S.O.S. Key Points

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The following charts highlight key economic information related to the Over-Spending Act of 2007. The last chart summarizes the Act's provisions.

Chart A: Tax Receipts Up 11%, Surpassing 2001 Peak

Chart B: Economic Growth Propels Revenues

Charts A & B: Pro-Growth economic policies have resulted in dramatic increases in tax revenue

Fiscal Year 2005 tax revenues increased $274 billion (adjusted for inflation) over FY 2004, representing the largest increase on record in real terms.

• Fiscal YTD (through April 2006) tax receipts are up $137 billion (11.2%) over a year ago.
• Fiscal YTD (through April 2006) individual income tax receipts are up 10.2% over the same period a year ago; corporate tax receipts are up 29.5% over the same period a year ago.
• The most recent data suggests this trend has continued through May. The daily Treasury statements indicate that tax receipts in May 2006 are up $35.5 billion over May 2005, to $166.2 billion.
• CBO expects the 2006 deficit will be significantly less than $350 billion and perhaps as low as $300 billion. CBO forecast assumes enactment of the supplemental and tax bill this year. (Senate-passed FY07 Budget Resolution assumed 2006 deficit of $372 billion.)
• CBO attributes much of that improvement to revenue growth.

Chart C: Mandatory Spending Grows Higher Than One Fourth of the Economy

Chart C: The bill requires Congress to produce entitlement spending reductions commensurate with capping the deficit at 2.75% ($379 billion) of GDP in 2007, declining to 0.5 in 2012. In 2006, the deficit is currently forecast at 2.3% of GDP.

• The Act establishes a deficit limit based on a percentage of GDP. The deficit triggers are as follows:
• 2.75% of GDP in 2007
• 2.25% of GDP in 2008
• 1.75% of GDP in 2009
• 1.25% of GDP in 2010
• 0.75% of GDP in 2011
• 0.5% of GDP in 2012 and beyond
• If the limit is breached in any one year; “automatic reconciliation” goes into effect. The mandatory reconciliation” goes into effect. The mandatory reconciliation procedure would be similar to the normal reconciliation procedure except:
• Each Authorizing Committee would be required to report legislation that achieves savings equal to the amount instructed by the Budget Committee. If a Committee fails to report legislation sufficient to meet its instruction the Budget Committee has the authority to include the necessary legislative language to meet the deficit reduction amount.
• If Congress fails to enact a Reconciliation bill with savings that meet the deficit target, automatic across-the-board reductions (“sequestration”) of mandatory spending would automatically go into effect.
• The proposal exempts Social Security, net interest, prior legal obligations of funds, and funds not available for sequestration.