

Trill

ions

of D

olla

rs

*Intragovernmental debt refers to Treasury securities held by federal trust funds (e.g., Social Security and Medicare) and other government accounts. Debt held by the public refers to any federal debt held by individuals, corporations, state or local governments, and foreign entities.NOTE: Totals may not add due to rounding.SOURCES: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget: February 2010, Historical Tables; and the Department of Treasury, Daily Treasury Statement (April 30, 2010). Compiled by PGPF.

Intragovernmental DebtDebt Held by the Public

$ 5.6 Trillion

57 %of GDP

89 %of GDP

$ 12.9 Trillion

3-Debt and Deficits

Within 10 years, the total public debt in the U.S. (including state and local government held debt) is projected to reach Greece’s current debt level

0

20

40

60

80

100

120

140

1980 1990 2000 2010 2020

Percen

tage of G

DP

NOTES: Projected state and local government debt was assumed to be held constant as a percent of the economy at the average of years 2000 to 2009 (14.4%). Public debt here refers to all federal debt held by individuals, corporations, state or local governments, and foreign entities, in addition to state and local government debt. SOURCES: Data from the Federal Reserve, Flow of Funds Accounts of the United States; the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update, alternative simulation using Congressional Budget Office assumptions; and the Congressional Budget Office, Long‐Term Budget Outlook, June 2009. Compiled by PGPF.

4-Debt and Deficits

Public debt levels in the U.S are comparable to some of the most financially troubled countries in Europe

0

20

40

60

80

100

120

140

Greece Italy Portugal Ireland Spain United Kingdom

United States

Percen

tage of G

DP

2008 2009 2010

NOTE: All 2009 and 2010 numbers are projections. Public debt here refers to state and local governmental debt as well as debt held by the public, or all federal debt held by individuals, corporations, state or local governments, and foreign entities. SOURCE: International data from the International Monetary Fund. U.S. data from the Federal Reserve, Flow of Funds Accounts of the United States; and the Office of Management and Budget, The 2011 Budget: Historical Tables. Compiled by PGPF.

5-Debt and Deficits

‐5

0

5

10

15

20

25

30

35

1800 1830 1860 1890 1920 1950 1980 2010

Deficits (+) a

nd Surpluses (‐)

as a Percentage of GDP

Civil War

WWI

Great Depression

Up until the Great Depression, the U.S. experienced more budget surpluses than deficits

SOURCES: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February 2010; the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update, alternative simulation using Congressional Budget Office assumptions; and the Historical Statistics of the United States, Millennial Edition Online, Cambridge 2006. Compiled by PGPF.

6-Debt and Deficits

WWII

‐10

0

10

20

30

40

50

60

70

80

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Deficits (+) a

nd Surpluses (‐)


10%16%

24%

33%

44%

57%

Under current policies, federal deficits are projected to more than double as a percentage of GDP even after the economy recovers

NOTE: Current policy estimates assume extension of the 2001 and 2003 tax cuts, alternative minimum tax (AMT) exemption amount is indexed to inflation, Medicare physician payments are not reduced, and discretionary spending grows with GDP. SOURCES: Data the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February 2010; and the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update, alternative simulation using Congressional Budget Office assumptions. Compiled by PGPF.

Actual Projected

74%

7-Debt and Deficits

Using alternative assumptions would affect projections of the long-term fiscal gap

0

1

2

3

4

5

6

7

8

9

10

Excess Health Care Cost Growth

Productivity Growth Rate of Immigration

Fiscal Gap

as a Pe

rcen

tage of G

DP

Baseline Assumptions Alternative Health Care

Alternative Productivity

Alternative Immigration Baseline and alternative

assumptions used in projections of the fiscal gap:

Excess health care cost growth: Baseline Health care costs per person grow 2% faster than GDP per capita; alternatives are 1% and 0.5%.

Productivity: Baseline output per hour increases by 2.3% percent per year; alternatives are 2.8% and 1.8%

Immigration: Baseline is 1 million immigrants per year; alternatives are 1.3 million and 0.7 million.

1% 0.5% 2.8%

1.8% 1.3Mil.

0.7Mil.

NOTE: The fiscal gap refers to the increase in taxes or reduction in non‐interest spending required to keep the debt‐to‐GDP ratio stable over the next 75 years. SOURCE: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytical Perspectives, February 2010. Compiled by PGPF.

2.0%1.0Mil.2.3%

8-Debt and Deficits

Elimination of Bush tax cuts and withdrawal of troops from Iraq and Afghanistan would have a small impact on the long-term fiscal gap

0

5

10

15

20

25

30

35

40

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Percen

tage of G

DP

Primary Spending

Revenues

Tax cuts expire on schedule

End deployment to Iraq and Afghanistan

Historical Projected

Revenues

0.7% GDP difference in 2080

1.8% GDP difference in 2080

SOURCE: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February 2010; the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010, alternative simulation based on Congressional Budget Office assumptions; and the Congressional Budget Office, Budget Outlook: January 2010. Compiled by PGPF.

Primary Spending(excluding net interest)

9-Debt and Deficits

0

10

20

30

40

50

60

70

80

90

100

1960 1980 2000 2020 2040 2060 2080

Percen

tage of G

DP

Net Interest57% ofGDP


Total Spending

Revenues

74% ofGDP

SOURCES: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February 2010; and the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010, alternative simulation based on Congressional Budget Office assumptions. Compiled by PGPF.

Over three quarters of the long-term budget gap in 2080 is caused by escalating projected interest costs assuming the baseline interest rate of 5.0%


10-Debt and Deficits

If we wait to close the fiscal gap, by using spending cuts or revenue increases alone, we would face more and more difficult choices in the future

0

5

10

15

20

25

30

35

Percen

tage of G

DP

36 % Spending Cuts

50% Revenue Increase

48% Spending Cuts

64% Revenue Increase

2010 2030

Revenue Increase Spending Cuts

NOTE: Spending refers to non-interest spending. The amounts shown are the non-interest spending cuts or revenue increases from the projected levels required to close the projected fiscal gap by using only one or the other, not both. The fiscal gap refers to the reduction in spending or increase in revenues required to keep debt-to-GDP no higher than the 2010 level in 2085.SOURCE: Data from the Congressional Budget Office, Long-Term Budget Outlook, June 2009. Compiled by PGPF.


Without reforms, within 12 years, future revenues will only cover Social Security, Medicare, Medicaid and interest on the debt assuming the baseline interest rate of 5.0%

1% 5%9%

14%5%

5%6%

6%

5%6%

9%

11%

4 %

2 %

2 %

2 %

9 %9 %

9 %

9 %

0

5

10

15

20

25

30

35

40

45

50

2010 2020 2030 2040

Percen

tage of G

DP Revenue

SOURCE: Data from the Government Accountability Office The Federal Government’s Long‐Term Fiscal Outlook: January 2010, alternative simulation using Congressional Budget Office assumptions. Compiled by PGPF.

Discretionary Spending

Other Mandatory

Medicare & Medicaid

Social Security

Net Interest


Without fiscal reforms, federal interest costs alone would consume all projected revenues by 2040 if baseline interest rates rise 2 percent to 7.0%. (The historical interest rate since 1980 is 6.4%.)

2 % 7 %12 %

20 %

5%

5%

6%

6%

5%

6%

9%

11%

4 %

2 %

2 %

2 %

9 %

9 %

9 %

9 %

0

5

10

15

20

25

30

35

40

45

50

2010 2020 2030 2040

Percen

tage of G

DP Revenue

NOTE: The projections use implied CBO interest rates through 2020, and an interest rate of 5.0 percent thereafter. A 2 percent rate increase would be within historic range for Treasury interest rates.SOURCE: Data from the Government Accountability Office The Federal Government’s Long‐Term Fiscal Outlook: January 2010, alternative simulation using Congressional Budget Office assumptions. Compiled by PGPF.

Discretionary Spending

Other Mandatory

Medicare & Medicaid

Social Security

Net Interest


Current Treasury interest rates are low by historical standards

0

2

4

6

8

10

12

14

16

1980 1985 1990 1995 2000 2005 Apr‐06

Interest Rate

3‐Month

10‐Year

30‐YearAverage

Interest Rate: 6.5% over past

30 years

NOTE: The U.S. Treasury Department did not offer 30‐year bonds between 2003 and 2006. SOURCE: Data from the Federal Reserve Statistical Release, Table H.15, Selected Interest Rates, Historical Data, accessed April 14, 2010. Complied by PGPF.


A rate increase of just two percent from baseline levels of 5.0 percent have a dramatic effect on interest costs

0

5

10

15

20

25

2010 2015 2020 2025 2030 2035 2040

Percen

tage of G

DP

Additional Interest from Rate Increase from 5.0% to 7.0%Baseline Net Interest

NOTE: The projections use implied CBO interest rates through 2020, and an interest rate of 5.0 percent thereafter.SOURCE: Data from the Government Accountability Office The Federal Government’s Long‐term Fiscal Outlook: January 2010, alternative simulation using Congressional Budget Office assumptions. Compiled by PGPF.

5.7% of GDP

14.1% of GDP


Foreign Holdings:19%

U.S. dependency on foreign lenders to finance the public debt has risen sharply

2010 est.Total Debt: $8,387 billion

Foreign Holdings: 47%

1990Total Debt: $2,412 billion

NOTE: 2010 data reflects debt levels through February 2010. SOURCES: Data for 1970 and 1990 from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytical Perspectives, February 2010. Data for 2010 from Department of Treasury, Daily Treasury Statement (February 26, 2010) and Treasury International Capital Reporting System, April 15, 2010 release. Compiled by PGPF.

Foreign Holdings: 5%

1970Total Debt: $283 billion


Foreign holdings of U.S. Treasury securities are concentrated among a few countries

Total Foreign Holdings: 47%

NOTE: U.S. debt here refers to debt held by the public, or all federal debt held by individuals, corporations, state or local governments, and foreign entities. All numbers reflect debt levels as of December 2009.SOURCES: Data from the United States Treasury, Treasury International Capital System, Major Holders of Treasury Securities, April 30, 2010. U.S. debt is debt held by the public, U.S. Treasury, Debt to the Penny, February 26, 2010. Compiled by PGPF.

Country

February 2010

Holdings(in billions of U.S. dollars)

Holdings (as a percent of total U.S. debt)

China $877.5 11%

Japan $768.5 10%

United Kingdom $233.5 3%

Oil Exporters $218.8 3%

Brazil $170.8 2%

All other countries $1,483.1 19%


Foreign purchases of marketable Treasury securities are overwhelmingly in shorter maturities, indicating sizeable interest-rate risk upon rollover

85 2233

46182

451

104

340

635

0

200

400

600

800

1,000

1,200

2001 2002 2003 2004 2005 2006 2007 2008 2009

Billion

s of Con

stan

t 2009 Dollars

30 years 10 Years2‐7 Years 1 year or less

NOTE: Purchases reflect gross foreign purchases of bills (4‐week, 13‐week, 26‐week, 52‐week, and cash‐management bills); notes (2‐year, 3‐year, 5‐year, 7‐year, and 10‐year) and bonds (30‐year). Data excludes sales of Treasury Inflation Protected Securities (TIPS), and also is not net of sales. SOURCE: Data from the U.S. Treasury, Office of Debt Management, Investor Class Auction Allotments. Compiled by PGPF.


‐40

‐20

0

20

40

60

80

100

120

140

160

1980 1990 2000 2010 2020 2030

Percen

tage of G

DP Cline Baseline Projection

Cline Fiscal Erosion ScenarioHistorical Data

133%

64%

NOTE: Displays U.S. net international investment position: a positive number means external liabilities are greater than external assets. SOURCE: Bureau of Economic Analysis and William Cline, “Long‐term Fiscal Imbalances, U.S. External Liabilities, and Future Living Standards,” in C. Fred Bergsten, ed., The Long‐term International Economic Position of the United States, Peterson Institute for International Economics, 2009. Compiled by PGPF.

By itself, the U.S. net external debt projection is unsustainable under baseline assumptions and worse if fiscal conditions erode

“The projected path is so unsustainable and dangerous that a crisis would virtually be certain to occur long before the U.S. reached such a painful point of reckoning.”

William Cline, Peterson Institute for International Economics

Actual Projected


Growth in purchases by foreign investors of Treasury Inflation Protected Securities (TIPS) reflect concern about U.S. inflation outlook

$10.1 billion

$29.2 billion

0

5

10

15

20

25

30

35

2000‐2004 2005‐2009

Billion

s of Con

stan

t 2009 Dollars

190% increase

NOTES: Purchases only reflect gross foreign purchases (they exclude gross sales of TIPS by foreign investors). Data reflects TIPS with maturities of 5, 10, 20 and 30 years; and total long‐term Treasury security purchases reflect securities with maturities of 5‐7, 10, and 30 years. Treasury Inflation Protected Securities were first offered in 1997. SOURCE: Data from the U.S. Treasury, Office of Debt Management, Investor Class Auction Allotments. Compiled by PGPF.


Or 5.1% of foreign purchases of long-term

Treasury securities

Or 6.4% of foreign purchases of long-term

Treasury securities

Major Fiscal Exposures: Another measure of the federal government’s fiscal condition

In Trillions of Dollars

2000 2009Explicit liabilities $6.9 $14.1

Publicly held debt 3.4 7.6

Military & civilian pensions & retiree health 2.8 5.3

Other Major Fiscal Exposures 0.7 1.3

Commitments & contingencies 0.5 2.0E.g., Pension Benefit Guaranty Corporation, undelivered orders

Social insurance promises 13.0 45.8

Future Social Security benefits 3.8 7.7

Future Medicare benefits 9.2 38.2

Future Medicare Part A benefits 2.7 13.8

Future Medicare Part B benefits 6.5 17.2

Future Medicare Part D benefits -- 7.2

Total $20.4 $61.9

NOTE: Numbers may not add due to rounding. Estimates for Medicare and Social Security benefits are from the Social Security and Medicare Trustees reports, which are as of January 1, 2009 and show social insurance promises for the next 75 years. Future liabilities are discounted to present value based on a real interest rate of 2.9% and CPI growth of 2.8%. The totals do not include liabilities on the balance sheets of Fannie Mae, Freddie Mac, and the Federal Reserve. Assets of the U.S. government not included. Does not include civil service and military retirement funds, unemployment insurance and debt held by other government accounts outside of Social Security and Medicare.SOURCE: Data from the Department of Treasury, 2009 Financial Report of the United States Government. Compiled by PGPF.


Section II: Spending

PageFederal spending: 1900‐2080 (percentage of GDP) 1

Composition of federal spending: 1970, 2010 (est.), and 2040 (est.) 2

Composition of federal spending in 2010 (excluding stimulus package) 3

Historical spending for R&D: 1965‐2009 (percent of total spending) 4

International comparison of countries with highest military expenditure in 2008

5

Historical spending growth by major category: 1950‐2010 (percentage of GDP)

6

Timeline of when projected net interest costs will exceed areas of spending and revenue

7

Projected growth in Medicare, Medicaid and Social Security: 2010‐2080 (percentage of GDP)

8

Contributing factors in projected growth for Medicare, Medicaid and Social Security: 2010‐2080 (percentage of GDP)

9

Historical Social Security trust fund cash flows: 1936‐2009 (percentage of GDP)

10

Section II: Spending(continued)

PageProjected Social Security trust fund cash flows: 1970‐2080 (percentage of GDP) 11

Impacts of raising taxable maximum income for payroll taxes on Social Security trust fund cash flows: 2010‐2080 (percentage of GDP)

12

Impacts of balancing Social Security benefits and receipts on the long term fiscal gap: 1990‐2080 (percentage of GDP)

13

Federal spending is projected to soar far above its 50-year average of 20.5 percent of GDP if current policies remain unchanged

0

10

20

30

40

50

60

70

80

90

100

1900 1920 1940 1960 1980 2000 2020 2040 2060 2080

Percen

tage of G

DP

SOURCES: Data from the Historical Statistics of the United States, Millennial Edition Online, Cambridge 2006, the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February 2010, and the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook, January 2010 Update, alternative simulation using Congressional Budget Office assumptions. Compiled by PGPF.

208092% of GDP28 %

42%

62%


1-Spending

Discretionary18%

MandatoryPrograms

47%

Net Interest35%Discretionary

62%

MandatoryPrograms

31%

Net Interest7%

Total Spending 1970: $900 Billion

(Constant 2009 Dollars)

Total Spending 2010: $3.5 Trillion (est.)


Total Spending 2040: $12.3 Trillion (est.)


Total Mandatory38%

Total Mandatory62%

Total Mandatory 82%

Discretionary38%Mandatory

Programs 57%

Net Interest5%

Mandatory programs − including Social Security, Medicare, Medicaid and other entitlement programs − and interest costs are taking over more and more of the federal budget

SOURCES: Data derived from the Office of Management and Budget, FY 2011 Budget, Historical Tables, February 2010; and the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook, January 2010 Update, alternative simulation using Congressional Budget Office assumptions. Calculated by PGPF.

2-Spending

Nondefense discretionary includes many programs that could promote future economic growth

Mandatory55%

Net Interest6% Defense

19%Education

4%Transportation

3%

All Other Programs11%

Other20%

2010 (est.)

Health* 2%

NOTES: *Discretionary health programs include National Institutes of Health, Center for Disease Control and Prevention, & Indian Health Service. Spending excludes the 2009 Stimulus package and emergency funding for activities in Iraq and Afghanistan. R&D investment spending over the last decade has been about 3.1% of GDP, or 15% of the budget, and makes up a large part of non‐defense discretionary spending. SOURCE: Data from the Congressional Budget Office The Budget and Economic Outlook: Fiscal Years 2010 to 2020, January 2010. Compiled by PGPF.

3-Spending

Growth in entitlements has already crowded out important investments such as federal spending for R&D, which has dropped by more than half as a percent of total spending since the late 1960s

0

5

10

15

20

25

30

35

1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009As a Pe

rcen

tage of Total Spe

nding

52% decrease since late 60s

NOTE: Research and development includes spending in major public physical capital, education and training. The top sources ofallocations of R&D in the U.S. are Defense systems development, the National Institutes of Health (NIH), education, transportation, NASA, Nuclear Security Administration (NSA), National Science Foundation (NSF),the Defense Advanced Research Projects Agency (DARPA), and the Air Force, Army, and Navy. SOURCE: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February 2010. Compiled by PGPF.

4-Spending

U.S. spending on defense exceeds the next largest fourteen defense budgets combined in 2008

China

France

UK

Russia

GermanyJapanItaly

Saudi ArabiaIndia

South Korea

BrazilCanadaSpain

Australia

0

100

200

300

400

500

600

700

In billions of d

ollars

SOURCE: Data from Stockholm International Peace Research Institute, 15 Major Spender Countries in 2008. Compiled by PGPF.

$607 billion$581 billion

U.S.A.

5-Spending

Growth in Social Security, Medicare and Medicaid have more than offset declines in defense since the late 1960s

SOURCE: Data from the Office of Management and Budget, FY 2011 Budget, Historical Tables, February 2010. Compiled by PGPF.

6-Spending

Defense

Social Security

Medicare & Medicaid

All Other Programs

Net Interest

0

5

10

15

20

25

30

1950 1960 1970 1980 1990 2000 2010

Percen

tage of G

DP

Unless current polices change, net interest costs are projected to exceed total federal revenues in 2046

Projected net interest will exceed….. In year

Medicaid spending, 1.7% of GDP 2012

Defense spending, 3.6% of GDP* 2017

Medicare spending, 3.9% of GDP 2018

Social Security, 5.4% of GDP 2022

Total Revenues, 18.1% of GDP 2046

*Assumes that troops in Iraq and Afghanistan would be reduced to only 60,000 troops by 2015, and that projected defense spending would grow at the same rate as GDP thereafter.

NOTE: Net Interest already exceeds most federal budget functions including Science, Space and Technology (250), Transportation (400), and Education (500). The projections use implied CBO interest rates through 2020, and an interest rate of 5.0 percent thereafter. If interest rates rise, projected interest costs will exceed projected program costs earlier.SOURCES: Data from the Congressional Budget Office, Analysis of the President’s Budget: March 2010 and Government Accountability Office The Federal Government's Long‐Term Fiscal Outlook: January 2010 Update. Compiled by PGPF.

7-Spending

Social Security

Medicare

Medicaid

0%

5%

10%

15%

20%

25%

30%

2010 2020 2030 2040 2050 2060 2070 2080

Percen

tage of G

DP

Fiscal YearSOURCE: Data from the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update, alternative simulation using Congressional Budget Office Assumptions. Compiled by PGPF.

6% of GDP

4 % of GDP

14% of GDP

5% of GDP

3% of GDP

2% of GDP24 % of GDP

Social Security, Medicare and Medicaid, the three largest entitlement programs, are projected to more than double as a percentage of GDP under current policies

8-Spending

In the Absence of Aging and Excess Health Care Cost

Growth

Effect of Aging

Effect of Excess Health Care Cost Growth

0

5

10

15

20

25

2010 2020 2030 2040 2050 2060 2070 2080

Sources of Projected

Growth in

Social Security,

Med

icare an

d Med

icaid as Percentage of GDP

Fiscal YearNOTE: “Excess health care cost growth” is the amount growth in age‐ adjusted health care costs per person exceeds the growth in per capita GDP.SOURCE: Data from the Congressional Budget Office, The Long‐Term Budget Outlook, June 2009. Compiled by PGPF.

9% of GDP

8 % of GDP

6% of GDP4.8%

4.8%

2054

Aging drives most of the projected cost growth in Social Security, Medicare and Medicaid until 2054. After that year, excess cost growth of health spending takes over as the leading driver of cost growth.

8.9%

9-Spending

Since its inception, the Social Security program has experienced more surpluses than deficits

‐0.4

‐0.2

0.0

0.2

0.4

0.6

0.8

1.0

1936 1945 1954 1963 1972 1981 1990 1999 2008

Social Security Ca

sh Surpluses (+

) and

Deficits (‐) as a Percentage of GDP

NOTE: Excludes interest earnings. SOURCE: Data from the Office of Management and Budget, FY 2011 Budget, Historical Tables, February 2010. Compiled by PGPF.

10-Spending

‐2

‐1.5

‐1

‐0.5

0

0.5

1

1.5

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

Social Security Surpluses /D

eficits In Percent of G

DP

2040 Social Security Deficit1.3 % of GDP ($342 Billion*)

In the future, persistent cash deficits are projected for Social Security

* In 2009 Dollars.NOTE: CBO projections show negative cash deficits in 2010 and 2011. Excludes interest earnings.SOURCE: Data from the Social Security Administration, Provisions Affecting Payroll Tax Rates: 2009. Compiled by PGPF.

2080 Deficit 1.4% ofGDP ($700

Billion*)

2000 Social Security Surplus0.9 % of GDP ($114 Billion*)

11-Spending

Raising the taxable maximum wage level subject to payroll taxes would somewhat increase Social Security cash receipts and reduce projected deficits

‐1.5

‐1.0

‐0.5

0.0

0.5

1.0

2010 2020 2030 2040 2050 2060 2070 2080

Social Security Surpluses an

d Deficits In

Percen

t of G

DP

Savings when raising the taxable maximum wage level

15% decrease

NOTE: : Assumes that wage cap for payroll taxes will be raised to include 90 percent of total covered earnings, from $106,800 to$181,500 in 2010. More recent projections show negative cash deficits in 2010 and 2011.SOURCE: Data from the Social Security Administration, Provisions Affecting Payroll Tax Rates: 2009. Compiled by PGPF.

12-Spending


Balancing Social Security benefits and receipts would have a small impact on the long term fiscal gap

0

5

10

15

20

25

30

35

40

1990 2000 2010 2020 2030 2040 2050 2060 2070 2080

Percen

tage of G

DP

Primary Spending

Revenues


Revenues

1.3% of GDP Change

15.6% of GDP Gap

NOTE: Balancing Social Security is defined as having Social Security benefit payments no higher than Social Security payroll tax receipts.SOURCE: Data from the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010; CBO Analysis of America’s Future Act of 2010. Compiled by PGPF.

13-Spending

Section III: Revenues

Page

Composition of revenues: 2010 1

Composition of revenues: 1935‐2020 (percentage of GDP) 2

Federal revenues: 1970‐2030 (percentage of GDP) 3

Impact on the projected deficit of restoring pre‐2001 tax rates (percentage of GDP) 4

Impact on projected federal revenues of extending 2001 and 2003 tax cuts (percentage of GDP) 5

Top 5 most expensive tax expenditures 6

Top 5 corporate tax expenditures 7

Relative size of the top 5 tax expenditures to large spending areas 8

Median household income tax rates by quintile (percentage of total income) 9

Median individual income tax rates by quintile (percentage of total income) 10

Section III: Revenues (continued)

PageShare of pre‐tax income and total federal taxes by quintile 11

Share of pre‐tax income for high and low income households 12

International comparison of tax burdens 13

Individual income and payroll taxes comprise most of federal receipts

Individual Income Taxes43%

Corporate Income Taxes7% Payroll Taxes 40%

Excise3%

Estate and Gift 1%Customs Duties 1%

Miscellaneous4%

Other9%

2010: Total Revenues$2,177 billion

SOURCE: Data from the Congressional Budget Office, Preliminary Analysis of the President’s Budget, March 2010. Compiled by PGPF.

1-Revenues

The composition of federal revenues has been relatively constant since the mid-1970s

0

5

10

15

20

25

1935 1945 1955 1965 1975 1985 1995 2005 2015

Percen

tage of G

DP

Individual Income Taxes

Social Insurance Taxes

Corporate Income Taxes

Other Receipts

Actual

6%

2%1%

11%

* The “Current Law Projection” assumes that the 2001 and 2003 tax cuts expire as scheduled.SOURCES: Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February 2010, and Congressional Budget Office, Analysis of the President’s Budgetary Proposals for FY 2011, March 2010. Compiled by PGPF.

Current LawProjection*

2-Revenues

Since 1970, federal revenues have averaged 18 percent of GDP and will return to about that level if the 2001 and 2003 tax cuts are extended

12

14

16

18

20

22

1970 1980 1990 2000 2010 2020 2030

Percen

tage of G

DP

40‐Year Average

Actual GAO Projected*

*Projections assume the 2001 and 2003 tax cuts are extended and the alternative minimum tax (AMT) exemption amount is adjusted to inflation. SOURCES: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Historical Tables, February 2010, and the Government Accountability Office, The Federal Government’s Long‐Term Fiscal Outlook: January 2010 Update. Compiled by PGPF.

0

3-Revenues

Restoring pre-2001 tax rates on households earning over $250,000 will have a small impact on projected deficits.

5.1% 5.5%4.7% 5.1%

3.4%3.9%

0

1

2

3

4

5

6

2015 2020

Percen

tage of G

DP

OMB Baseline Deficit

Deficit if Upper‐Income Tax Provisions in FY11 Budget are Implemented *Deficit if 2001 and 2003 Tax Cuts to Expire for Everyone

SOURCE: Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, February 2010.* Includes expanding/reinstating income tax rates, reinstating the personal exemption phase‐out and limitation on itemized deductions, and imposing a 20 percent tax rate on capital gains and dividends for taxpayers with income over $250,000 (married) and $200,000 (single).

4-Revenues

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Billion

s of Dollars

Revenues Under Current Law Baseline Revenues with Tax Cuts *

SOURCE: Data from the Congressional Budget Office, Analysis of the President’s Budget: March 2010 and The Budget and Economic Outlook, January 2010. Compiled by PGPF.* Includes interactive effects of extending the tax cuts (EGTRRA and JGTRRA) and indexing the AMT (Alternative Minimum Tax)

Extending the 2001 and 2003 tax cuts would reduce federal revenues by $2.7 trillion between 2011 and 2020

5-Revenues

Tax expenditures, deductions, credits, and other special provisions total an estimated $1 trillion annually and provide substantial benefits that are not counted in the budget

Top 5 Tax ExpendituresTax Revenue Lost

(FY2010)1. Exclusion of employer provided health insurance from taxable

income.*$262 billion

2. Exclusion of pension contributions and earnings.** $122 billion

3. Deduction of mortgage‐interest on a primary residence. $92 billion

4. Deduction of non‐business state and local taxes (includesincome, property and sales taxes)

$53 billion

5. Capital gains (except agriculture, timber, iron ore, and coal).*** $45 billion

Total of Top 5 $573 billion

* Includes the exclusion from payroll taxes and income taxes. ** Includes employer pension plans, employee and employer contributions to 401k plans, IRAs, and Keough plans.*** In addition, the biodiesel producer tax credit results in a $200 million reduction in excise tax receipts in 2010.NOTE: Numbers may not add due to rounding. SOURCE: Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytic Perspectives, February 2010.

6-Revenues

NOTE: Numbers may not add due to rounding. SOURCE: Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytic Perspectives, February 2010.

The top 5 corporate tax expenditures, deductions, credits and other special provisions are relatively small compared to the largest tax expenditures

Top 5 Corporate Tax Expenditures Tax Revenue Lost (FY2010)

1. Deferral of income from controlled foreign corporations $31 billion

2. Deduction for U.S. production activities $8.8 billion

3. Credit for increasing research activities $5.8 billion

4. Deferred taxes for financial firms on certain income earned overseas

$5.5 billion

5. Credit for low‐income housing investments $ 5.4 billion

Total of Top 5 $56.4 billion

7-Revenues

$0

$100

$200

$300

$400

$500

$600

$700

$800

Top 5 Tax Expenditures

Medicare Social Security Defense

Billion

s of Dollars

The value of the five largest tax expenditures is sizeable relative to major spending programs in 2010

NOTE: Health Insurance, Retirement Saving, Mortgage Interest, and State & Local taxes are categories of spending that reduce taxable income. SOURCE: Data from the Office of Management and Budget, A New Era of Responsibility: The 2011 Budget, Analytic Perspectives, February 2010.

8-Revenues

1.3%7.9%

15.5%

18.7%22.2%

27.9%

0

5

10

15

20

25

30

Lowest Quintile Less than $17,800

Second Quintile $17,800‐$34,800

Middle Quintile $34,800‐$63,400

Fourth Quintile $63,400‐$104,200

Top Quintile

$104,200+

Top 1% $532,500+

Percen

t of Incom

eThe U.S. tax system has progressive attributes: effective median tax rates rise with income (households by income quintile in 2010)

9-Revenues

NOTE: Effective federal tax rate is calculated as total federal taxes paid divided by cash income. Federal taxes include individual and corporate income tax, and payroll taxes for Social Security and Medicare.SOURCE: Data from the Tax Policy Center. Compiled by PGPF.

Effective median individual income tax rates are negative or zero for households with incomes below $34,800

‐4.2%

0%

3.2%

6.4%

10.8%

18.8%

‐10

‐5

0

5

10

15

20

Lowest Quintile <$17,800




Top Quintile $104,200+

Top 1% $532,500+

Percen

tage of Total In

come

SOURCE: Data from the Tax Policy Center. Compiled by PGPF.

10-Revenues

High-income households earn a disproportionate share of pre-tax income and pay a disproportionate share of total federal taxes

4%1%

8% 4%

13%

9%

20%

17%

55%69%

0

10

20

30

40

50

60

70

80

90

100

Share of Total Pre‐Tax Income Share of Total Federal Taxes

Percen

t

Top Quintile $67,400+




Lowest Quintile Less than$17,900

Top 0.5% (23% )

Top 0.5% (15% )

NOTE: Data for 2005 in 2005 dollars.SOURCE: Congressional Budget Office, Historical Effective Tax Rates: 1979‐ 2005: Additional Data on Sources of Income and High‐Income Households December 2008. Compiled by PGPF.

11-Revenues

The share of total pre-tax income has increased for the wealthy but decreased for low income households since 1980

6.6 %

14.6 %

5.7 %

4.0 %

0

2

4

6

8

10

12

14

16

1980 2005

Percen

tage of Total Pre‐Tax In

come

Top 0.5%

Lowest Quintile

SOURCE: Data from Congressional Budget Office, Historical Effective Tax Rates, 1979 to 2005: Additional Data on Sources of Income and High‐Income Households, December 2008. Compiled by PGPF.

12-Revenues

48%43%

36%33%

18%

28%

0

10

20

30

40

50

60

Sweden France OECD ‐ Total Canada Mexico United States

Total Tax Reven

ue


Total tax burdens are lower in the U.S. than many other industrial countries

NOTE: Data for each country is as of 2007. OECD is the Organization of Economic Cooperation and Development. Total tax revenue includes federal, state and local.SOURCE: Data from OECD Statistics Extract. Compiled by PGPF.

13-Revenues

Section IV: Health Care

Page

Federal health expenditures: 1960‐2040 (as percentage of GDP) 1

Growth in health care consumption per capita: 1990‐2030 (constant 2009 dollars) 2

Projected health care costs per capita: 2010‐2080 (constant 2009 dollars) 3

International comparison of health care costs (as percentage of GDP) 4

International comparison of health care costs per capita (U.S. dollars) 5

Selected US health outcomes ranked against other nations 6

International comparison of CT scanners per capita 7

International comparison of MRI units per capita 8

International comparison of angioplasty per 1,000 people 9

International comparison of coronary bypass operations per 1,000 people 10

Growth in U.S. population (65 and older) by age group 11

Comparison of U.S. health care costs per person by age group 12

Section IV: Health Care (continued)

PageComposition of health care coverage, pre and post enactment of health care reform law 13

Comparison across U.S. states of Medicare costs per person 14

Portion of Medicare spending that go towards services in the last year of life 15

Comparison across U.S. states of number of visits to specialist by Medicare beneficiaries in last two years of life 16

U.S. health expenditures are projected to soar to more than one-third of the economy by 2040

5 %7 %

8 %12 %

13 %

17 %

22 %

29 %

34 %

0

5

10

15

20

25

30

35

40

1960 1970 1980 1990 2000 2010 2020 2030 2040

Percen

tage of G

DP

SOURCE: Data from the Congressional Budget Office, The Long‐Term Fiscal Outlook: June 2009. Compiled by PGPF.

Actual Projected

1- Health Care

In the future, the share of per capita consumption that is devoted to health care will rise from 24 percent in 2010 to 40 percent in 2030. It was 17 percent in 1990.

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

Per Ca

pita Con

sumption in

2009

Dollars

Calendar Year

Health Spending

Non‐Health Spending

40%

60%

24%

NOTE: Total spending is equal to the sum of personal and government consumption as defined by the Bureau of Economic Analysis.SOURCE: Data from the Congressional Budget Office, The Long‐Term Budget Outlook, June 2009. Compiled by PGPF.

2- Health Care

76%

Actual Projected

Average health care costs per American are projected to soar to over $30,000 in 2050 from $8,064 in 2010

0

5000

10000

15000

20000

25000

30000

35000

2010 2020 2030 2040 2050

Curren

t 2009 Dollars

Calendar Year

$8,064

SOURCE: Data from the Congressional Budget Office, The Long‐Term Budget Outlook: June 2009; and the U.S. Census Bureau. Compiled by PGPF.

$32,047(297% increase from 2010)

3- Health Care

U.S. health care costs are far higher than those of any other OECD country

8% 8% 9% 9% 9%10% 10% 10% 11% 11%

16%

02468

1012141618

Japan* UK

Australia

Italy

Swed

en

Austria

Canada

Germany

Switzerland

France US

Percen

tage of G

DP

*Japan data from 2006. ** Estimate for the United States in 2010 is 17 percent of GDP.NOTE: Health care costs in 2007, unless otherwise noted.SOURCE: Data from OECD Health Data 2009, November 2009. Compiled by PGPF.

**

4- Health Care

Currently, Americans spend about twice as much per capita on health care than other OECD countries with no appreciable difference in health outcomes

$2,581$2,992

$3,357$2,686

$3,323$3,895 $3,588

$4,417

$3,601

$7,290

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Japan* UK

Australia

Italy

Swed

en

Canada

Germany

Switzerland

France US

Per Ca

pita Health Ca

re Costs

U.S. D

ollars

*Japan data from 2006. NOTE: Per capita health expenditures in 2007, unless otherwise noted. Comparison uses Purchasing Power Parity, which adjusts exchange rates to assume identical price of goods in different countries.SOURCE: Data from OECD Health Data 2009, November 2009. Compiled by PGPF.

5- Health Care

Even though the U.S. spends more on health care than other countries, its health outcomes are generally no better

29%

15%

64%34%

SOURCE: Data from OECD Health Data 2009, November 2009. Compiled by PGPF.

Outcome Rank

Heart AttacksU.S. = 4% deaths per 100 people in 2005

9 out of 23

Life Expectancy at BirthU.S. = 78.1 years in 2006

24 out of 30

Infant MortalityU.S. = .67% deaths per live birth in 2006

28 out of 30

ObesityU.S. = 34% over age 15 in 2006

14 out of 14

6- Health Care

The U.S. has the most CT scanners per capita of any OECD country

12.010.0

16.7

8.4

18.7

7.6

34.0

0

5

10

15

20

25

30

35

40

Canada France Germany Netherlands Switzerland United Kingdom

United States

Per Million Po

pulation

NOTE: Number of CT scanners in 2006.SOURCE: Data from OECD Health Data 2009, November 2009 and OECD Health Data 2008, December 2008. Compiled by PGPF.

7- Health Care

By far, the U.S. has highest number of MRI units per capita of any OECD country

6.7 5.77.7 6.6

14.4

8.2

25.9

0

5

10

15

20

25

30

Canada France Germany** Netherlands* Switzerland United Kingdom

United States

Per Million Po

pulation

*As of 2005. **As of 2006.NOTE: Number of MRI units in 2007, unless otherwise noted.SOURCE: Data from OECD Health Data 2009, November 2009 and OECD Health Data 2008, December 2008. Compiled by PGPF.

8- Health Care

The U.S. has more angioplasty operations per capita than any other OECD country other than Germany

135.9190.8

536.1

144.6112.8 93.2

436.8

0

100

200

300

400

500

600


United States

Per 100,000 Po

pulation

(in‐pa

tien

t)

NOTE: Number of angioplasty operations in 2006.SOURCE: Data from OECD Health Data 2009, November 2009. Compiled by PGPF.

9- Health Care

The U.S. has the most coronary bypass graft operations per capita of any OECD country, other than Germany

72.7

30.9

129.1

58.2

33.843.4

84.5

0

20

40

60

80

100

120

140


United States

Per 100,000 Po

pulation

(in‐pa

tien

t)

NOTE: Number of MRI units in 2006.SOURCE: Data from OECD Health Data 2009, November 2009. Compiled by PGPF.

10- Health Care

The size of the population ages 85 and older is expected to triple in size − from 2.4 million to 7.4 million − between 1980 and 2030

16 18 19 2232

38810 12

13

15

24

23

55

6

7

0

10

20

30

40

50

60

70

1980 1990 2000 2010 2020 2030

Millions of P

eople

85+

75‐84

65‐74

SOURCE: Data from the Center for Medicare & Medicaid Services, Office of the Actuary Last Year of Life Study. Compiled by PGPF.

11- Health Care

Per capita health care spending by those ages 85+ was 7 times higher than per person spending by those under the age of 65

$5,276 $3,581

$10,778

$16,389

$25,691

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

All Ages 0‐64 65‐74 75‐84 85+

Health Co

sts Pe

r Pe

rson

SOURCE: Data from the Center for Medicare and Medicaid Services, National Health Expenditures: 2008, reflects 2004 data. Compiled by PGPF.

12- Health Care

In 2019, health care reform legislation will lower the number of uninsured Americans primarily through the creation of health insurance exchanges and expanded Medicaid coverage

Without Reform After Health Care Reform Act

Medicaid & CHIP10%

Employer48%

Nongroup & Other

9%

Uninsured16%

Medicare17%

Medicaid & CHIP15%

Employer47%

Nongroup & Other

7%

Uninsured6%

Medicare18%

Exchanges7%

NOTE: Nongroup refers to people who purchase health insurance under individual plans.SOURCE: Data from the Congressional Budget Office, Cost Estimate: H.R. 4872, Reconciliation Act of 2010, March 20, 2010 and Centers for Medicare & Medicaid Services, National Health Expenditures Historical and Projections, 1965‐2019: January 2010. Compiled by PGPF.

13- Health Care

Medicare spending per capita varies substantially across the States

$11,883

$7,754

$11,594 $11,697

$7,531

$11,849

$7,493

$10,002

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

New Jersey

Iowa Florida Louisiana Hawaii Texas New Mexico

United States

Med

icare Spen

ding

per Enrollee

NOTE: Data estimated for 2009 using average annual growth rates from 1991‐2004.SOURCE: Data derived from the Center for Medicare and Medicaid Services, National Health Expenditures: 2008. Calculated by PGPF.

14- Health Care

Almost three out of every ten Medicare dollars is spent for people who are in the last year of life

Medicare Spending In the Last Year of

Life (1999 Decedents)

29%

Other Medicare Spending (1999

Survivors)71%

NOTE: Data in 1999.SOURCE: Data from the Center for Medicare & Medicaid Services, Office of the Actuary Last Year of Life Study. Compiled by PGPF.

15- Health Care

The number of visits made to specialists by Medicare beneficiaries in the last two years of life varies by State

29.0

20.8 20.4

6.2 6.6

11.7

0

5

10

15

20

25

30

35

New Jersey Florida California Oregon Minnesota Massachusetts

Med

ical Spe

cialist V

isit pe

r Deced

ent

SOURCE: Dartmouth Atlas Group. Compiled by PGPF.

16- Health Care

Section V: Personal Finances

Page

Poverty levels by age groups: 1970‐2008 (percentage of age group) 1

Ratio of covered workers to beneficiaries: 1950‐2070 2

International comparison of ratio of those 65 and older to total work force 3

Historical look at longevity of those 65 and older: 1940‐2080 4

Population 65 and older as a percentage of total population: 1950‐2050 5

Variations in life expectancy at birth by income 6

Japan’s ratio of elderly population rises, national savings declines: 1990‐2010 7

Importance of Social Security benefits to seniors (percentage of total income) 8

Variation in lifetime Social Security benefits by income and by birth cohort 9

International comparison of households savings (percentage of disposable income) 10

Growth in U.S. household debt: 1952‐2009 (percentage of disposable income) 11

U.S. personal savings: 1930‐2009 (percentage of disposable income) 12

Net national savings: 1930‐2009 (percentage of GDP) 13

Poverty levels for the young population have remained higher than other age groups and have been on the rise, while the poverty levels for the elderly have declined

0

5

10

15

20

25

1970 1975 1980 1985 1990 1995 2000 2005

Percen

t in Po

verty

Under 18 Years

65 Years and Older

SOURCE: Data from the U.S. Census Bureau, poverty statistics. Compiled by PGPF.

2008

1-Personal Finances

18‐64 Years

As the population ages, there will be many fewer covered workers for each Social Security beneficiary

16.5

3.7 3.4 3.02.2 2.1 2.0

0

2

4

6

8

10

12

14

16

18

1950 1970 1990 2010 2030 2050 2070

Workers per Ben

eficiairy

SOURCE: Data from the Social Security Administration 2009 Trustees Report. Compiled by PGPF.

2-Personal Finances

Now and in the future, the U.S. population is slightly older than that of emerging countries, but younger than most developed nations

0 20 40 60 80 100

ItalyJapanSpain

GermanyFrance

UKSwitzerland

CanadaChina

MexicoBrazil

Ages 65+ as Percentage of Total Labor Force

2010

2050

SOURCE: Data from the OECD Economic Outlook Volume 2009 Issue 2: December 2009. Compiled by PGPF.

United States

3-Personal Finances

As the baby boomers retire, the result will be a nation of Floridas

8 %9 % 10 %

11 %13 % 12 % 13 %

16 %

20 % 20 % 21 %

0

5

10

15

20

25

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050Popu

lation

65 an

d over as a pe

rcen

t of the

total pop

ulation

SOURCE: Data from the OECD, Factbook 2009. Compiled by PGPF.

4-Personal Finances

At age 65, people today live 50 percent longer on average than in 1940. By 2085, longevity at age 65 is projected to be 80 percent longer than 1940

12

14

16

18

20

22

24

1940 1960 1980 2000 2020 2040 2060 2080

Remaining

Years of Life

at Age 65


SOURCE: Data from the Social Security Administration, Trustees Report: 2009. Compiled by PGPF.

5-Personal Finances

22 years remaining

Over the last two decades, improvements in life expectancy at birth have been greater for those with higher socio-economic status

73.0

74.7 (+1.7 years)

75.8

79.2 (+ 3.4 years)

70.0

72.0

74.0

76.0

78.0

80.0

1980‐82 1998‐2000

Life Expectancy at Birth

Most Deprived Least Deprived

NOTE: The deprivation index considers 11 different factors, among them education, wealth, occupation, and income. SOURCE: Data from Gopal K. Singh and Mohammad Siahpush, "Widening Socioeconomic Inequalities in U.S. Life Expectancy, 1980–2000," International Journal of Epidemiology, vol. 35, no. 4 (2006), pp. 969–979. Compiled by PGPF.

6-Personal Finances

Japan’s example: As the elderly population increases as a share of the population, household savings rate declines

0

5

10

15

20

25

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Percen

tage

SOURCE: Data from the OECD Economic Outlook Volume 2009 Issue 2: December 2009. Compiled by PGPF.

Household Savings% of GDP

Elderly Population % of Total

2.6%

23.1%

7-Personal Finances

Social Security benefits account for most of low-income seniors’ total income

32%

81% 79%

61%

40%

15%0

10

20

30

40

50

60

70

80

90

Total (Median $26,350)

Lowest Quintile (Median $10,700)

Second Quintile (Median $14,400)

Third Quintile (Median $21,600)

Fourth Quintile (Median $31,750)

Highest Quintile (Median $58,000)

Social Security Be

nefits

As a Pe

rcen

t of Total In

come

NOTE: Data assumes that seniors spend down a portion of their assets to supplement their income in retirement. Total asset levels for each quintile is imputed based upon total asset income. SOURCE: Data derived from the Social Security Administration Income of the Population 55 or Older: 2008. Calculated by PGPF.

8-Personal Finances

Under current law, the Social Security lifetime benefits for the highest income earners grow faster than those of lower income earners

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

2005 2015 2025 2035 2045 2055 2065

Med

ian Lifetime Be

nefits,

In 2009 Dollars

10‐year Birth Cohort, Turning 65 in Year

Lowest Quintile

Middle Quintile

Highest Quintile

SOURCE: Data from the Congressional Budget Office Long‐Term Projections for Social Security: June 2009. Compiled by PGPF.

9-Personal Finances

32%

13%11% 10%

4% 4% 3%

0

5

10

15

20

25

30

35

China* France Germany Italy Japan Canada United States

Savings Ra

te as a Pe

rcen

t of

Dispo

sable Income

Among OECD countries, U.S. has the lowest average household savings rate as a percent of disposable income over 2000-2010 period

*Data for China actually reflects average across the period of 2000‐2007.SOURCE: Data from the OECD Economic Outlook Volume 2009 Issue 2: December 2009; CEIC Flow of Funds data, for China. Compiled by PGPF.

10-Personal Finances

U.S. household debt has reached historically high levels as a percent of disposable Income

0

20

40

60

80

100

120

140

1952 1959 1966 1973 1980 1987 1994 2001 2008

Hou

seho

ld Deb

t as a Percentage of

Dispo

sable Income

SOURCES: Data from the Federal Reserve, Flow of Funds Accounts—Liabilities of Households and Nonprofit Organizations; and Bureau of Economic Analysis, Personal Income and Its Disposition: February 2010. Compiled by PGPF.

215% Increase since 1952

39%

123%


Current U.S. personal savings as a percent of disposable income has fallen to historically low levels

‐5

0

5

10

15

20

25

30

1930 1940 1950 1960 1970 1980 1990 2000

Percen

tage of D

ispo

sable Income WWII

Great Depression

‐1.7%

4.3%

2009

SOURCE: Data from Bureau of Economic Analysis, Personal Income and Its Disposition: February 2010. Compiled by PGPF.


‐7.5%

16.1%

‐2.5%

‐10

‐5

0

5

10

15

20

1930 1940 1950 1960 1970 1980 1990 2000

Net Nationa

l Savings


Great Depression

WWII

Current net national savings are at their lowest level since the Great Depression

SOURCE: Data from the Bureau of Economic Analysis, National Income and Product Accounts. Compiled by PGPF.


2009

Pgpf chart book 051310 final

Economy & Finance

Transcript of Pgpf chart book 051310 final