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Government Budget
Do Deficits & Debt Matter?
Federal Gov’t Taxes
• Federal Income Tax
– Progressive Tax: tax rate increases as income increases
• Social Security Tax– 6.2% of salary on first $110,000 income
– Why: Gov’t pension starting at 65 (or older)
• Medicare Tax
– 1.45% of entire salary
– Why: Gov’t health insurance starting at 65
Federal Income Tax
• Progressive Income Tax
As income
Federal Marginal
Tax Rate
Single Person
10%
$0 – $8,925
15%
$8,926 – $36,250
25%
$36,251 – $87,850
28%
$87,851 – $183,250
33%
$183,251 – $398,350
35%
$398,351 – $400,000
39.6%
% Tax Rate
$400,001+
2013 TAX
BRACKETS
The Government Budget
Government Revenue
Taxes
Government Spending
All Gov’t Expenses
2014 Budget Summary
• Spending:
$3.651 Trillion dollars
• Revenue
$3,002Trillion (from taxes)
• Deficit:
$649 Billion
• Debt:
$17.9 Trillion
Government Spending
•
•
•
•
•
•
•
•
•
Social Security
Medicare
Medicaid
Interest on Debt
Defense Spending
Homeland Security
Education
Other
Total
22.0%
14.0%
7.0%
6.0%
18.0%
1.0%
2.0%
26.0
100.0%
43% of Budget
24% of Budget
THANK
YOU!
US Demographics
• America’s population is aging
– smaller young (echoboomer) generation
– Babyboomers beginning to retire
– By 2040 1 in 4 Americans will be over 65
• Average life span has risen
– 77 years men, 81 years women
– why: advances in medical technology, nutrition, etc…
• This FACT ensures that entitlement spending will increase a
rapidly growing rate
Entitlement Spending
• Includes- Social Security, Medicare & Medicaid
– Citizens are “entitled” to benefits at 65 years of age
• Largest part of Government budget
– Consumes approximately 40% of budget in 2011!
• Projected to 60%-70% by 2040!
Not Enough Workers?
• The ratio of workers to retirees is falling
– This means less money coming in => more going out
Wake-Up Call Video
http://www.cbsnews.com/stories/2007/03/01/60minutes/main2528226.shtml
Deficit & Debt relative to GDP
• Current Deficit = $649 Billion
• Current Debt = $17.9 Trillion
• Current GDP = $17.0 Trillion
• Deficit as % of GDP = 3.8% of GDP
– Highest since World War II
– Recent high (1983) 6% of GDP
• Debt as % of GDP =105.0% of GDP
– Highest ever (1946) was 120% of GDP
(2014 numbers)
NATIONAL DEBT AS % OF GDP
Debt:
17.9 Trillion
.
GDP
17.0 Trillion
105 % GDP
Growth of Entitlements
1964
.
27%
30%
33%
.
1984
2004*
20%
33%
46%
21%
7%
13%
14%
21%
9%
Defense
Social Security
Net interest
All other spending
*Current services estimate.
Source: Budget of the United States Government, FY 2005, Office of Management and Budget.
7%
19%
Medicare & Medicaid
Entitlement Reform?
.
Balancing the Budget?
“The only real question” is whether adjustments to taxes and spending
will come from a “careful and deliberative process” or from a “rapid
and painful response to a looming or actual fiscal crisis,”
Ben Bernanke
2010
Changing Entitlements
Social Security, Medicare & Medicaid
Social Security
Medicare
$470 Billion spent per year
$50 Billion stolen?
Medicare Fraud Video
U.S. Debt in Comparison
• Japan: 190% of GDP
(1970:
10% of GDP)
– $56,000 per person
• France 80% of GDP
– Deficit 7.5% of GDP
• Italy 115% of GDP
– Deficit 8.0% of GDP
• European Union (EU) debt limit of 60%
– Deficit limit: 3.0% of GDP
Debt as a % of GDP
.