Behind the numbers
A look behind the numbers that drive Budget Hero
How does Budget Hero model the federal budget?
How does Budget Hero forecast government revenue?
How does Budget Hero forecast government expenses?
How did you select the policy cards?
Where did you get the information for the cards?
How does Budget Hero incorporate the recently signed $787 billion economic stimulus package?
How does the CBO calculate the cost of recession bailouts and loans?
Why do you show the 10-year financial impact of each card?
Why does Budget Hero allow me to play in a year between 2009 and 2028?
How does Budget Hero calculate when my budget will go bust?
How do you handle calculations for the Surplus/Deficit meter?
How do you handle calculations for the Debt meter?
Why doesn't Budget Hero measure the solvency of Medicare and Social Security?
Why did you include a meter for Size of Government, and how is it calculated?
How did you choose Badges and the cards behind them?
Where can I go to learn or do more?
How can I contact you with ideas, suggestions, comments and complaints?
How does Budget Hero model the federal budget?
The game relies primarily on the budget model and forecasts in the Congressional Budget Office (CBO) "Long Term Fiscal Outlook." We grouped together the CBO budget categories into fewer building categories to simplify the game.
The CBO provides specific budget forecasts for the next ten years and then makes assumptions about growth after the ten-year period, based on economic and inflation forecasts. American Public Media journalists altered the baseline CBO budget in a couple of cases to ensure the game reflects the current political debate. For example, the game assumes that President Bush's 2001 and 2003 tax cuts continue beyond 2010 even though they are set to expire. The reason is that the current political debate assumes the cuts will continue and frames the issue as whether to end or partially roll them back. The game gives players the choice to end or roll back the cuts, along with many other tax and fee options.
If you play no cards, Budget Hero shows how today's government commitments and plans will affect the budget in the future. As players select policy cards, the baseline budget is adjusted to reflect year-by-year increases or decreases in spending. Some cards, like withdrawing troops from Iraq may increase spending in the next few years before they lead to savings in later years.
Model of the budget (pdf)
How does Budget Hero forecast government revenue?
Our model forecasts the federal government's income statement. On the revenue side, this includes money from individual and corporate income taxes, Social Security (i.e., payroll) and Medicare taxes, and other taxes and fees ranging from excise to estate taxes. Assumptions about the nation's economic outputs, as measured by its Gross Domestic Product (GDP), drive how these revenue amounts are calculate. Through 2018, we rely on the CBO's assumptions for GDP growth. Beyond 2018, we have used the guidance of both the CBO and Federal Reserve Bank to grow GDP in the range of two to three percent annually.
How does Budget Hero forecast government expenses?
For some types of spending, especially entitlements such as Medicare and Social Security, the budget estimates depend on forecasts of changing population demographics, workforce growth, health care cost inflation growth, as well as estimates of our nation's economic output, as measured by our GDP. For discretionary spending, which is money spent to support most government services, such as defense, education, infrastructure, etc., inflation is an important factor. Budget Hero generally follows the assumptions used by the Congressional Budget Office, with some slight refinements based on other expert sources.
When it comes to the war in Iraq and other military conflict, the CBO assumes the U.S. will continue its military spending at today's levels, with growth due to inflation. Budget Hero allows you to play policy cards that show the impact of reducing troop levels in Iraq either quickly or gradually.
How did you select the policy cards?
Our reporters researched the major policy ideas already proposed by the administration, legislators, political candidates, think tanks and interest groups. They looked at the main issues in the 2008 election and they interviewed people in different fields to understand what new policy proposals might enter the budget debate.
They took these proposals and winnowed them to a reasonable number of cards based on these criteria:
- Were the proposals defined clearly enough to estimate the budget impact?
- Did the proposals address major issues of debate in this country?
- Did the proposals represent a reasonable spectrum of the debate?
In some cases, our reporters developed specific options to either widen the range of proposals or provide choices reflecting a party's general goals, such as reducing the size of government. If significant new proposals arise, we will add cards to reflect these options.
Where did you get the information for the cards?
For many of the cards, the Congressional Budget Office had analyzed the financial impact of the proposal at the request of members of Congress. The administration's Office of Management and Budget has published data on options, as well. In other cases, think tanks or interest groups provided analysis. Our reporters vetted the information with a range of experts and researched the major pro and con arguments for each option and examples of the likely social impact. Budget Hero lists the sources we used at the bottom of the policy cards. You need to double-click on the small version of the card to see all the information about the card.
How does Budget Hero incorporate the recently signed $787 billion economic stimulus package?
The Congressional Budget Office estimated the cost of each individual program within the stimulus package in this document. We carefully examined the CBO's outline of the relief package and mapped each line item to the corresponding Budget Hero category. For example, the $2.75 billion set aside to fund highway construction in 2009 is captured in the infrastructure spending category for that fiscal year.
How does the CBO calculate the cost of recession bailouts and loans?
Congress has authorized $700 billion to help stabilize the financial industry, money the Treasury Department is using to purchase stock in struggling banks and other institutions. To determine the long-term effect on the federal budget, the Congressional Budget Office opted not to subtract $700 billion from the bottom line and add revenue as stock is sold. Rather, CBO compares the stock’s estimated value and the purchase price and records the difference as a net gain or loss depending on which is larger. The same method is used to calculate the net cost of the $200 billion federal takeover of lending giants Fannie Mae and Freddie Mac, the $85 billion loan to AIG and other bailouts.
Why do you show the 10-year financial impact of each card?
We show the 10-year cumulative impact of each policy on its card for two reasons. First, that is the number most often discussed in budget debates. And second, estimates of financial impact are harder to predict with accuracy for any longer period.
Remember, though, that you play Budget Hero from the perspective of a specific year between 2009 and 2028. The game opens in 2018, so you are watching from the perspective ten years out, however you can change the year by moving the slider. Budget Hero's buildings and meters register how your choices will affect the budget in the specific year on the slider. They do not show you the cumulative money spent from 2009 until that year. The 10-year impact noted on the card is to help you know the true cost of the option, but don't expect to see that impact all occur in the year you are playing in.
Why does Budget Hero allow me to play in a year between 2009 and 2028?
The game screen opens in the year 2018 so that you can see how choices you make today affect the federal budget 10 years from now. If you want to see the effect of a policy next year, you can move the year slider to 2009. The government's fiscal year begins October 1st, so Congress is debating policies that will start to take effect then (Fiscal Year 2009.) Just remember that most policies ramp up or down in any year, so it is easiest to see the impact of your choices by looking out ten or twenty years.
How does Budget Hero calculate when my budget will go bust?
While the Budget Hero screen only allows you to play in years up to 2028, the game actually calculates the budget impact of your choices through 2071. We worked with staff at CBO and other experts to define static growth rates over time. These estimates, of course, carry far more uncertainty than the 10 or 20 year forecasts, yet we need them to be able to provide you feedback on when your budget might go bust.
We define "Budget Bust" as the year when projected spending for health care (primarily Medicare and Medicaid), Social Security, and interest the government pays on its debt exceeds all the money the government takes in from taxes and fees. Medicare, Medicaid and Social Security are known as entitlement programs, because they are government obligations to taxpayers, and any changes that would lower benefits or tighten eligibility requirements carry severe political costs. Interest on debt is likewise a government obligation and if the U.S. government was to default on the debt, there would be severe effects on the global economy.
When the money we spend on these obligations equals or exceeds government revenue, then there is no money left for what we typically think of as the basic activities of government, such as defense, education, infrastructure, etc. Various independent experts, non-partisan government agencies and think thanks believe this is a reasonable way to define when the budget goes bust, including the Congressional Budget Office, the Government Accountability Office, Public Agenda, the Brookings Institution and the Center on Budget and Policy Priorities.
There is an alternate Budget Bust definition: the year when national debt grows faster than our nation's GDP. This would mean that the growth in our borrowing outstrips the growth in government income.
How do you handle calculations for the Surplus/Deficit meter?
Budget Hero assumes that the government increases its borrowing, or debt, to make up for deficits in any year's budget. In other words, the game adds the value of the deficit in a particular year directly to the accumulated national debt. Similarly, surpluses are automatically applied to paying down the debt.
While economists differ on the appropriate strategies for managing surpluses and deficits, we felt players should have a way to see if any year's budget was in balance or created a deficit or surplus. The surplus/deficit meter reads out in billions of dollars and reflects the maximum range of values that have occurred in the last few decades. The red-green ranges alert you to when deficit spending increases debt (red) or when surpluses decrease debt (green.)
How do you handle calculations for the Debt meter?
There are two ways to define the nation's debt, and this explains why some news reports have different numbers for the current U.S. debt. The U.S. government borrows money from individuals, corporations and other governments, usually in the form of treasury notes or bonds. This type of borrowing is described as "debt held by the public" and it is over $5 trillion today. This is how Budget Hero defines debt, because the government must pay interest on this debt to others.
However, the U.S. government also borrows money from itself, specifically from the trusts set up to support Medicare and Social Security. The government collects payroll taxes for Medicare and Social Security today to pay for benefits it will pay to people in the future, so these trusts have extra money now. Today, the government has borrowed more than $9 trillion from the trusts, which is called General Fund borrowing. While interest is assessed on these intra-governmental loans, this is largely "accounting interest" and has no net effect on the budget because the government both pays and receives the interest.
In the game, the debt meter shows "debt held by the public" as a percentage of our country's forecasted GDP. We set the limits of the debt meter to the range of debt the U.S. has had over the last 45 years and set the red-yellow-green ranges to show when a player was hitting the extremes of the historical percentage of debt.
Why doesn't Budget Hero measure the solvency of Medicare and Social Security?
Discussions around the solvency of Medicare and Social Security focus specifically on the government trust funds established for these programs. Medicare and Social Security (payroll) taxes fund these trusts. For now, the taxes cover more than the costs of their programs each year. But in the near future, these trusts will have insufficient funds to cover the estimated annual benefits they will have to pay out – and this is described as insolvency.
Many people argue about how to keep Medicare and Social Security solvent. However, many budget experts believe the solvency of these individual programs is not the real issue. After all, if the trusts don't have enough money, the government can use money from other taxes or can borrow money to pay for these programs. The real fiscal challenge is how to avoid the budget bust scenario, described above, where all of the government's revenue is consumed by paying for Medicare, Medicaid, Social Security and interest on the debt.
Why did you include a meter for Size of Government, and how is it calculated?
We wanted Budget Hero to be flexible enough to allow people with different political philosophies to pursue their own budget goals. Many people argue over whether government should be big or small, so we created the Size of Government meter. It doesn't measure the actual size of government in terms of people or scope of services. Rather, it measures the size of government as the ratio of the federal budget to the Gross Domestic Product, which is a measure of the size of the economy. Presumably, as the economy grows, the budget will grow, but the ratio should stay roughly the same unless government services grow or shrink. This is not always true. For example, you can "reduce" the size of government simply by reducing the debt, which lowers the interest on debt building and shrinks the federal budget.
The range represented on the meter is based on the historical percentage of budget to GDP over the last 45 years. We applied "small" and "big" government labels to show any changes from today, when the budget represents approximately 20 percent of GDP.
How did you choose Badges and the cards behind them?
We added badges to Budget Hero to add realism to the process of creating a budget. The meters provide players with a way to track financial goals, like balancing the budget or reducing the size of government. But the federal budget debate is not so much about numbers as it is about a vision for the future. We selected badges that represent political philosophies that play out across the budget categories. We avoided badges that could be earned simply in one category.
Our reporters researched potential political philosophies by talking with partisan and interest-based groups. We then picked policy cards that seemed to best fit these philosophies. However, not every individual in a group has the same understanding of how a philosophy converts into a specific platform, so our badges won't satisfy everyone. And we don't require people to pick every policy card that goes with a badge. Generally, players can earn a badge by playing four or five cards among up to 12 that map to a badge.
Please contact us if you believe we have not considered a policy card that should help players earn a particular badge.
Cards that can help earn specific badges, and the minimum number of cards needed for each badge (pdf)
Where can I go to learn or do more?
Your game results can help you start a conversation with friends, neighbors, legislators and policy makers. Click on the "Print" buttons on the pages that show your budget results and the comparison of your budget to others and use that information in discussions. You can also join a national conversation with other citizens who have played the game at www.BudgetHero.gather.com.
You can also find further information or ideas on how to influence the budget debate at these Web sites:
Government Agencies:
- Congressional Budget Office (http://cbo.gov/)
- Government Accountability Office (http://gao.gov/)
- Office of Management and Budget (http://www.whitehouse.gov/omb/)
- The Social Security Administration (www.ssa.gov)
General Budget Information:
- Public Agenda (http://publicagenda.org/)
- Center on Budget and Policy Priorities (http://www.cbpp.org/)
- National Priorities Project (http://www.nationalpriorities.org/)
- The Concord Coalition (http://www.concordcoalition.org/)
- The Brookings Institution (http://www.brookings.edu/)
- The Heritage Foundation (http://www.heritage.org/)
- The Tax Policy Center (http://www.taxpolicycenter.org/)
- Urban Institute (http://www.urban.org/)
- The Milken Institute (http://www.milkeninstitute.org/)
- Cato Institute (http://www.cato.org)
- Center for Education Policy (http://www.cep-dc.org)
- Center for Economic Policy Research (http://www.cepr.net/)
- Citizens Against Government Waste (www.cagw.org)
- Taxpayers for Common Sense (http://www.taxpayer.net/)
- The Washington Budget Report (http://www.washingtonbudgetreport.com/)
- Health08.org (http://www.health08.org/index.cfm)
- The Committee for a Responsible Federal Budget (http://www.crfb.org/index.htm)
- The Center for American Progress (http://www.americanprogress.org/)
- Progress Policy Institute (http://www.ppionline.org/)
Specific Policy Information:
- The National Education Association (http://www.nea.org/index.html)
- The Sierra Club (http://www.sierraclub.org/)
- American Dream Coalition (http://www.americandreamcoalition.org/)
- Defenders of Wildlife (www.defenders.org)
- Wilderness Society (http://www.wilderness.org/)
- The Natural Resources Defense Center (http://www.nrdc.org/)
- The Trade Adjustment Assistance Coalition (http://www.taacoalition.com/)
- Joint Center for Housing Studies (http://www.jchs.harvard.edu/)
- National Low Income Housing Coalition (http://www.nlihc.org/template/index.cfm)
- Surface Transportation Policy Partnership (http://www.transact.org/)
- The Urban Land Institute (www.uli.org)
- The Center For Arms Control and Non-Proliferation (http://www.armscontrolcenter.org/)
How can I contact you with ideas, suggestions, comments and complaints?
We welcome and encourage feedback from players that can help us improve Budget Hero and future games. You can provide feedback to us in one of three ways:
- Through the "Contact" tab, located in the frame around the game.
- After completing your budget in the game, you can click on the "Comment" button.
- Or e-mail us at BudgetHero@americanpublicmedia.org
