A View From Washington

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A View From Washington

▪ Marc Goldwein -

Senior Vice President and Senior Policy Director for the Committee for a Responsible Federal Budget. Economics Professor. Former senior staff on Simpson-Bowles Fiscal Commission and “Super Committee”.

▪ The Committee for a Responsible Federal Budget –

A

nonpartisan, non-profit think tank committed to educating

policymakers, the press, and the public on issues with significant economic and budgetary impact. http://www.CRFB.org

▪ The Campaign to Fix the Debt –

A coalition of business,

community, and policy leaders as well as ordinary citizens who want to see elected officials work together to solve our nation's long-term fiscal challenges. http://www.FixTheDebt.org

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American Faces Slow Growth, High Debt,

And Endangered Entitlement Programs

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Economic Growth Is Slowing

Source: Congressional Budget Office

Annual Real GDP Growth (Percent Change)

2.2% 2.9% 2.6% 2.1% 1.8% 1.7% _1.7% _1.7% 1.8% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 2017 2018 2019 2020 2021 2022 2023 2024 2025 Actual Historic

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CRFB.org 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Structural Economic Growth is Slowing

5-Year Rolling Average Potential GDP Growth

Source: Committee for a Responsible Federal Budget calculation based on CBO data.

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Population Aging is Largely Responsible

0 20 40 60 80 100 120 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070

Population 65 or Older (in Millions)

65 to 74 75 to 84 85 to 94 95 or Older

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Population Aging is Largely Responsible

0.8% 0.2% 1.0% 0.7% 1.3% 0.9% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 50-Year Historic 2019-2028 Contribution from Productivity Contribution from Capital Contribution from Labor

Percentage Points of GDP Growth

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TOTAL REVENUE

TRILLION

$3.5

TOTAL SPENDING

TRILLION

$4.4

THIS YEAR…

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CRFB.org 0% 20% 40% 60% 80% 100% 120% 1940 1950 1960 1970 1980 1990 2000 2010 2020 Axis Title

Debt is At Record-High Levels

Sources: Congressional Budget Office, Office of Management and Budget, and the Committee for a Responsible Federal Budget.

Percent of GDP Carter Bush Reagan Clinton Bush Trump 77% Obama JFK Eisenhower Truman 103% Ford Nixon Johnson

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And Growing Rapidly Over the Long-Term

Source: Congressional Budget Office, CRFB interpolations for 2039-2047 AFS.

360%

600%

Historical Average for Debt: 41% 0% 100% 200% 300% 400% 500% 600% 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 Percent of GDP

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CRFB.org -16% -12% -10% -10% -9% -7% -7% -6% -6% -6% -6% -5% -5% -4% -4% -3% -3% -3% -2% -2% -2% 1% 2% 6% 11% -18% -13% -8% -3% 2% 7% 12%

While Most Countries Are Reducing Their Debt

Source: International Monetary Fund World Economic Outlook, April 2019.

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Rising Health, Retirement, & Interest Costs

Explain Long-Term Debt Growth

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Some Consequences of Rising Debt

▪ “Slowing Income “Crowding Out” of private sector investment

▪ Higher Interest Rates on loans for households and businesses

▪ Higher Government Interest Payments displacing other

government priorities and investments

▪ Generational Unfairness with younger and future generations

paying the price of today’s consumption.

▪ Weakened Global Standing as we become increasingly reliant on

foreign countries to sustain borrowing an investment

▪ Reduced Fiscal Space for the government to react to wars,

recessions, or other national needs and emergencies

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CRFB.org $99,500 $97,000 $94,000 $90,500 $84,000 $86,000 $88,000 $90,000 $92,000 $94,000 $96,000 $98,000 $100,000 $102,000 Falling Debt [42% of GDP] Stable Debt [92% of GDP] Current Law [144% of GDP] AFS [219% of GDP]

Rising Debt Will Reduce Income Per Person

Source: Congressional Budget Office June 2019 Long Term Budget Outlook

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Most Major Trust Funds Are In Near-Term Trouble

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We Need to Save Social Security Soon

Source: 2019 Social Security Trustees’ report.

0% 50% 100% 150% 200% 250% 300% 350% 400% 450% 1990 2000 2010 2020 2030 2040 2050 Combined Trust Funds Percent of Benefits

Trust Fund Depletion, 21% Benefit Cut in 2035

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New Legislation Would Save

Social Security With Tax Increases…

Summary of Social Security 2100:

• Phase in Repeal of the $133,000 “Tax Max”

• Raise payroll tax rate from 12.4% to 14.8%

• Adopt a more generous measure of inflation for

cost of living adjustments

• Expand benefits for low income beneficiaries

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Alternatives Could Also Promote Economic Growth

Summary of Pro-Growth Social Security Plan:

• Encourage productive aging by raising retirement

ages with a backstop poverty-levels benefit at 62

• Count all years of work equally to promote work

• Automatically enroll workers in supplemental

retirement accounts to increase savings/investment

• Increase the Tax Max and broaden the base

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There Are Many Ways to Save Social Security

8% 10% 12% 14% 16% 18% 20% 2009 2019 2029 2039 2049 2059 2069 2079 2089 Social Security 2100

Social Security Reform Act Pro-Growth Reform Plan

Percent of Payroll

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New Ideas Emerging to Promote Workforce Retention

Paid Leave:

•

Current law - Federal employer tax credit, several state

programs and policies

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President’s proposal – expand unemployment program to

cover paid parental leave

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Dem proposal – universal payroll tax financed paid leave

•

GOP proposal – allow workers to take an ‘advance’ on their

Social Security benefits to finance paid leave

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Bipartisan proposal – offer large child tax credit for

newborns, reduced in future years

Disability Reform

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Parties Are Very Far Apart on Taxes

GOP: Extend and expand Tax Cuts and Jobs Act (TCJA)

Dems: Repeal parts of TCJA, increases taxes on high earners,

capital gains, dividends, estates, wealth, financial transactions, etc, etc, etc

Some in both parties: Revive ‘Zombie Extenders’ and repeal or

delay various Obamacare taxes

Few in Either Party: Enact Carbon tax, raise income taxes or cut

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Addressing Population Aging Will Require

Government and the Private Sector

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Is It Time to Re-Think Retirement?

Retirement Career

Encore Career

The Old Model – One-Size-Fits-All and Binary

The New Model – Multiple Options and Paths

Phased Retirement

Continue Working or Switch to Part-Time

Career Bridge Job Delayed Retirement Retirement Part-Time Consulting

Early Retirement: Permanently Reduced Income

Early Retirement: Poverty-Protected Income