The Budget and Deficit Reduction How Efforts to Reduce the Deficit Could Mean More Families in Poverty Struggle to Make Ends Meet
Addressing the Federal Deficit • There is no question that our long-term federal deficit must be addressed. This issue is not about whether there is a problem, but how to solve it. • Current proposals rely almost exclusive on spending cuts, mostly to programs that help low-income Americans — this is the wrong way to do it. • We should reduce the deficit over time through a balanced approach that includes equitable increases in revenue (i.e. taxes) and thoughtful reductions in spending. • Any deficit reduction plan must protect America’s most vulnerable.
House Budget Proposal (The Ryan Budget) To understand the impact of the various deficit reduction proposals, we need to understand the House FY 2012 budget. House Budget Committee Chairman Paul Ryan (R-WI-1) proposed a FY 2012 budget that includes significant cuts and restructuring of programs like Medicaid, Medicare, and SNAP (formerly the Food Stamp program). It also repeals health reform and cuts non-defense domestic discretionary programs by $400 billion. These include Head Start, child care, community health centers, and hundreds of other programs. Worse yet, it cuts taxes for millionaires and billionaires beyond the Bush tax cuts, and also cuts corporate income taxes. The House passed the budget on April 15, 235-193. Fortunately, the Senate rejected it on May 25, 57-40. However, elements of the Ryan Budget could still pass as part of the FY 2012 budget and/or deficit reduction deal.
Medicaid under the Ryan Budget • Medicaid pays for medical assistance individuals and families with low incomes and resources and covers 58 million low-income people, including 29.5 million children. • Administered by the states and funded by both the federal and state governments in a cost effective way • Medicaid provides long-term care to millions of seniors, critical services that help Americans with disabilities live independently, and is a core part of the successful coverage of America’s children. • 25.3 million children with Medicaid coverage in 2009, compared to 22.6 million in 2008, an increase of 2.8 million
Medicaid under the Ryan Budget • What the Ryan budget does to Medicaid • Cuts Medicaid by over $2 trillion over the next ten years • This includes $771 billion from the current program and $1.4 trillion from the repeal of the Medicaid expansion in health reform • Would convert Medicaid into a block grant • Fixed lump sum given to states • Amount would not rise based on health care costs or need, leaving states to fill in the gap or cut the program • Kaiser Foundation analysis states that block-granting Medicaid would cause 31 to 44 million people to lose health coverage over the first ten years
SNAP under the Ryan Budget • According to the U.S. Department of Agriculture, 16.7 million children (22.5 percent of all children) lived in households that were food insecure in 2008. • Supplemental Nutrition Assistance Program (SNAP), formerly food stamps, is the nation’s first line of defense against hunger. • SNAP is targeted to go to the neediest people in our country. 93 percent of benefits go to households with incomes below the poverty line. This includes millions of working poor families. • Overall, 49 percent of all participants are children (18 or younger), 52 percent of SNAP households include children, and 76 percent of all benefits go to households with children.
SNAP Under the Ryan Budget • What the Ryan budget does to SNAP • SNAP program would be made in a block grant for the states and cut by $127 billion over the next decade. • If enacted, such proposals would harm millions of vulnerable Americans. They would throw millions of people out of the program or reduce already inadequate benefit levels to a point that many families would run out of food as soon as halfway through the month. • For example, SNAP would have to be eliminated in AK, AR, CO, CT, DE, DC, Guam, HI, ID, IA, KS, ME, MD, MN, MS, MT, NE, NV, NH, NM, ND, OK, RI, SD, UT, VT, Virgin Islands, WV, WI and WY to meet this target • Also would prevent SNAP from being a critical safety net and economic primer in bad economic times, as it was in 2009 and 2010 • These cuts would also would cost jobs, reduce nutritional quality for poor families even while our nation struggles with problems of obesity, and increase health care costs.
Domestic Discretionary Programs Under the Ryan Budget • Under the Ryan budget, overall government spending for domestic (and international) anti-poverty programs would be reduced to 2008 levels, a cut of about $400 billion. This includes programs such as funding for WIC, community health centers, and other anti-poverty programs. Examples of programs that could be impacted: • Head Start: a federally funded preschool program that provides comprehensive services to low-income children and their parents • Currently, Head Start can only serve less than half of all eligible low-income children because of inadequate funding • Early Head Start: a child development program for pregnant women and low-income families with infants and toddlers. • Early Head Start serves less than 6 percent of all eligible families • The Child Care Development Block Grant (CCDBG): provides child care assistance to low-income families and provides critical funds to states to help them improve the quality of child care. • CCDBG only serves one out of seven eligible children
Spending Caps — The Trojan Horse • In an effort to reduce the deficit, some leaders have proposal instituting caps on federal spending. Here is how a cap would work: • The cap would apply to all spending (called a “global” spending cap) or certain types of spending, i.e. health or non-defense discretionary • The cap would be set at a certain percentage of GDP • For example, the Commitment to American Prosperity Act (CAP Act), S.245, introduced by Sen. Corker (R-TN) and McCaskill (D-MO) sets a global spending cap at 20.6 percent, which is meant to match the average proportion of federal spending in the past three decades. • Once the cap is exceeded, automatic triggers would come into play forcing immediate across the board cuts (few, if any, programs would be spared) • Tax increases would not be counted in staying under the cap
The Balanced Budget Amendment — The Trojan Horse’s More Evil Cousin • Would amend the U.S. Constitution to require the federal government to have a balanced budget each year, beginning in 2018 • Any expenses would have to be paid for with revenue in the current year (essentially telling the government that it must pay cash for everything) • House BBA would also cap federal spending at 18 percent of GDP (currently around 25 percent) • Cuts would be worse than Ryan budget • Domestic discretionary budget cut by 70 percent in 2021 • Medicaid, SNAP, and SSI would be cut in half • Medicare becomes voucher program and raises eligibility age for both Medicare and Social Security • Includes no increases in taxes (in fact require supermajority to pass tax increases) • Would be constitutionally required • Analysis by CBPP says that if a BBA passed Congress, it could conceivably be ratified by three-quarters of the states within 3 years
What Spending Caps and a BBA Ignore • By basing spending on the past, these plans ignore: • We have an aging population with higher medical costs and a Medicare prescription drug plan • When Ronald Reagan was President, federal spending was 22 percent of the economy • We’ve cut taxes dramatically since 1980 • We are in engaged in two costly wars overseas and have higher homeland security costs • We just came out of a bad recession when revenue dropped and spending increased because people had to turn to government programs like Medicaid, SNAP, and UI for help
What Spending Caps and a BBA Would Mean • Because Medicare, Medicaid and Social Security take up half of the federal budget, these programs would suffer massive cuts to meet the cap/BBA requirements • Block granting Medicaid and SNAP would be inevitable • Medicare and Social Security would end as we know it • Even if they were exempted, that means other parts of the budget (domestic discretionary) would face enormous cuts to make up the difference • Federal government would be forced to abandon its responsibility to assist states in nursing home care, nutrition assistance, education, Head Start, and health care for children and families, etc. • In times of economic crisis, federal government would be unable to effectively respond (what would the U.S. look like if there had been no ARRA?) • Spending caps/BBA are a back door to the Ryan Budget (or worse)
What’s Next on Deficit Reduction • Debt Ceiling Vote • The government must vote to raise the federal debt ceiling before August 2 and it is anticipated that a deficit reduction plan will be included. • Republicans are demanding a global spending cap and/or BBA be included • Negotiators in the House and Senate are meeting now with Vice President Biden to craft a final deficit reduction agreement. • If talks don’t produce a deal by early July, expected that President Obama and Congressman Boehner will step in • Balanced Budget Amendment • Passed House Judiciary Committee on June 15 • Vote may or may not come up in the next few weeks • Would need passage by 2/3 of both House and Senate • No presidential signature required • Republicans may demand it be part of debt ceiling vote
What We Want in Deficit Reduction As a nation, we must do something about long-term deficits and the debt. Current spending and inadequate revenue are unsustainable over the long term. However, any solution must be balanced and fair. Tell members of Congress to talk to congressional leadership and budget negotiators, urging that any deal abide by these principles: Any deficit reduction plan must protect low-income Americans and not increase poverty. Low-income mandatory programs like Medicaid, SNAP, and Social Security, as well as vital domestic discretionary programs, must be exempted from any deficit “triggers” and across the board cuts. Congress must reject structural changes to Medicaid and SNAP. Members of Congress must oppose proposed cuts to the Medicaid and SNAP programs and changes, such as block grants, that will hurt millions of vulnerable Americans. Any deficit reduction/debt ceiling agreement must be a balanced approach, relying as much on new revenue as spending cuts. Without new revenue, especially after years of costly tax cuts, we will not solve our fiscal problems. Congress must reject federal spending caps (global or partial) and a balanced budget amendment. Congress should reject arbitrary spending caps and a balanced budget amendment, which would result massive cuts in Medicare, Medicaid, Social Security, and other programs that provide vital economic security for millions of Americans.
Laser Talk Engage: Our struggling economy has hit low-income Americans the hardest, with poverty, hunger and unemployment at their highest levels in decades. Problem: Unfortunately, Congress is looking to make matters worse by proposing unprecedented cuts to programs that support low-income children and families, all in the name of deficit reduction.
Laser Talk Inform or Illustrate: There is no doubt that the current path of the federal budget is unsustainable; we need a solution to our long-term deficits. Unfortunately, the proposals being considered are going in the wrong direction. Instead of taking a balanced approach that includes new revenue alongside thoughtful, strategic cuts in spending, these proposals — the Ryan budget, a global spending cap, and a balanced budget amendment — all will force cuts to programs like Head Start, SNAP (formerly Food Stamps) and Medicaid. For example, studies show that cuts and structural changes to Medicaid that would result in no less than 31 million people losing coverage. Balancing the budget on the backs of low-income Americans is wrong-headed and cruel.
Laser Talk Call to Action: Urge House and Senate budget negotiators to tackle deficit reduction the right way. Specifically, urge them to: Protect low-income Americans by exempting anti-poverty programs from budget triggers and across the board cuts Reject proposals to block grant Medicaid and SNAP Use a balanced approach for deficit reduction by relying on new revenue at least as much as spending cuts Reject spending caps and any balanced budget amendment proposals.
Resources RESULTS June Action: http://www.results.org/take_action/us_poverty_actions_and_news/june_2011_u.s._poverty_action/ RESULTS spending cap blog post: http://www.results.org/results_blog/trojan_horse_the_global_spending_cap_and_why_it_is_dangerous Center on Budget and Policy Priorities budget resources: http://www.cbpp.org/research/index.cfm?fa=topic&id=29 Coalition on Human Needs budget and deficits page: http://www.chn.org/issues/budgetchoices/index.html National Priorities Project federal budget info: http://nationalpriorities.org/en/tools/taxday/breakdown-one-dollar/.
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