Ignored Crisis: A Looming Wave of Debt

Sources: Office of Management and Budget Historical Tables, Congressional Budget Office Alternative Fiscal Scenario

Deb

t  as  a % of G

DP

18

0

20

40

60

80

100

120

140

160

1960 1970 1980 1990 2000 2010 2020 2030

2030: 146%

Today: 62%

Widening Gap Between Spending and Revenue

12.0

14.0

16.0

18.0

20.0

22.0

24.0

26.0

28.0

1960 1970 1980 1990 2000 2010 2020

Revenue

Spending

2020 Gap: $1.25 Trillion

Sources: OMB Historical Tables (1940‐2009), Congressional Budget Office's Long‐Term Budget Outlook Alternative Fiscal Scenario

% of G

DP

17

Washington “Budgeting”

• In 2008, average TN household earned $43,000

• Using Washington logic, they would spend $74,000

• That’s $31,000more than they earn

• Must borrow 40 cents for every dollar they spend

16

1970 Spending

31%

62%

7%

Discretionary Spending (Defense, Highways, 

Education):  $558 billion

Interest Payments:$63 billion

Mandatory Spending (Medicare, Medicaid, 

Social Security): $279 billion

In Current Dollars

Source: Congressional Budget Office15

2010 Spending 

42%52%

6%

Interest Payments:$209 Billion

Discretionary Spending (Defense, Highways, 

Education): $1.38 Trillion

Mandatory Spending (Medicare, Medicaid, 

Social Security): $2.03 Trillion

Source: Congressional Budget Office14

2035 Spending

49%

26%

25%

Interest Payments:

$2.27 Trillion

Discretionary Spending (Defense, Highways, 

Education): $2.43 Trillion

Mandatory Spending (Medicare, Medicaid, 

Social Security): $4.46 Trillion

Source: Congressional Budget Office, Alternative Fiscal Scenario 

In Current Dollars

13

187

6949 45 44

3012

0

20

40

60

80

100

120

140

160

180

200

Net Interest Dept of Transportation

Dept of Homeland Security

Dept of Education

Dept of Housing 

TN State Budget 

Dept of Labor

Billion

s of $

Debt Isn’t Free:Putting 2009 Costs Into Perspective 

Sources: President’s FY’11 Budget, CBO, TN 2010‐11 Budget 12

Billion

s of $

Debt Isn’t Free:Putting 2020 Costs Into Perspective  

Sources: President’s FY’11 Budget, CBO, TN 2010‐11 Budget

11

916

83 59 54 52 35 140

100

200

300

400

500

600

700

800

900

1000

Net Interest Dept of Transportation

Dept of Homeland Security

Dept of Education

Dept of Housing  TN State Budget  Dept of Labor

Sources: President’s FY’11 Budget, CBO, TN 2010‐11 Budget

Who Owned America’s Debt in 1960?Total Publicly Held Debt: $236.8 Billion

Source: OMB and Department  of the Treasury

Domestic Holders: 

$223.8 billion(95%)

Foreign Holders: $13 Billion

(5%)

10

Who Owns America’s Debt in 2010?Total Publicly Held Debt: $8.8 Trillion

Domestic Holders: $4.7 Trillion  

(54%)

Foreign Holders: 

$3.9Trillion (46%)

China Owns: $876 Billion (10%)  

Source: Department of the Treasury, Federal Reserve Board 9

Plenty of blame to go around.

8

Historical Context

Spending: 20.3% of GDP over the last 50 years

Revenue: 18.0% of GDP over the last 50 years

7

What is Right Amount of Spending?

21% of GDP: Erskine Bowles

20.3% of GDP: 50-year Average

18% of GDP: Balanced Budget

6

Getting Spending Back to a Balanced Budget: $6.7 Trillion Reduction in Spending Over Ten Years

12.0

14.0

16.0

18.0

20.0

22.0

24.0

26.0

28.0

1960 1970 1980 1990 2000 2010 2020

Revenues as % of GDP

Outlays as % of GDP

Tough Medicine:

$6.7 Trillion

Getting to 21% of GDP would be $3.4 TrillionGetting to 20.3% of GDP would be $4.5 Trillion 

5

% o

f GD

P

$670 billion a year is about what we spend

on ...

4

Fundamentally change the way Washington does

business

3

A construct that forces us to cap spending and

incentivize growth

2

We should not leave our children and

grandchildren with this crippling debt

1