A Complete Look At The Federal Budget In 28 Slides

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The Economist’s U.S. editor Greg Ip directs us to this comprehensive slideshow from CBO director Doug Elmendorf on the state of the federal budget.

It jibes nicely with a presentation we published earlier Friday from the BEA on misconceptions about the economy. 

Elmendorf breaks down federal spending’s sources and destinations, then discusses different paths the budget could take depending on whether House Republicans or Senate Democrats get their way.

Although he emphasises the CBO does not advise on policy, he repeatedly stresses the dangers of failing to get a handle on our growing debt.

Let's begin.

Here's what we're talking about.

Discretionary spending is one of the smaller parts of the budget, compared with things like Medicare and social security.

Among other mandatory spending (so not social security or Medicare), the largest share goes to low-income households.

Discretionary spending. Within defence spending, operations spending is nearly double what personnel receive.

The budget is about evenly split between individual income and other forms of tax.

Government spending was still high last year.

Many federal programs are forms of transfer payments to state and locals.

The public sector really has gotten smaller in the past few decades.

Tax rate changes have mostly moved in lockstep in recent years, no matter the quintile.

Soon, even more spending will be direct toward social security and Medicare.

Such spending will grow in both nominal and relative terms.

But revenues should also soon go up.

The deficit will actually soon go down before going back up again.

Debt is also going up.

Rising debt is bad. It means less room to tackle problems in front of us.

Elmendorf says debt is on an unsustainable path.

There are several ways to evaluate policy through the lens of debt: how fast will it be reduced, and by how much?

There are other considerations, like how it would affect the economy, and how it would affect future policy changes.

Finally, from a values perspective, are we spending money in the right places?

Republicans say their plan, which involves large cuts, would balance the budget by 2023.

Democrats also have a 2023 target to reduce — though not balance — the deficit, except they would change spending and taxes.

Here's the full table of projections.

CBO doesn't have a say. It's merely a scorer's table.

And it's picky about what kinds of plans it scores.

In conclusion, under current law medicare and social security spending will be up, defence spending will be down and debt will be huge.

Democrats and GOP see the problem in different ways.

Whoever gets their way, sacrifices will be required.

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