Talk of federal budgets has reached fever pitch in Washington, as politicians, advocates, and the public around the country try to address competing interests of profound importance (and score political points, too). Let’s get our heads on straight—this is important and we need to do it right. The economic recovery, our nation’s fiscal health, and the well-being and economic security of American families all rest in the balance. This post will share several principles we believe should guide the important work of deficit reduction, and then take a look at the House’s proposed Continuing Resolution. Soon, we’ll have another post analyzing the President’s fiscal year 2012 budget proposal.
Without careful analysis and a balanced approach, deficit-reduction efforts could have unintended and unwanted consequences. Poorly crafted policies could inadvertently cost our country both jobs and the job supports that help individuals be productive and will help the economy thrive in the future. Austerity will prolong the weak economy; investments will strengthen it. Moreover, ill-conceived measures could weaken the middle class, making it out of reach for those with the greatest need of assistance—children, working families, seniors, people with disabilities, and many others. Finally, cuts to effective programs will prove a Pyrrhic victory; saving a bit of money now will cost us all much more in the end.
Ultimately, there are three ways to reduce the deficit: reduce spending, increase taxes, and grow the economy so the tax base increases. No one of these alone will end the deficit, all three must be balanced, and each is interrelated. Here are the principles that should guide the budget planning ahead:
Evenly Balance Spending Cuts and New Revenues; Austerity Is Not the Answer. Growth in the deficit is not due solely to spending; it’s due to an imbalance between spending and revenues. Trying to reduce the deficit through spending cuts alone would require making drastic cuts in effective and important investments that are key to long-term economic growth. In fact, according to the most recent evidence, the countries that pursued austerity instead of stimulus had short-lived growth and are now lagging behind the United States. Cutting government spending in a time of recession will exacerbate the ongoing unemployment crisis by causing significant job loss. Thus, spending cuts should not account for more than half of the equation.
Evenly Balance Defense and Non-Defense Discretionary Spending. There cannot be any sacred cow; even military spending will have to be reduced. Requiring equal percentage cuts from defense and non-defense categories was endorsed by the bipartisan National Commission on Fiscal Responsibility and Reform.
Avoid Making Low- and Moderate-Income Households Worse Off. As the President said in his State of the Union address, deficit reduction is necessary, “[b]ut let's make sure that we're not doing it on the backs of our most vulnerable citizens.”
Make Wise Investments in the Future to Ensure the Economic Recovery and Economic Security for Americans. Strengthening our overall economic recovery demands that we invest in people. The President touched on this theme in his State of the Union address: “Cutting the deficit by gutting our investments in innovation and education is like lightening an overloaded airplane by removing its engine. It may make you feel like you're flying high at first, but it won't take long before you feel the impact.” To grow the economy, the country’s priority must be job creation. Higher employment and better jobs will rebuild the middle class and reduce the deficit.
H.R. 1 – The House’s Continuing Resolution for 2011
The stars have aligned so that there are two strands of debate going on right now about the federal budget.
The President just unveiled his fiscal year 2012 budget. You can check out the proposal in a visual format with the New York Times’ interactive budget graphic, and find highlights and analysis in a prior blogpost. Soon, we’ll have another post analyzing the President’s fiscal year 2012 budget proposal.
The big debate this coming year will actually be about the budget for the remainder of fiscal year 2011. Congress never appropriated funds to government agencies for fiscal year 2011, and the current stop-gap continuing resolution (CR) expires on March 4. The House has passed a CR with $61 billion in cuts as compared to FY 2010 spending, which is approximately $100 billion compared to the administration’s 2011 funding request. These cuts would go into effect almost immediately and apply to this fiscal year, which ends September 30. The Senate will take up that bill next week. Both the House and Senate may consider shorter CRs to avert a government shutdown.
The House CR is unfairly weighted to harm our most vulnerable. It is over 80% domestic discretionary and international cuts, and less than 20% cuts from military, homeland security, and veterans programs. Wisely, the House stripped $450 million that had been slated to build a second, alternate engine for the F-35 airplane.
The House CR makes drastic cuts in a dizzying array of critical programs (you can find a 21-page spreadsheet of cuts here). These cuts are radical, imbalanced, and profoundly unwise:
· Education: The CR provides $2 billion less than the President requested for Head Start in 2011 (which is $1 billion less than was spent in 2010), reducing enrollment by 218,000 children. The CR also provides $5 billion less for the Department of Education, which will reduce funding for K-12 schools that serve one million low-income children. And, the CR imposes a 17% reduction in the maximum Pell Grant award, which makes college affordable to many Americans.
· Social Security Administration: The CR would cut $1 billion from the President’s FY 2011 request. These cuts will exacerbate the significant delays disabled Americans suffer when they apply for benefits.
· Food security: The CR would reduce Meals on Wheels to the elderly, which help keep elderly people living in their own communities, which is both more dignified for our elders and more economical for the government. The CR would also reduce food safety inspections, which would actually require meat and poultry plants to shut down, causing losses of $11 billion.
· Health: Many amendments to the CR would block funding of the Affordable Care Act and make cuts in critical initiatives, including cuts to community health centers and eliminating funding for Planned Parenthood.
· Housing: The CR would slash the public housing capital fund by $1 billion, which will further the disinvestment in public housing and likely lead to greater demolition in the future, reduce the critical Community Development Block Grant fund by nearly $3 billion, and reduce other housing programs that provide assistance for the elderly and disabled.
· Jobs and Training: The CR entirely eliminates funding for Title I of the Workforce Investment Act, which provides job training to 8.5 million job seekers around the country, as well as YouthBuild and AmeriCorps, which are critical programs that create opportunities for public service for young Americans.
· The House CR also reduces funding for science, health research, technology, and innovation. Such unwise cuts will cost the government more in the long run and will hamper our nation’s return to long-term prosperity.
This bill would add to our unemployment crisis. One million jobs will be lost if H.R. 1 goes into effect. The unemployment rate has been at or above 9% for nearly two years, and the Congressional Budget Office expects it to remain that way for the rest of the year. In fact it predicts elevated unemployment through 2016. The House CR would undermine the fragile recovery and the economic security of American families.
We need to make cuts to control the federal deficit, but doing so blindly will cost jobs and destabilize the fragile economic recovery. Austerity is not the answer. We must be fiscally responsible and still fulfill our responsibility to the most vulnerable in our society. By investing in education and training and funding innovation, we will have a stronger economy. A stronger economy will increase tax revenues in the future and help balance the budget, while strengthening the middle class and helping Americans make ends meet and pursue the American Dream.