Spending, Taxes, & Deficits: A Book of Charts. Brian Riedl Senior Fellow, Manhattan Institute September 2018

Transcription

1 Spending, Taxes, & Deficits: A Book of Charts Brian Riedl Senior Fellow, Manhattan Institute September 2018

2 Highlights -- Why the Deficit Could Top $3 Trillion Within a Decade (page 9) -- Each 1% Interest Rate Rise Adds $13 Trillion to 30-Year Debt (16) -- What Happened to the 2011 BCA Spending Caps? (24) -- 91% of New Spending is For Social Security, Medicare, & Interest (30) -- What is Driving CBO s Projected $84 Trillion Deficit over 30 Years? (31-35) -- The Democratic Socialist Agenda Would Cost $42 Trillion (51) -- A Menu of Tax Increase Options (52) -- Does the U.S. Have the OECD s Most Progressive Tax Code? (70) -- Is it Possible that the 1980s Defense Build Up Paid for Itself? (74) -- What Really Caused the 1990s Budget Surpluses? (75) -- The Comprehensive Bush Budget Record (77-78) -- The Comprehensive Obama Budget Record (79-86) 2

3 Methodology Nearly all charts were built with publicly-available government data from the Office of Management and Budget (OMB), Congressional Budget Office (CBO), U.S. Treasury, Council of Economic Advisors (CEA), Bureau of Labor Statistics (BLS), Bureau of Economic Analysis (BEA), and Census Bureau. Unless otherwise noted, short time periods are expressed in nominal dollars, medium time periods are expressed in inflation-adjusted dollars, and long time periods are expressed as percentage of the economy. Sources for any chart can be obtained by contacting Brian Riedl at 3

4 Table of Contents 1) Rising Budget Deficits and National Debt 2) What is Driving the Debt? Soaring Federal Spending 3) Discretionary Spending is Not Driving the Long-Term Debt 4) Mandatory Spending and Entitlement Costs are Rising Rapidly 5) Can t We Just Raise Taxes, Cut Defense, & Nationalize Health Care Instead? 6) Tax Revenues Will Continue Growing Faster Than the Economy 7) The Tax Code Has Become Increasingly Progressive 8) Countering Tax, Spending, & Deficit Myths of the 1980s Through ) A Comprehensive Accounting of the Obama Fiscal Record 4

5 Chapter 1 Rising Budget Deficits and National Debt 5

6 Percentage of GDP Background: Budget Deficits are Heading Above Their Historical Average 5% 0% 2% (2000) -5% -10% -15% -6% (1983) -10% (2009) -7% (2028) -20% -25% -30% -30% Hi (1943) Fiscal Year Source: OMB Historical Table 1.2, and April 2018 CBO (current-policy) Baseline 6

7 Nominal $Billions CBO Projects $2 Trillion Budget Deficits Within a Decade, Assuming Current Policies are Extended $0 -$500 -$1,000 -$587 -$665 -$805 -$1,500 -$2,000 -$2,500 -$981 -$1,105 -$1,267 -$1,449-$1,473-$1,468 -$1,602-$1,682 -$1,851 -$2, Fiscal Year Source: OMB Historical Table 1.1, and April 2018 CBO (current-policy) Baseline, Table 4.5 7

8 Budget Deficit in Nominal $Billions Entitlements Remain the Lead Driver of Budget Deficits $0 -$500 -$1,000 Deficit Driven by Recession & Federal Response $-459 (2015) Underlying CBO Budget Deficit -- Driven by Social Security, Health Benefits, & Debt Interest 2017 Tax Cuts -$1,500 -$2,000 $-1,415 (2009) 2018 Deal Raising Discretionary Spending Caps $-1,624 $-263 $-219 -$2, Fiscal Year Source: Calculated using April 2018 CBO (current-policy) Baseline. Assumes that new tax cuts and higher discretionary spending levels are renewed. Resulting interest costs are incorporated into each category. Author: Brian Riedl, Manhattan Institute 8

9 Surplus/Deficit in Nominal $Billions If Interest Rates Return to 1980s or 1990s Levels, Net Interest Costs and Thus the Deficit Will Soar $500 $0 -$500 -$1,000 -$1,500 -$2,000 -$2,500 $236 (2000) -$161 (2007) -$1,413 (2009) Historical and CBO Current-Policy Baseline Deficits -$3,000 -$4,010 (2028) -$3,500 Baseline -$4, s Interest Rates 1980s Interest Rates -$4, Fiscal Year -$2,106 (2028) -$2,918 (2028) Source: Calculated using April 2018 CBO (current-policy) Baseline data and CEA historical interest rate data. Amounts in nominal $billions 9

10 Inflation-Adjusted (2018) $Billions Budget Deficits are Once Again Soaring (Adjusted for Inflation $500 $333 (2000) $0 -$500 -$1,000 -$383 (1990) -$190 (2007) Historical -$805 (2018) -$1,500 -$1,621 -$1,656 -$2,000 (2009) (2028) Fiscal Year CBO Baseline Source: OMB Historical Table 1.1, and April 2018 CBO (current-policy) Baseline, adjusted in to 2018 dollars. 10

11 $Trillions Projected New Federal Debt Added by Decade Unless Reforms are Enacted $70 $60 $50 Blue - Nominal Dollars Purple Inflation-Adjusted (2018) Dollars $63.1 $40 $30 $20 $10 $0 $31.7 $15.5 $9.9 $27.1 $16.7 $2.2 $9.2 $ Decade Source: CBO 2018 Long-Term Budget Outlook adjusted to reflect the current-policy baseline. 11

12 Debt Held by the Public (%GDP) The National Debt is Set to More than Double its Pre-Recession Level 120% 100% 80% 106% (1946) 105% (2028) 60% 40% 20% 23% (1974) Historical Debt as a Percentage of GDP 0% Fiscal Year 48% ( ) 39% (2008) CBO Baseline Source: OMB Historical Table 7.1, and April 2018 CBO (current-policy) Baseline Table 1-1. Figures refer to Debt Held by the Public 12

13 Debt Held by the Public (%GDP) CBO Long-Term Baseline Shows Unsustainable Debt 150% 120% 106% (1946) Note: This is the rosy scenario that assumes no wars, no recessions and continued low interest rates. It also assume all tax cuts expire as scheduled. 152% (2048) 90% 78% (2018) 60% 30% 23% (1974) 48% ( ) 35% (2007) Projected Debt Levels Historical Debt Levels 0% Fiscal Year Source: CBO 2018 Long-Term Budget Outlook Author: Brian Riedl, Manhattan Institute - 13

14 Inflation-Adjusted (2018) Dollars Each Household s Share of the National Debt $220,000 $200,000 $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $59,491 (1990) $75,737 (2000) $99,290 (2008) Historical $ Fiscal Year $ (2018) $203,326 (2028) CBO Baseline Source: OMB Historical Table 7.1, April 2018 CBO (current-policy) Baseline, and Census Bureau. 14

15 Inflation-Adjusted (2018) $Billions Net Interest Costs are Set to Rise Dramatically $800 $700 $600 $780 (2028) $500 $400 $300 $200 $319 (1990) Spending on Net Interest $316 (2018) CBO Baseline $100 $ Fiscal Year Source: OMB Historical Table 3.2 and April 2018 CBO (current-policy) Baseline Table 1.1 adjusted for inflation into 2018 dollars 15

16 National Debt in Nominal $Trillions Rising Interest Rates Would Push the National Debt to as High as $190 Trillion Within 30 Years $200 $180 $160 $140 $120 $100 $80 $60 Average interest paid rate on national debt: 1980s 10.5% 1990s 6.9% 2000s 4.8% % % (CBO projection) % (CBO projection $40 CBO Baseline $20 (with current-policy adjustments) Assumes 3% - 4% interest rate after 2028) $ Fiscal Year $189 9% $175 8% $161 7% $150 6% $137 5% $126 Source: Calculations using the 2018 CBO Long-Term Baseline. Alternative scenarios assume higher interest rates beginning in Most economists agree that a steeply rising debt will raise interest rates. 16 Author: Brian Riedl, Manhattan 16 Institute

17 Chapter 2 What is Driving the Debt? Soaring Federal Spending 17

18 Percentage of GDP Background: Federal Spending & Taxes: % 45% 40% 35% 30% 25% Spending 20% 15% 10% Revenues 5% 0% Fiscal Year Source: OMB Historical Table 1.2 ( ), and April 2018 CBO (current-policy) Baseline ( projections) 18

19 Percentage of GDP Over the Next Decade, Spending Will Outstrip Even the Above-Average Revenue Levels 30% 28% 26% 24% 22% 20% 18% 16% 14% 12% Spending 24.4% (2028) Average: 19.9% Revenues Average: 17.3% 10% Fiscal Year 17.4% (2028) Source: OMB Historical Table 1.2 ( ), and April 2018 CBO (current-policy) Baseline ( projections) 19

20 Percentage of GDP 35% Rising Spending Not Falling Revenues Drives the Long-Term Deficit 30% 25% 19.9% ( ) Federal Spending 31.5% (2048) 20% 15% 10% 17.3% ( ) Tax Revenues 18.6% (2048) 5% 0% Fiscal Year Source: CBO 2018 Long-Term Budget Outlook, adjusted into current-policy baseline 20

21 Inflation-Adjusted (2018) Dollars Washington Now Spends More Than $32,000 Per Household $45,000 $40,000 $35,000 $30,000 $25,000 $23,249 (1990) $23,687 (2001) $27,878 (2007) $32,488 (2018) $40,639 (2028) $20,000 $15,000 $10,000 $5,000 Actual Spending per Household CBO January 2018 Baseline $ Fiscal Year Source: OMB Historical Table 1.1, April 2018 CBO (current-policy) baseline, and Census Bureau data 21

22 Chapter 3 Discretionary Spending is Not Driving the Long-Term Debt 22

23 Federal Spending (%GDP) The Budget Control Act Will Drop Discretionary Spending Far Below its Historic Average 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 9.1% (1968) 3.3% (1962) Defense Discretionary 5.1% (1980) Non-Defense Discretionary 2.9% ( ) 3.1% (2018) 3.2% (2018) 2.7% (2028) 2.5% (2028) 0% Fiscal Year Source: OMB Historical Table 8.4, and April 2018 CBO (current-policy) Baseline. 23

24 $Billions of Budget Authority Budget Deals Have Weakened the Budget Control Act (BCA) Discretionary Spending Caps $1,400 $1,300 $1,200 Black Actuals & Original CBO Baseline Blue Original BCA Caps Red Final Figures After Budget Deals 1,208 1,245 $1,100 1,090 1,050 1, ,066 1,070 $1,000 $ , ,012 1, $800 Source: Congressional Budget Office Excludes OCO and emergency spending. Amounts in nominal $billions Fiscal Year 24

25 Inflation-Adjusted (2018) $Billions Since 1990, Non-Defense Discretionary Spending Has Grown 5 Times Faster than Defense $1,600 $1,400 $1,200 $1,000 $800 $600 $419 (1990) Non-Defense: Up 49% $623 (2018) $400 $200 $590 (1990) (Includes war spending) Defense: Up 9% $643 (2018) $0 Fiscal Year Source: OMB Historical Table 8.2, converted into 2018 dollars 25

26 Chapter 4 Mandatory Spending and Entitlement Costs are Rising Rapidly 26

27 Major Components of the 2018 Federal Budget 2018 Outlays $Millions Per Household Social Security $992,533 $7,785 24% National Defense 643,266 5,046 15% Medicare 588,373 4,615 14% Medicaid 400,388 3,141 10% Income Security Programs 321,764 2,524 8% Net Interest 310,313 2,434 7% Veterans Benefits 177,230 1,390 4% Justice Administration 69, % Education 68, % Health Research & Regulation 67, % Highways & Mass Transit 62, % International Affairs 47, % All Else 423,721 3,324 10% Total 4,172,992 32, % % 2018 Revenues $Million Per Household % Ind. Income Taxes $1,660,063 $13,021 50% Social Insurance Taxes 1,169,701 9,175 35% Corporate Taxes 217,648 1,707 7% Excise Taxes 108, % Fed. Reserve Earnings 72, % Customs Duties/Fees 40, % Estate/Gift Taxes 24, % Other Revenues 47, % Total Receipts 3,340,360 26, % Source: OMB Historical Tables , 2.4, 2.5, 3.2, and 8.5

28 Mandatory Spending is Squeezing Discretionary Spending Mandatory (34%) Defense (43%) Mandatory (70%) Domestic Discretionary (23%) Domestic Discretionary (15%) Defense (15%) Source: OMB Historical Table

29 Composition of Federal Spending, % 90% 80% 70% 60% 50% 29% 6% 3% 13% Other Programs Net Interest Antipoverty Programs 21% 7% 19% 40% 30% 49% Social Security & Medicare 38% 20% 10% 0% Defense (including wars) Fiscal Year 15% Source: OMB Historical Tables 3.2, 8.5, and

30 Inflation-Adjusted (2018) $Billions Social Security, Health Entitlements, & Interest Costs are Driving 91% of the Spending Hikes $6,000 $5,000 $780 $4,000 $3,000 $294 $1,398 Social Security & Health Entitlements (up $1,589 billion) $2,987 $2,000 $455 Other Entitlements (up $128 billion) $583 $1,000 $606 Non-Defense Discretionary (up $75 billion) $681 $711 Defense & Wars (down $18 billion) $693 $ Fiscal Year Source: April 2018 CBO (current-policy) Baseline and historical data, adjusted for inflation 30

31 Percentage of GDP Federal Budget, (Projected) 35% 30% 7.5% 25% 20% 15% Revenue 15.5% Social Security & Health Entitlements Note: This is the rosy scenario that assumes: -- no more wars -- no recessions -- health costs slow down -- the interest rate paid on the national debt remains far below average even as the debt soars past $100 trillion. 10% 2.5% 5% 3.0% Defense & Wars 3.0% 0% Fiscal Year Source: Source: CBO 2018 Long-Term Budget Outlook adjusted into a current-policy baseline. Author: Brian Riedl, Manhattan 31

32 Federal Spending (%GDP) Social Security and Health Entitlement Spending as a Percentage of the Economy 25% 20% Historical Level of Total Federal Spending 19.8% 3.7% 15% 10% 5% 0% 7.1% 1.2% 1.9% 10.1% 2.2% 3.0% 4.0% 4.9% 12.9% 2.6% 4.2% 15.0% 3.2% 5.9% 9.6% 6.1% 5.9% 6.5% Medicaid, SCHIP, ACA Medicare Social Security Source: CBO 2015 Long-Term Budget (Alternative Scenario). This was the last CBO report to project longer than 30 years. 32

33 Surplus/Deficit in Nominal $Trillions What is Causing $84 Trillion Budget Deficit? Social Security & Medicare: $100 Trillion Deficit The Rest of the Budget: $16 Trillion Surplus $20 $10 $0 -$10 -$20 -$30 -$40 -$50 -$60 -$70 -$80 Social Security $-18.1 $-12.4 $-30.5 Medicare $-41.3 $-28.2 $-69.5 $16.2 Rest of the Federal Budget Purple Program Deficit Blue Interest Costs Directly Attributable to Program Deficit Source of $83.7 Trillion Budget Deficit Projected over Period ($Nominal) Source: Calculations from CBO 2018 Long-Term Budget Outlook, converted to a current-policy baseline. To inflation adjust, trim amounts by one-third. Note: Social Security & Medicare deficits are the benefits that must be paid from general revenues because payroll taxes, premiums, and other non-interest trust fund revenues are insufficient. CBO assumes full benefits will continue even after trust fund insolvency. 33

34 $Nominal Trillions Cost of 2017 Tax Cuts vs. Major Entitlements Over 30 Years $80 $70 $60 $50 Blue Interest Costs Purple Principal Costs $69.5 $28.2 $40 $30 $20 $10 $0 $15.1 $6.0 $ Tax Cuts (Extended) $30.5 $12.4 $18.1 Social Security Cash Deficit $41.3 Medicare Cash Deficit Source: Calculated using the CBO 2018 Long-Term Budget Outlook and CBO Alternative Scenarios Projected Totals Author: Brian Riedl, Manhattan Institute 34

35 Percent of GDP Projected 2048 Budget Deficits are Entirely Driven by Social Security & Medicare Shortfalls 20% 18% 18.5% 16% 14% 13.9% 12% 10% 8% 6% 5.9% Outlays Revenues 10.8% Outlays 4% 2% Dedicated Revenues 0% Social Security & Medicare Systems Rest of Federal Budget Note: 2048 is the final year of the latest CBO 30-year budget projection. Source: CBO 2018 Long-Term Budget Outlook adjusted into a current-policy baseline. Each outlay category includes portion of national debt interest attributed to its deficits. Author: Brian Riedl, Manhattan Institute - 35

36 Inflation-Adjusted (2015) Dollars The Typical Retiring Couple Will Receive $3 in Medicare Benefits for Every $1 Paid into the System and Also Come Out Ahead in Social Security $700,000 $600,000 $500,000 $400,000 $300,000 $543,000 Taxes Paid In $616,000 Benefits Received $422,000 Benefits Received $200,000 $100,000 $140,000 Taxes Paid In (net of premiums paid) $0 Social Security Medicare Represents typical, average-income married couple turning 65 in Calculations represent expected present values. Source: Urban Institute (2015) 36

37 Nominal $Billions Social Security s Deficits Will Steeply Increase, While Medicare Also Faces Rising Deficits $50 $0 -$50 -$100 -$150 -$200 -$250 -$300 -$350 -$400 Social Security (DI) $-27 Medicare Part A (HI) $-114 $ Fiscal Year Source: April 2018 CBO Baseline Supplemental Trust Fund Tables. Excludes general revenue transfers into the programs, such as interest payments. 37

38 Nominal $Billions Nominal $Billions Medicare and Social Security Trust Funds Face Bankruptcy in 8 and 13 Years, Respectively $250 $3,000 $200 Social Security (OASI) Trust Fund Balance $2,500 $150 $2,000 $1,500 $100 $50 Medicare Part A (HI) Trust Fund Balance $1,000 $500 $ Fiscal Year $0 Source: April 2018 CBO Baseline Supplemental Trust Fund Tables. 38

39 Federal Spending (%GDP) Anti-Poverty Spending Has Soared Regardless of Party Control of Government 4.5% 4.0% 4.2% (2010) 3.9% (2018) 3.5% 3.0% 2.6% (2000) 3.2% (2008) 2.5% 2.0% 1.5% 1.0% 0.5% 0.5% (1962) 1.8% (1980) Cash & Other Aid Food Aid Housing Health Care 0.0% Fiscal Year Source: OMB Historical Tables 3.2, 8.5, and

40 Percentage Increase From 2001 through 2016, SNAP (Food Stamp) Caseloads Grew 6 Times as Fast as the Poverty Population 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 23% Up 8 Million 155% Up 27 Million 194% Up $47 Billion (After Inflation) Individuals in Poverty SNAP Caseloads Total Spending Sources: Department of Agriculture and Census Bureau. The poverty rate increased from 11.7% to 12.7% over this period. 40

41 In 2017, Washington Made $135 Billion in Improper Payments Medicare Fee-for-Service $37 Medicaid $36 Earned Income Tax Credit (EITC) Medicare Advantage (Part C) $14 $16 Other High-Risk Programs $31 $0 $10 $20 $30 $40 $ Improper Payments ($Billions) Source: OMB at 41

42 Inflation-Adjusted (2018) $Billions Veterans Programs Have Earned Healthy Funding Increases $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 $177 $123 $ Fiscal Year Source: OMB Historical Table 3.2, adjusted for inflation 42

43 Why the Debt Limit Matters All 8 Major Deficit-Reduction Laws Since 1985 Were Attached to Debt Limit Legislation Year Major Deficit-Reduction Law Attached to Debt Limit? 1985 Gramm-Rudman-Hollings Deficit Caps 1987 Gramm-Rudman-Hollings Deficit Caps II 1990 Bush Tax Increases & Spending Caps 1993 Clinton Deficit Reduction Package 1996 Line-Item Veto Act (later struck down by Supreme Court) 1997 Balanced Budget Act 2009 Statutory Pay-As-You-Go Act 2011 Budget Control Act (Cutting $2.1 Trillion) Source: Compiled by the Committee For a Responsible Federal Budget 43

44 Chapter 5 Can t We Just Raise Taxes, Cut Defense, and Nationalize Health Care Instead? 44

45 Percentage of GDP Federal Budget, (Projected) 35% 30% 7.5% 25% 20% 15% Revenue 15.5% Social Security & Health Entitlements Note: This is the rosy scenario that assumes: -- no more wars -- no recessions -- health costs slow down -- the interest rate paid on the national debt remains far below average even as the debt soars past $100 trillion. 10% 2.5% 5% 3.0% Defense & Wars 3.0% 0% Fiscal Year Source: Source: CBO 2018 Long-Term Budget Outlook adjusted into a current-policy baseline. Author: Brian Riedl, Manhattan 45

46 No Easy Pay-Fors for Social Security & Medicare: Programs Face Shortfalls of 6.3% of GDP by 2040s Tax Proposals Savings (%GDP)* Liberal or Government Source Raise Payroll Tax by 10 Percentage Points, no wage limit 3.64% CBO Options Dec Impose a 20% Value-Added Tax (VAT) like a national sales tax 3.48% CBO Options Dec Raise Income Tax Rates Across-the-Board by 10 Percentage Points 3.26% CBO Options Dec Double 35% and 37% Tax Brackets to 70% and 74%** 1.60% CBO Options Dec. 2016*** Raise Corporate Tax Rate by 20 Percentage Points 0.89% CBO Options Dec Repeal EITC and Child Credit 0.87% JCT, Report JCX Eliminate FICA Cap 15.3% Payroll Tax on All Wages 0.78% Social Security Admin Repeal Entire 2017 Tax Law ( average savings) 0.67% CBO April 2018 Baseline Tax Dividends & Long-Term Capital Gains as Ordinary Income 0.58% JCT, Report JCX Eliminate Mortgage Interest, Charitable, & SALT Deductions 0.49% JCT, Report JCX Carbon Tax of $25/Metric Ton no rebate for households hit 0.42% CBO Options Dec Impose "Bank Tax" on Large Financial Institutions 0.04% CBO Options Dec % Minimum "Buffett Tax" for Millionaires 0.03% CBO Options Dec End Oil & Gas Tax Breaks 0.01% CBO Options Dec Tax Carried Interest as Ordinary Income 0.01% CBO Options Dec Spending Proposals Cut Defense Budget to European Levels 1.00% CBO April 2018 Baseline Enact Single-Payer Health Care (Sanders Proposal) Adds Costs Urban Institute, Emory University NOTE: These static estimates do not account for revenues lost to the economic impact. Combining policies may also create interaction effects or duplicate the same policies. *Includes outlay effects. **State and payroll taxes add as much as 15% more. ***CBO data adjusted for subsequent 2017 tax cuts 46 Author: Brian Riedl, Manhattan

47 Federal Spending (%GDP) Defense is Not Driving the Deficit and Even Eliminating It Completely Would Not Come Close to Financing Soaring Long-Term Entitlement Costs 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Fiscal Year Source: OMB Historical Tables 3.2, and 10.1; and the CBO 2015 Long-Term Budget Outlook (Alternative Scenario) This was the last CBO report to project longer than 30 years. Social Security and Health Entitlements Defense 47 Note: Current law will cut defense to 2.7 percent of GDP by 2021

48 Average Annual Cost Per-Household Single-Payer Health Plans Do Not Save Money They Would Require Huge Per-Household Tax Increases $40,000 $35,000 Redirect Existing Govt. Health Funds New Spending & Taxes $35,280 $30,000 $25,000 $20,000 $15,000 $19,340 $20,524 $5,371 $7,973 $26,497 $13,248 $14,203 $10,000 $5,000 $13,970 $12,552 $13,248 $21,078 $0 Colorado Plan (failed referendum) Vermont Plan (abandoned) California Plan (abandoned) Bernie Sanders National Plan Source: Public scores of Vermont and California bills, and Colorado Health Institute data. Sanders calculated from Urban Institute 2016 score of plan Author: Brian Riedl, Manhattan 48

49 Percentage of GDP Even 100% Tax Rates on Small Businesses and Upper-Income Families Could Not Come Close to Balancing the Long-Term Budget 14% 12% 10% 8% 7.1% 9.5% 12.9% All untaxed personal & small business adjusted gross income (AGI) annually earned above the listed income threshold 6% 4% 4.0% 3.8% 5.1% 2% 0% $1 million $500, Projected Budget Deficit Source: CBO 2018 Long-Term Budget Outlook adjusted into current-policy baseline and analysis of IRS 2016 (latest year) income tables 49

50 Nominal $Billions Common Tax Hike Proposals Would Close Just 2 Percent of the Budget Deficit or Raise Nothing if They Trim Economic Growth Rates by Even 0.1 Percent $1,600 $1,400 $1,200 $1,000 $1,498 Combined Tax Increase* 1) Raise capital gains & dividend tax rates by 4% 2) Wall Street financial fee 3) Buffett tax 4) Tax business costs of moving overseas 5) Repeal oil and gas tax breaks 6) Repeal corporate jets "loophole" $800 $600 $400 Annual Combined Tax Increase Revenue $200 $0 -$200 Average Annual Budget Deficit over Next Decade $31 Static Score Revenue $-1 Dynamic Score if Annual Economic Growth Falls From 1.8% to 1.7% Source: CBO January 2018 Baseline adjusted into current-policy baseline. Tax proposals scored by CBO/JCT. OMB estimates that a 0.1% fall in annual economic 50 growth costs the federal government nearly $32 billion annually.

51 Democratic Socialist Price Tag $42 Trillion (Even According to Liberal Sources) Popular Far-Left Spending Proposal Trillions*%GDP Liberal or Government Source Single-Payer Health Care $ % Urban Institute Sanders Proposal Government Job Guarantee $ % Center on Budget & Policy Priorities** Student Loan Forgiveness $ % Rep. Jared Polis (D-CO) H.R Infrastructure Buildup $ % Senate Democrats Free Public College Tuition $ % Tax Policy Center Sanders Proposal Paid Family Leave $ % Tax Policy Center Sanders Proposal Expand Social Security $ % Tax Policy Center Sanders Proposal Subtotal: Far-Left Spending Proposals $ % CBO Baseline Budget Deficit $ % CBO (current law baseline, ) Total Federal Budget Deficit $ % Popular Liberal Spending Offsets Cut Defense to European Levels $ % CBO (current law baseline) Single-Payer - Capture State/Local Govt Savings $ % Urban Institute Sanders Proposal Remaining Budget Shortfall To Fill $ % Requires *Doubling* Federal Revenues *All figures are over ten years. **Absurdly-low jobs guarantee score assumes only 9.7 million people sign up, even though generous proposal would provide a higher income for roughly 70 million Americans. Sens. Sanders and Booker are proposing even higher wages than the CBPP version. 51 Author: Brian Riedl, Manhattan

52 Taxes Cannot Easily Finance: Long-Term Deficit (13% of GDP by 2048) or Democratic Socialist Agenda (17% of GDP Immediately) Tax Proposal Savings (%GDP)* Liberal or Government Source Raise Payroll Tax by 10 Percentage Points, no wage limit 3.64% CBO Options Dec Impose a 20% Value-Added Tax (VAT) like a national sales tax 3.48% CBO Options Dec Raise Income Tax Rates Across-the-Board by 10 Percentage Points 3.26% CBO Options Dec Double 35% and 37% Tax Brackets to 70% and 74%** 1.60% CBO Options Dec. 2016*** Raise Corporate Tax Rate by 20 Percentage Points 0.89% CBO Options Dec Repeal EITC and Child Credit 0.87% JCT, Report JCX Eliminate FICA Cap 15.3% Payroll Tax on All Wages 0.78% Social Security Admin Repeal Entire 2017 Tax Law ( average savings) 0.67% CBO April 2018 Baseline Tax Dividends & Long-Term Capital Gains as Ordinary Income 0.58% JCT, Report JCX Eliminate Mortgage Interest, Charitable, & SALT Deductions 0.49% JCT, Report JCX Carbon Tax of $25/Metric Ton no rebate for households hit 0.42% CBO Options Dec Impose "Bank Tax" on Large Financial Institutions 0.04% CBO Options Dec % Minimum "Buffett Tax" for Millionaires 0.03% CBO Options Dec End Oil & Gas Tax Breaks 0.01% CBO Options Dec Tax Carried Interest as Ordinary Income 0.01% CBO Options Dec NOTE: These static estimates do not account for revenues lost to the economic impact. Combining policies may also create interaction effects or duplicate the same policies. *Includes outlay effects. **State and payroll taxes add as much as 15% more. ***CBO data adjusted for subsequent 2017 tax cuts. 52 Author: Brian Riedl, Manhattan

53 Percentage of GDP No, Defense Cuts Cannot Pay For Much of Democratic Socialism 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Note: Defense is 15% of the federal budget 3.1% 4.5% Entire Defense Budget Social Security & Medicare Shortfall (over next 30 years) 16.8% Democratic Socialist Proposals Sources: Author calculations using data from CBO and liberal think tanks. 53

54 Federal Spending ($Billions) Trump Budget Proposal Would Allow Social Security, Medicare, and Interest to Swallow up the Budget $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Social Security, Medicare, and Interest Up 100% From Fiscal Year All Other Spending Up 9% From Source: FY 2018 Trump Budget Summary Tables, with CBO historical data for

55 Chapter 6 Tax Revenues Will Continue Growing Faster Than the Economy 55

56 Percentage of GDP 35% Rising Spending Not Falling Revenues Drives the Long-Term Deficit 30% 25% 19.9% ( ) Federal Spending 31.5% (2048) 20% 15% 10% 17.3% ( ) Tax Revenues 18.6% (2048) 5% 0% Fiscal Year Source: CBO 2018 Long-Term Budget Outlook, adjusted into current-policy baseline 56

57 Income Tax Revenues Have Remained Relatively Constant Regardless of the Top Tax Rate 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Top Income Tax Rate Average Top Rate / Revenues 1950s: 90.5% / 7.2% 1960s: 80.3% / 7.6% 1970s: 70.2% / 7.9% 1980s: 48.4% / 8.2% 1990s: 36.7% / 8.1% 2000s: 36.2% / 7.8% 2010s: 37.8% / 7.8% Income Tax Revenues (%GDP) Correlation : % Fiscal Year 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Source: OMB Historical Table 2.3, and U.S. Treasury SOI Tax Stats Historical Table 23 57

58 Individual Income Tax Revenues (%GDP) Individual Income Tax Revenues Will Rise Even With the Tax Cuts Due to Real Bracket Creep & Taxable Retirement Distributions 10% 9% 8% Bracket Creep Tech Bubble & Burst CBO Baseline with (Tax Cuts Extended) Reagan Tax Cuts 7% Deep Recession Deep Recession 6% Fiscal Year Source: OMB Historical Table 2.3, and April 2018 CBO (current-policy) Baseline. Real bracket creep is when rising incomes (above inflation) push taxpayers into higher tax brackets, raising their average tax rate. Author: Brian Riedl, Manhattan Institute 58

59 High Capital Gains Tax Rates Have Not Produced More Revenue 45% Top Capital Gains Tax Rate 40% 35% 30% 25% 20% 15% 10% 5% Correlation: % Capital Gains Tax Revenues (%GDP) 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0% 0.0% Fiscal Year Source: Tax Tables, U.S. Treasury Office of Tax Analysis. 59

60 United States France Belgium Germany Australia Mexico Japan Portugal Greece New Zealand Italy Luxembourg Canada Austria Chile Netherlands Spain United States Korea Israel Norway Denmark Sweden Switzerland Slovak Republic Estonia Finland Iceland Turkey Czech Republic Poland Slovenia United Kingdom Latvia Ireland Hungary Top Corporate Tax Rate Before the TCJA Cut it to 25% (incl. 4% State Taxes) U.S. had the Highest Corporate Tax Rate in the OECD 40% 39% 34%34% 30% 20% 10% 30%30% 30% 30% 30% 29% 28% 28% 27% 27% 25% 25% 25% 24% 25% 25% 24% 24% 22% 21% 20% 22% 20% 19% 21% 20% 20% 19% 19% 19% 15% 13% 9% 0% Source: OECD Stats (2017), Tax Table II.1. Tax rates include federal, state, province and local corporate taxes. Notes: While all countries allow businesses to reduce their taxes through exemptions, deductions, and credits, the U.S. has been among the highest effective corporate tax rates too. 60

61 Top Corporate Tax Bracket The U.S. has Finally Caught Up With the Rest of the OECD on Corporate Tax Competitiveness 40% 35% 30% 25% 20% 15% 10% 5% 0% United States 39% 32% 31% Average of Other 30% 30% 29% 34 OCED Nations 28% 27% 26% 25% 25% 25% 25% 25% 25% 25% 25% 25% 24% 24% 24% Source: OECD Stats (2017), Tax Table II.1. Tax rates include federal, state, province and local corporate taxes. 61

62 Nominal $Billions The Economy Matters More: $500 Billion in Net Tax Hike Revenue Was Negated by $3.2 Trillion Lost to Economic Downgrades $1,500 $1,000 $500 $0 -$500 -$1,000 -$1,500 -$2,000 -$2,500 -$3,000 -$3,500 Lost Revenue from Tax Cuts -$822 $1,328 Added Revenue from Tax Hikes Lost Revenue from Economic Downgrades and Technical Re-estimates -$3,153 Source: Congressional Budget Office data. Between January 2009 and January 2017, Congress and President Obama enacted legislation adding $516 billion to revenues (against a current-policy baseline). During that same period, the unexpectedly-weak economic recovery and related technical estimates reduced revenues by $3,153 billion. Note that the initial January 2009 CBO baseline had already incorporated the projected revenue losses from the recession. These additional economic downgrades reflect the weak recovery, particularly in the later years. 62

63 Taxes Cannot Easily Close Security & Medicare Shortfall: Will Need General Revenues of 6.6% of GDP by 2040s Tax Proposal Savings (%GDP)* Liberal or Government Source Raise Payroll Tax by 10 Percentage Points, no wage limit 3.64% CBO Options Dec Impose a 20% Value-Added Tax (VAT) like a national sales tax 3.48% CBO Options Dec Raise Income Tax Rates Across-the-Board by 10 Percentage Points 3.26% CBO Options Dec Double 35% and 37% Tax Brackets to 70% and 74%** 1.60% CBO Options Dec. 2016*** Raise Corporate Tax Rate by 20 Percentage Points 0.89% CBO Options Dec Repeal EITC and Child Credit 0.87% JCT, Report JCX Eliminate FICA Cap 15.3% Payroll Tax on All Wages 0.78% Social Security Admin Repeal Entire 2017 Tax Law ( average savings) 0.67% CBO April 2018 Baseline Tax Dividends & Long-Term Capital Gains as Ordinary Income 0.58% JCT, Report JCX Eliminate Mortgage Interest, Charitable, & SALT Deductions 0.49% JCT, Report JCX Carbon Tax of $25/Metric Ton no rebate for households hit 0.42% CBO Options Dec Impose "Bank Tax" on Large Financial Institutions 0.04% CBO Options Dec % Minimum "Buffett Tax" for Millionaires 0.03% CBO Options Dec End Oil & Gas Tax Breaks 0.01% CBO Options Dec Tax Carried Interest as Ordinary Income 0.01% CBO Options Dec NOTE: These static estimates do not account for revenues lost to the economic impact. Combining policies may also create interaction effects or duplicate the same policies. *Includes outlay effects. **State and payroll taxes add as much as 15% more. ***CBO data adjusted for subsequent 2017 tax cuts. 63 Author: Brian Riedl, Manhattan

64 Chapter 7 The Tax Code Has Become Increasingly Progressive 64

65 2017 Average Tax Rate The Federal Tax Code Remains Progressive 50% 40% 30% 20% 10% 0% -10% -20% 38.5% Average Tax Rate Paid for All Federal Taxes 33.1% 25.8% 23.5% 21.1% 18.1% 15.4% 12.7% 23.1% 26.4% 9.6% 5.9% -4.1% 1.7% 15.7% 9.6% 12.1% 7.1% -10.3% -3.2% 0.1% 2.6% 4.9% -7.2% -17.5% -12.7% Average Tax Rate Paid For Federal Income Taxes -30% 0-10 $9k $18k $24k $33k $43k $57k $74k $97k $135k Income Distribution Range and Average Family Cash Income $194k $330k $933k Top.1% $7M Source: U.S. Treasury, Office of Tax Analysis. Data represents 2017, fully phased-in current law. 65

66 Average Federal Tax Rate Paid Average Federal Tax Rate Paid by Income Category, % 35% 30% 25% 20% 15% 10% 5% 0% 35% 27% 22% 19% 15% 8% Top 20% Top 1% Second 20% Middle 20% Fourth 20% Bottom 20% Fiscal Year Note: Includes federal income, payroll, corporate, and excise taxes paid. 34% 26% 17% 13% 8% 3% Source: CBO "Distribution of Household Income and Federal Taxes (2016) 66

67 Percentage of Federal Tax Burden Paid by Quintile The Federal Tax Burden (For All Combined Taxes) Has Grown More Progressive Over Time 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 22% 14% 7% 2% 55% Percentage of Federal Tax Burden Financed by Income Quintile Top 20% Second 20% Middle 20% Fourth 20% Bottom 20% Fiscal Year 69% 17% 9% 4% 1% Source: CBO "Distribution of Household Income and Federal Taxes (2016) 67

68 Percentage of Income Tax Burden Paid by Quintile The Highest-Earning 20 Percent of Taxpayers Pay 88 Percent of All Federal Individual Income Taxes 100% 90% Percentage of Federal Income Tax Burden Financed by Income Quintile 88% 80% 70% 60% 50% 40% 65% Top 20% 30% 20% 20% Second 20% 10% 11% Middle 20% 4% Fourth 20% 0% 0% Bottom 20% -10% Fiscal Year 13% 4% -1% -4% Source: CBO "Distribution of Household Income and Federal Taxes (2016) 68

69 Ratio of the Share of Income Taxes Paid Divided by the Share of Income Earned Even Controlling for Income Inequality, Income Taxes Have Become More Progressive, With the Highest-Earning 20 Percent Increasing Their Income Tax Share Progressivity Ratio by Income Rank Top 1% Top 20% Bottom 20% Second 20% Middle 20% Fourth 20% Fiscal Year Progressivity ratio refers to the share of all individual income taxes paid divided by the share of pre-tax income earned. So a group that pays 40% of the taxes while earning 20% of the income has a progressivity ratio of 2. Ratios above 1 represent tax burdens exceeding their share of the income, while ratios below 1 represent tax burdens below their income share. Negative figures reflect a negative tax burden. Source: Calculations using CBO "Distribution of Household Income and Federal Taxes (2016) 69

70 Even Controlling for Income Inequality, the U.S. Has the Most Progressive Income/Payroll Tax Code in the OECD United States Australia Netherlands Ireland Canada Finland United Kingdom New Zealand Italy Korea Czech Republic Luxembourg Slovak Republic OECD-24 France Austria Germany Denmark Japan Sweden Norway Belgium Iceland Poland Switzerland Note: For the highest-earning % of taxpayers, these figures 1.10 refer to their share of the nation s 1.07 taxes paid, divided by their share of the nation s pre-tax income earned. So if the top decile pays 30% of the taxes and earns 20% of the income, its ratio is Progressivity Ratio Source: OECD (2008) and Tax Foundation. The U.S tax code has since become even more progressive. Figures also exclude value-added taxes that make many other OECD nations tax codes even less progressive. 70

71 Chapter 8 Countering Tax, Spending, & Deficit Myths of the 1980s Through

72 Percentage of GDP The Reagan Tax Cuts Did Not Starve the Government Spending Worsened the 1980s Deficits 22% 21% Red = Revenues Purple = Spending 21.6% 20% 19.4% 19% 18% 17% 16.7% Taxes Paid In 17.1% 18.0% 17.3% 17.4% 17.8% 16% 15% 1950s 1960s 1970s 1980s Source: OMB Historical Table

73 Federal Spending (Percentage of GDP) Why Did 1980s Budget Deficits Exceed the 1970s Deficits? 1970s Average Percentage of GDP: Revenue 17.4%, Spending 19.4%, Deficit: 2.0% 1980s Average Percentage of GDP: Revenue 17.8%, Spending 21.6%, Deficit: 3.8% 6% 5% 4% 5.7% 5.6% 4.3% 4.4% 4.0% 5.8% 3.6% 3.5% 1980s increase: 60% - added debt 40% - higher interest rates 3% 2% Fell during 1970s, rose back during 1980s 1.4% 2.7% 1% 0% 1970s Defense 1980s 1970s 1980s Non-Defense Discretionary Source: OMB Historical Table 8.4, and interest rate calculations using the Economic Report of the President Table B s 1980s Social Security & Medicare 1970s 1980s Other Entitlement Programs 1970s 1980s Interest on Debt Author: Brian Riedl, Manhattan Institute 73

74 Defense Spending (%GDP) To the Extent it Contributed to the Soviet Collapse, the 1980s Defense Buildup Eventually Paid for Itself 7% 6% 5% 4% 3% 2% 1% Cold War Buildup: Average of 5.5% of GDP (0.7% above 1980 Baseline) Initial 1980 Baseline of 4.8% of GDP Post-Cold War Wind Down: Average of 3.5% of GDP (1.3% below 1980 baseline) 0% Fiscal Year Source: OMB Historical Tables 3.2, and 10.1 Note: Some believe that America s 1980s defense buildup pushed the Soviets into an unaffordable arms race that contributed to its economic problems and ultimately a more accommodating posture towards the West, each of which contributed to Soviet destabilization and collapse. 74 Author: Brian Riedl, Manhattan Institute

75 Change in Percentage of GDP The 1990s Budget Was Balanced by an Economic Boom and the Cold War Peace Dividend (and by Washington Not Spending All the Savings) 3% 2% 1% 0% -1% Revenues Jumped 2.9% of GDP 0.7% 1993 Clinton tax hike 2.2% Economic growth & small tax changes Defense cuts after Cold War ends Interest savings -0.9% Spending Fell 3.9% of GDP Strong Economy Reduced Grew faster than unemployment Social Security costs benefits Various small savings -0.4% -0.4% -0.5% -2% -1.7% Change Between 1992 Peak Deficit of 4.5% of GDP, and 2000 Peak Surplus of 2.3% of GDP Source: OMB Historical Tables 2.3, 3.2, and 10.1; and the CBO (1993) score of tax increases 75

76 The May 2003 Supply-Side Tax Rate Cuts Were More Successful Than They are Credited For 1, % / 4.0% 1, % / 4.5% 1, % / 5.0% 1,100 1, S&P 500 Employment (and Unemployment) Rate 94.5% / 5.5% 94.0% / 6.0% 93.5% / 6.5% 93.0% / 7.0% 15% 10% 5% 0% -5% Business Investment Growth Real GDP Growth -10% May % 6% 5% 4% 3% 2% 1% 0% -1% -2% Source: BEA, BLS, S&P. The 2003 tax cuts reduced marginal tax rates for families, small businesses, & investors. The less-successful 2001 tax cuts were more rebate-based. The 2007 housing crash that ended this mini-boom was unrelated to these tax policies. Author: Brian Riedl, Manhattan 76

77 The Bush Tax Cuts for Upper-Income Taxpayers Caused Only 7% of the Fiscal Decline Under President Bush Other Tax Policies, 5% 2008 Economic Stimulus Act, 2% Defense Spending, 21% Non-Defense Discretionary Spending, 8% Note: When President Bush took office, CBO forecast a $5.9 trillion surplus over the FY period. When he left office in January 2009, CBO was showing a $4.4 trillion deficit over that same decade. "Bush Tax Cuts" - Earners Under $250k, 16% Other Entitlement Reforms, 4% Medicare Prescription Drug Program, 3% TARP, 2% This chart accounts for the $10.3 trillion fiscal decline. "Bush Tax Cuts" - Earners Over $250k, 7% Economic & Technical Downgrades, 32% Green Tax Legislation Blue Spending Legislation Red Non-Legislative Source: Calculations based on a CBO June 2012 report, and CBO baseline updates over period. Tax distribution data was estimated using Treasury data accumulated by the Tax Policy Center. Each category s cost includes its resulting net interest expenses. Author: Brian Riedl, Manhattan 77

78 President Bush Oversaw a $10.3 Trillion Decline from the Inherited Budget Projections (All numbers in nominal $billions) CBO January 2001 Projected Surplus ,891 Legislative Changes "Bush Tax Cuts" - Earners Over $250k "Bush Tax Cuts" - Earners Under $250k ,631 Defense Spending ,171 Non-Defense Discretionary Spending AMT Patch, Tax Extenders, Other Tax Changes Medicare Prescription Drug Program TARP Financial Bailouts Economic Stimulus Act of Other Entitlement Reforms Economic & Technical Re-estimates Economic/Technical Downgrades ,337 CBO January 2009 Budget Surplus/Deficit , ,394 Memorandum Legislative Changes ,000-1, ,947 Economic & Technical Re-estimates ,337 Total Deficit Changes ,095-1,895-1,500-1,386-10,285 Revenue Changes ,148 Spending Changes , ,138 Source: Author calculations based on a CBO June 2012 report, and CBO baseline updates over period. Positive numbers add to deficit, negative numbers reduce deficit. Legislative changes include associated interest costs and savings. Ending figures represent estimates on January 2009 when President Bush left office. See Obama's Fiscal Legacy: A Comprehensive Overview of Spending, Taxes, and Deficits, by Brian Riedl. Author: Brian Riedl, Manhattan 78

79 Chapter 9 A Comprehensive Accounting of the Obama Fiscal Record 79

80 Nominal $Billions President Obama Oversaw Budget Deficits $4.6 Trillion Beyond the Inherited Baseline $0 -$200 -$ CBO Baseline Deficit, January $600 -$800 -$1,000 -$1,200 -$1,400 -$1,600 Fiscal Year Actual Budget Deficits Note: The January 2009 CBO baseline already incorporated the 10-year effects of the recession, and the policies inherited from President Bush. The added Obama deficits consist of $5 trillion in new legislation, partially offset by $400 billion saved by the sluggish recovery, as lower interest rates and thus interest costs offset the lower revenues 80 Source: CBO data. FY "actuals" reflect CBO baseline as of January 2017, and thus reflect the deterioration of the full ten-year budget picture. See Obama's Fiscal Legacy: A Comprehensive Overview of Spending, Taxes, and Deficits, by Brian Riedl. Author: Brian Riedl, Manhattan

81 Nominal $Billions Under President Obama, the Deficit Worsened by $4.6 Trillion Relative to the Inherited January Baseline $3,000 $2,314 $2,000 $1,000 $397 $820 $0 -$1,000 -$2,000 -$3,000 -$4,000 -$5,000 New Legislation Signed by President Obama -$4,988 Revenue Downgrades (Weak Recovery & Technical Re-estimates) -$3,153 Faster Recovery of Financial Bailout Costs Deficit Impact Automatic Entitlement Savings Due to Weak Economy & Technical Re-estimates Automatic Interest Savings Due Mostly to Falling Interest Rates from Weak Recovery Purple = Deficit changes unrelated to legislation. Sum to $378 billion in deficit reduction Source: Author calculations based on CBO baseline updates and bill scores. Positive figures reduce the deficit, negative figures worsen the deficit. The January 2009 baseline already incorporated the long-term effects of the recession. Subsequent economic downgrades reflect the unexpectedly-weak recovery after the recession ended. See Obama's Fiscal Legacy: A Comprehensive Overview of Spending, Taxes, and Deficits, by Brian Riedl. 81

82 President Obama Oversaw a $4.6 Trillion Decline from the Inherited Budget Projections (All numbers in nominal $billions) CBO January 2009 Baseline Budget Deficit -1, ,321 Legislative Changes Renewing Pre-2009 Tax Policies , ARRA Stimulus ,010 Subsequent Stimulus and Recession Relief Renewing Pre-2009 Health Laws Other Mandatory Spending Legislation Hurricane Sandy Relief BCA Mandatory Sequesters Affordable Care Act Other Revenue Legislation Other Discretionary Spending and OCO Reforms Economic and Technical Re-estimates Revenue Effect - Economic Changes ,920 Revenue Effect - Techncial Re-estimates ,233 Financial Bailout Cost Re-Estimates Mandatory Spending - Economic/Technical Re-estimates Interest Spending - Economic/Technical Re-estimates ,314 Actual Deficits and January 2017 Baseline Deficit -1,413-1,294-1,300-1, ,931 Memorandum Total Legislative Changes ,988 Total Economic and Technical Re-estimates Total Deficit Changes ,610 Source: Obama's Fiscal Legacy: A Comprehensive Overview of Spending, Taxes, and Deficits, by Brian Riedl (based on CBO data). Positive numbers add to deficit, negative numbers reduce deficit. Legislative changes include associated interest costs and savings. Ending figures represent estimates as of January 2017 when President Obama left office. Author: Brian Riedl, Manhattan 82

83 Nominal $Billions Tax Revenue Impact of CBO Economic Growth Downgrades (and Upgrades) Under President Obama $100 $0 -$100 -$33 $27 $3 -$17 -$200 -$300 -$400 -$180 -$197 -$256 -$287 -$299 -$329 -$ Fiscal Year Source: CBO budget baselines between March 2009 and January See Obama's Fiscal Legacy: A Comprehensive Overview of Spending, Taxes, and Deficits, by Brian Riedl. Note: Consists of gained/lost revenues specifically resulting from economic growth upgrades and downgrades between March 2009 and January Post-2016 figures reflect latest estimates. 83 Author: Brian Riedl, Manhattan

84 Interest Savings in Nominal $Billions CBO Economic Downgrades Under President Obama Have Sharply Lowered Interest Rates and Therefore Net Interest Costs $0 -$100 -$200 -$300 -$400 -$500 -$4 -$2 -$26 -$121 -$206 -$252 -$319 -$346 -$363 -$398 -$ Fiscal Year Note: Consists of net interest savings directly attributed to lower interest rates from economic downgrades occurring between March 2009 and January Post-2016 figures reflect latest estimates. Source: CBO budget baselines between March 2009 and January See Obama's Fiscal Legacy: A Comprehensive Overview of Spending, Taxes, and Deficits, by Brian Riedl. 84 Author: Brian Riedl, Manhattan