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These charts tell the fiscal story of 2021 — looking back at how our fiscal situation deteriorated over the past year and what challenges lie ahead.
A continuing resolution is a temporary funding measure that Congress can use to fund the federal government for a limited amount of time.
As of November 2021, about $4.9 trillion, or 85 percent of the authorized amount, has been committed or disbursed. Some of the $850 billion in remaining funds, such as the increased federal support for state Medicaid programs, are expected to be spent over the following years.
Unemployment Insurance (UI) was a critical part of the federal government’s response to the recession caused by the coronavirus (COVID-19) pandemic.
“This seven-year low in our fiscal confidence index is a clear sign that voters are concerned about our nation’s fiscal sustainability, and Congress should keep this in mind as they shape major budget legislation,” said Michael A. Peterson, CEO of the Peterson Foundation.
The legislation includes support for families and lower-income households, funding for climate change, infrastructure and healthcare, and a range of other social investments and tax policy. The new spending is mostly, but not fully, offset by other savings in the bill.
The Build Back Better Act includes spending on a wide variety of policy areas. If enacted, the legislation would provide benefits for many lower-income households and take steps to address climate change and other social investments.
“This CBO score is the latest evidence that this bill needs to be improved as it moves through the legislative process," said Michael A. Peterson, CEO of the Peter G. Peterson Foundation.
Income levels for Americans vary across geography, race, and gender.
Despite lawmakers’ claims, analysts anticipate that a large portion of the spending called for by the infrastructure package will need to be deficit financed.
With our economy in recovery, the national debt rising unsustainably, the country still grappling with a devastating pandemic, and lawmakers pursing significant new legislation, America faces many critical questions for its future. To shed light on the best way forward, two top economists participated in a panel discussion as part of the latest edition of the Peterson Foundation Economic Forum.
Increasing the debt limit allows the Treasury to borrow funds to pay for government obligations that have already been incurred as the result of laws and budgets approved by the President and Congress.
If lawmakers do not agree on raising or suspending the debt limit before the extraordinary measures are exhausted, there would be severe consequences for both the federal government and the economy.
Average income among households in the lowest fifth of the income distribution was $21,000, while income for households in the highest fifth averaged $291,000.
10 New Papers and Upcoming Virtual Event Highlight Policy Solutions on Economic Recovery and Rising Debt as America Emerges from Pandemic
There were 531,000 jobs added in October, as the unemployment rate declined for the fourth consecutive month. However, the unemployment rate remains high, especially for non-white workers. Get the facts here.
The economy continued to grow in the third quarter of 2021, but at a slightly slower pace than previous quarters due to the delta variant of COVID-19.
“Timing gimmicks not only game the budget, but can be highly disruptive to our economy and society because of the year-to-year uncertainty they present for millions of Americans," said Michael A. Peterson, CEO of the Peter G. Peterson Foundation.
The Children’s Health Insurance Program, or CHIP, is a key piece of the social safety net and is aiding in the economy recovery process due to the effects of the COVID-19 pandemic.
“This record level of voter concern about our national debt reinforces the urgent need for fiscal responsibility and should encourage lawmakers to fulfill their promise to fully fund new programs,” said Michael A. Peterson, CEO of the Peterson Foundation.
The sharp rise in student debt has sparked debate among policymakers on whether, and how, to address it.
Federal trust funds bear little resemblance to their private-sector counterparts.
Lawmakers in the House and Senate are discussing a range of policies under what’s known as reconciliation. To their credit, they have pledged to offset the cost of the legislation, so that the bill won’t add to the country’s already unsustainable debt and deficits.
Several federal programs that are governed by trust funds are facing serious funding shortfalls. As a result, such trust funds, including the retirement portion of Social Security, Medicare’s Hospital Insurance Trust Fund, and the Highway Trust Fund, are projected to be exhausted in the near future.
The federal government has enacted five pieces of legislation that provide relief to individuals and corporations that have been affected by the COVID-19 pandemic. To finance those provisions, the Treasury Department has ramped up its borrowing.
Housing insecurity is an ongoing issue for millions of American families. COVID-19 and its economic impact exacerbated an existing shortage of affordable housing that far predated the pandemic.
The possibility of raising the corporate tax rate has spurred a debate among economists and policymakers about the optimal corporate income tax rate to balance revenue generation and U.S. competitiveness.
Broadband is an indispensable tool for aspects of everyday life such as employment, education, and healthcare. As a result, federal policymakers have prioritized funding it.
In light of the growing urgency of the climate crisis, many lawmakers, advocacy groups, and American citizens are calling for the government to undertake policies to more comprehensively address climate change.
“Voters have made it overwhelmingly clear that they want their leaders to pay for all new spending with credible offsets, and they strongly support many proposed options to fully fund the package,” said Michael A. Peterson, CEO of the Peterson Foundation.
SNAP is the largest federal program aimed at combating hunger and food insecurity among low-income Americans.
“As the bill moves through the process, there is no shortage of options to fully pay for these new programs using credible offsets and realistic assumptions," said Michael A. Peterson, CEO of the Peter G. Peterson Foundation.
Democratic leaders this week for the first time revealed specific details for how they intend to pay for, or offset, the approximately $3.5 trillion of spending in their reconciliation bill.
Many Americans, young and old, may be confused by the complex set of issues that comprise how the government raises revenues and allocates them.
A key part of the Biden administration’s policy agenda in 2021 relates to our nation’s energy policy, and in particular, there have been important debates among policymakers about how we use the tax code to incentivize economically and environmentally beneficial behavior.
Components of a large legislative package — that could carry a price tag of as much as $3.5 trillion — is now being debated in the House of Representatives.
Proposals such as a regulatory restructuring of repayment plans and cancellation of student debt through personal bankruptcy or other means have been offered as reforms to address the growing student debt burden.
The Social Security and Medicare Trustees released their annual reports, which show that these vital programs are on an unsustainable path.
Medicare is an essential health insurance program serving millions of Americans, and a major part of the federal budget and our fiscal outlook.
Social Security is the largest single program in the federal budget and makes up approximately one quarter of total federal spending.
The Social Security Trustees note that the Old-Age and Survivors Trust Fund is now expected to become depleted in 2033, compared to 2034 in last year’s report.
“It makes no sense that we allow programs as essential as Social Security and Medicare to remain on such shaky and uncertain fiscal ground," said Michael A. Peterson, CEO of the Peter G. Peterson Foundation.
Over the next 10 years, the cumulative deficit would total $13.9 trillion if the President’s policies were carried out.
“It’s rare to see bipartisan agreement on any issue, yet overwhelming majorities of American voters from both parties want their leaders to fully pay for this reconciliation package,” said Michael A. Peterson, CEO of the Peterson Foundation.
Here are the top ten spending categories for the federal budget.
Infrastructure investment has important impacts on the economy, and this piece examines the economic effects that could be expected from the bipartisan physical infrastructure plan that is currently being debated.
“This bill has been formed through constructive, bipartisan policymaking and includes important investments in our economy, but it falls short of being fiscally balanced," said Michael A. Peterson, CEO of the Peter G. Peterson Foundation.
The United States spent $725 billion on national defense during fiscal year (FY) 2020 according to the Office of Management and Budget, which amounts to 11 percent of federal spending.
Due to the COVID-19 pandemic and the resulting monetary policy response, short-term interest rates are currently near zero and longer-term rates are historically low.
The continued economic recovery, fueled by consumer spending, brought economic output back to its pre-pandemic level just a year after the worst economic contraction ever recorded.
“Leaders from both parties have pledged to fully offset the cost of new spending, and voters want them to honor this commitment,” said Michael A. Peterson, CEO of the Peterson Foundation.
“It is encouraging that leaders in the U.S. Senate have reached an historic bipartisan agreement to invest in national infrastructure," said Michael A. Peterson, CEO of the Peter G. Peterson Foundation.
The U.S. Federal Reserve has significantly ramped up its holdings of Treasury securities as part of a broader effort to counteract the economic impact of the coronavirus (COVID-19) pandemic. Currently, the Federal Reserve holds more Treasury notes and bonds than ever before.
“NYC Small Biz: Open + Online,” a new initiative to help small businesses to participate in the growing digital economy, was launched today by the NYC Small Business Resource Network (SBRN), a unique public-private partnership among the New York City Economic Development Corporation, the Peter G. Peterson Foundation, the five borough Chambers of Commerce, NYC Department of Small Business Services and the Partnership for New York City.
Eight innovative research projects led by Northwestern faculty and funded by recent $1 million Peterson Foundation grant get underway
The rising national debt carries substantial costs today and poses an even greater toll on America’s future.
Understanding the United States’ changing labor force can be a key part of understanding larger trends in the overall economy. Here are key characteristics of the foreign-born population and how they compare to the native-born population.
U.S. defense spending increased substantially from 2019 to 2020 relative to other countries.
A key provision of the ARP advances half of the expected credit for 2021 in periodic payments, which have now begun.
Adjustments to the U.S. corporate income tax system could influence the level of domestic investment, economic growth, and hiring; such adjustments would also alter the amount of revenues collected by the federal government, which would have an effect on the nation’s fiscal outlook.
While the United States does not currently have a nationwide free college program, a number of such initiatives have been proposed in the past few years.
National security is both a vital priority and a significant part of the federal budget.
Even if Congress raises the debt limit and avoids default, last-minute brinksmanship alone has the potential to create economic damage.
Reconciliation provides for expedited consideration of certain legislation; its use is particularly important in the Senate because it limits the time allowed for debate and prevents the inclusion of non-budgetary provisions.
Public schools for students in kindergarten through 12th grade are financed through a combination of local, state, and federal dollars in proportions that vary across and within states.
President Biden’s budget for fiscal year 2022 outlines new details of the American Families Plan (AFP), a $1.7 trillion package including major new investments in education, childcare, healthcare, and family leave.
The deduction of state and local tax payments (known as SALT) from federal income taxes has been a subject of debate among economists and policymakers over the past few years — with significant implications for our budget and fiscal outlook.
The coronavirus (COVID-19) pandemic has caused federal spending on Medicaid to rise sharply as millions of Americans seek benefits under the program.
While deficits will decline over the next few years as the pandemic wanes and the economy recovers, the nation will remain on an unsustainable fiscal trajectory due to a structural mismatch between spending and revenues.
“This new CBO report shows that our national debt will reach a record level over the next decade," said Michael A. Peterson, CEO of the Peter G. Peterson Foundation.
President Biden’s recently released budget for fiscal year 2022 shows new details for his proposed American Jobs Plan — a nearly $2.6 trillion package aimed at addressing a range of issues, including transportation and other infrastructure, climate change, caregiving, and housing.
As the Biden administration and a bipartisan group lawmakers discuss a range of infrastructure investments, vast majorities of voters — including Democrats and Republicans — are calling on leaders to pay for their priorities.
“Americans across party lines understand that fiscal responsibility is an essential component of effective leadership and policymaking,” said Michael A. Peterson, CEO of the Peterson Foundation.
“Bipartisanship is important, and so is our $28 trillion national debt. Working across the aisle to address important needs of our nation is an essential component of a functioning democracy." said Michael A. Peterson, CEO of the Peter G. Peterson Foundation.
In May, the Administration released details for the proposed American Jobs Plan. It would be a massive investment in a range of national priorities including transportation, climate change, caregiving, and housing.
The step-up in basis is a provision in tax law that relates to how assets — such as stocks, bonds, or real estate — are valued and taxed after their owner passes away.
“As leaders continue to seek bipartisan common ground on investments in our nation’s infrastructure, it’s critical that they maintain a fiscally responsible approach and pay for their priorities," said Michael A. Peterson, CEO of the Peter G. Peterson Foundation.
President Biden’s request for discretionary funding for next year (fiscal year 2022) would substantially increase funding for nondefense programs, particularly in the Departments of Education, Health and Human Services, Housing and Urban Development, and Veterans Affairs.
While the capital gains tax affects anyone selling a capital asset, higher-income individuals are typically subject to the tax more so than average Americans.
Innovative next-gen campaign raises awareness among college students, policymakers about the impact of U.S. fiscal and economic policy issues on their future.
The United States currently faces a range of complex challenges including deteriorating infrastructure, a changing climate, and an inadequate system of education.
When most Americans think about businesses in this country, the word “corporation” may come to mind — but the truth is that the vast majority of businesses in the United States are not structured as traditional corporations, but as pass-through entities.
The COVID-19 pandemic has led to a considerable increase in spending — but our long-term debt was already on an unsustainable path.
The President’s budget for fiscal year 2022 calls for a large increase in nondefense discretionary spending next year as well as substantial spending for infrastructure and social programs over the upcoming decade.
“As our nation continues to recover from the pandemic, this budget proposal outlines significant investments aimed at addressing a range of national challenges," said Michael A. Peterson, CEO of the Peter G. Peterson Foundation.
A new five-year, $1.9 million grant will support the Howard University Department of Economics and the Women’s Institute on Science, Race and Equity (WISER) in their innovative work to increase diversity in the field of economics and promote greater inclusion in fiscal and economic policymaking.
Presently, revenues raised by the corporate income tax represent the third-largest category of federal tax revenue in the United States, trailing those generated from the individual income and payroll taxes.
“In the last month alone, the concerns about our growing national debt have spiked meaningfully,” said Michael A. Peterson, CEO of the Peterson Foundation.
Climate change and its effects already impose a cost on the American economy and the federal budget — and looking ahead, the impact could be even more significant.
The unprecedented size of the economic disruption, however, put the safety net to the test, revealing weaknesses that often prevented support from reaching some of the neediest families in a timely manner.
The way in which Americans have been spending their stimulus checks has differed across each round of payments.
There have been a number of proposals to increase, eliminate, or otherwise adjust the payroll tax cap as a way to shore up Social Security’s finances.
Let’s take a closer look at the key components of the Senate Republican infrastructure proposal, highlighting some of the differences between it and the American Jobs Plan in terms of scope and potential pay-fors.
The administration and Congress have suggested adding new sources of revenue through various types of taxation of wealth.
While investing in a college education has undeniable, lifelong economic benefits, excessive levels of student debt can impose hefty financial burdens on borrowers.
Economists don’t always agree — but there is a wide consensus developing that the United States is in store for rapid economic growth.
“Voters are clearly enthusiastic that lawmakers are finding ways to pay for their priorities rather than add more to the national debt,” said Michael A. Peterson, CEO of the Peterson Foundation.
The continued economic recovery and reopening of businesses has been fueled by COVID relief programs and an accelerating vaccination effort.
“The Biden Administration has put forward thoughtful proposals aimed at creating jobs for working- and middle-class families, increasing our global competitiveness, and addressing important national priorities like infrastructure, climate change, and racial equity," said Michael A. Peterson, CEO of the Peter G. Peterson Foundation.
Compared to historical trends and other advanced economies, corporate tax revenues in the United States are very low.
Despite the consensus among economists that some amount of inflation is likely to occur in the near term, their level of concern varies.
Even before the COVID-19 pandemic, 1 in 7 children were classified as being in poverty.
Generally, states with larger populations have been receiving more federal dollars from COVID-19 relief programs as such states typically have more unemployed persons, small businesses, and healthcare providers to which that relief has been targeted.
One key component of the $1.9 trillion package is an estimated $362 billion in federal aid to state, local, territorial, and tribal governments to cover expenditures incurred due to the public health emergency.
Here’s an overview of inflation, why it matters, and how it’s managed.
The child tax credit (CTC) is a measure administered though the tax code that is designed to make raising children more affordable by easing the financial burden faced by families.
The earned income tax credit (EITC) is a measure administered through the tax code to address poverty. It was first enacted in 1975 on a temporary basis amid broader debates about welfare reform and had the primary goal of encouraging people to obtain employment.
Most working Americans are subject to payroll taxes, which are usually deducted automatically from an employee’s paycheck. Employers are also often subject to these types of taxes.
Cracking down on the tax gap would not only introduce more fairness into the system, but it could be a big help for our nation’s fiscal imbalance — to the tune of hundreds of billions of dollars every year.
The fairness of our federal tax system is a hotly debated issue. Too often, however, those debates confuse or misrepresent important facts because they focus on one type of tax in isolation rather than the various taxes that people face in aggregate.
America’s small businesses have been severely impacted by the economic downturn caused by the pandemic — and lawmakers have focused a significant part of federal relief on helping this critical part of our economy.
New $1 million research initiative will help inform and improve pandemic relief and recovery policies.
The number of individuals experiencing long-term unemployment (lasting 27 weeks or longer) has quadrupled during the coronavirus (COVID-19) pandemic.
“Voters understand that we are continuing to endure a terrible public health and economic crisis, but they also realize that we are piling on trillions of debt to what was already an unsustainable fiscal outlook,” said Michael A. Peterson, CEO of the Peterson Foundation.
Since April 2020, the federal government has spent an average of $9 billion per month on SNAP — 71 percent higher than the amount spent in March 2020 (before the pandemic was widely recognized).
The decline in purchasing power has important implications for the federal budget and our nation’s infrastructure, and has led some to call for a new effort to address the gas tax.
Three sets of stimulus checks have been issued to eligible recipients as part of the pandemic relief. Each set of payments have been slightly different.
The coronavirus pandemic has caused a severe public health crisis as well as substantial economic disruption for every American. So far, lawmakers have enacted five separate pieces of legislation.
Here's a breakdown of the major programs in the American Rescue Plan and how much they cost.
The report highlights the structural misalignment in the country’s budget and the resulting unsustainable fiscal trajectory.
“Today’s report provides a troubling snapshot of America’s fiscal outlook, which we know will only get worse from here,” said Michael A. Peterson, CEO of the Peter G. Peterson Foundation.
Although the debt affects each of us, it may be difficult to put such a large number into perspective and fully understand its implications.
Setting a higher minimum wage would affect family incomes in a variety of ways, including increasing earnings for most low-wage workers and lifting some families out of poverty.
“As overcoming this pandemic continues to be a top priority, voters are also becoming more concerned about America’s rapidly worsening fiscal condition,” said Michael A. Peterson, CEO of the Peterson Foundation.
Medicaid’s role in state budgets is unique, since the program acts as both an expenditure and the largest source of federal support in state budgets.
After a promising decline in recent years, the number of Americans without health insurance is back on the rise.
The primary deficit focuses on the difference between government revenues and spending, excluding interest payments. Learn more about the U.S. primary deficit.
The debt growing to double the size of GDP is, in many respects, a symbolic milestone — but it is a clear indicator of the monumentally unsustainable path of our fiscal trajectory.
The CBO released new baseline projections today, which show that the nation will face daunting fiscal challenges over the next decade resulting from the existing structural mismatch between revenues and outlays as well as the enormous amount of borrowing necessary to address the pandemic and its economic effects.
“This new report provides the latest evidence that our fiscal condition has worsened significantly since the pandemic began, and will need to be addressed once we’re through the COVID crisis,” said Michael A. Peterson, CEO of the Peter G. Peterson Foundation.
As of January 29, 2021, the Department of the Treasury has disbursed over $34 billion of the total $48 billion allocated to air carriers through the PSP1 and PSP2.
As lawmakers continue to explore policies to help the nation recover from the economic damage caused by the pandemic, a key part of the discussion is how stimulus checks should be structured and targeted for maximum effectiveness. Looking at recent spending and saving trends offers some clues.
The economic recovery is expected to continue and gross domestic product (GDP) will return to its pre-pandemic level by the middle of this year, according to the latest data from the Congressional Budget Office (CBO).
As the nation continues to battle the devastating effects of the pandemic, new data from the Bureau of Economic Analysis (BEA) shows a sharp drop in the rate of economic growth at the end of last year, while the nation’s economy overall remains significantly below pre-pandemic levels.
One key part of the CARES Act was the Coronavirus Relief Fund, which provided $150 billion in direct federal fiscal support to governments in states, territories, and tribal areas to cover expenditures incurred due to the COVID-19 public health emergency.
“With the nation still in the grips of a devastating public health and economic crisis, President Biden and the new Congress are right to explore additional relief and recovery legislation, but it’s also critical that we remain mindful of our long-term fiscal outlook, which has gotten far worse as our debt now exceeds the size of our economy,” said Michael A. Peterson, CEO of the Peterson Foundation.
As the United States borrows a significant amount of money to respond to the COVID-19 pandemic, let’s take a closer look at a few key characteristics of Treasury borrowing that can affect its budgetary cost.
This budget explainer describes what Medicaid is, how it is financed, and who benefits from it.
Putting our economy on a path to recovery continue to be the most pressing priorities for our nation. At the same time, our fiscal outlook has worsened considerably.
“The nation remains in the grips of a devastating health and economic crisis caused by the pandemic. Overcoming the virus remains the nation’s top priority, but the vast majority of Americans also recognize the need to address our unsustainable fiscal outlook once this crisis is over,” said Michael A. Peterson, CEO of the Peterson Foundation.
