The Budget and Deficit Reduction
How Efforts to Reduce the Deficit Could
Mean More Families in Poverty Struggle to
Make Ends Meet
Snapshot of the Federal Budget
Addressing the
Federal Deficit
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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 lowincome 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) antipoverty 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:
1. 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.
2. 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.
3. 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.
4. 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 lowincome 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:
1. Protect low-income Americans by exempting anti-poverty
programs from budget triggers and across the board cuts
2. Reject proposals to block grant Medicaid and SNAP
3. Use a balanced approach for deficit reduction by relying
on new revenue at least as much as spending cuts
4. 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_2
011_u.s._poverty_action/
RESULTS spending cap blog post:
http://www.results.org/results_blog/trojan_horse_the_global_spending_ca
p_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/.
RESULTS/RESULTS Educational Fund
750 First St NE, Ste 1040
Washington DC 20002
RESULTS Early Childhood Development Campaign Contacts:
Meredith Dodson, dodson@results.org, (202) 782-7100, x116
Jos Linn, jlinn@results.org, (515) 288-3622
www.results.org