President's Budget Proposal: A Strong Tightrope Walk

Posted on February 4, 2010 by John Bouman

Earlier this week President Obama announced his budget proposal for the coming year. These are precarious times with conflicting demands. Most economists agree that more government spending is needed to help speed the end of the recession and bring down unemployment. But there is also mounting concern that that federal deficit is getting too large, which weighs against added longer term spending. The President’s proposal walks the tightrope between these concerns and promotes both the short term “jobs” goal and the longer term deficit-reduction goal.  It contains important policy and spending priorities and deserves support.

Help for states and working families

The President proposes to extend the life of crucial enhanced payments to states under Medicaid, the state fiscal stabilization program, and the TANF Emergency Contingency funds. These three funding streams created by the American Recovery and Reinvestment Act (ARRA) stimulus law have helped states patch their budgets, save and create jobs, and protect health coverage. It is important that as much of this relief as possible be included in the immediate “jobs” proposal (some call it a “second stimulus”) being debated for passage in Congress in the next weeks, rather than waiting for the next federal fiscal year.

Improve revenues overall while protecting middle-class tax relief

The budget proposal allows the Bush-era tax credits for the wealthy to expire as scheduled, and it closes a number of tax loopholes. It also makes permanent the improved middle-class tax relief that was put in place by ARRA through the Earned Income Tax Credit, Child Tax Credit, and the American Opportunity Tax Credit.

Targeted discretionary spending freeze, but program increases

The discretionary spending freeze got the most press. It is a “global” freeze, in that the overall number is frozen, but within that number there are important priorities. Some programs actually get increases, while less effective programs will be cut. Child care would get a $1.6 billion per year increase. Housing Choice vouchers (Section 8) would get a $1.3 billion increase, enough to fully fund renewal of all 2.1 million current vouchers. Pell Grants would increase by over $7 billion and would be taken out of the “discretionary” category altogether.  And Head Start would increase by $1 billion.

Assumes passage of health reform

By making financial decisions that assume that health reform measures are in place, the budget proposal corroborates the frequent statements of the President and others that the Administration intends to complete the health care reform process.

The budget proposal walks the difficult line between short-term stimulus and long-term deficit reduction, while setting important priorities for low- and middle-income working families. 

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The incalculable cost of the General Assembly's budget

Posted on June 22, 2009 by John Bouman

The Illinois General Assembly meets this week to attempt to resolve the budget.  Failure carries with it incalculable costs that prolong the recession and hit every legislative district. 

The impending cuts directly impact hundreds of thousands of children, seniors, people who are sick and hurt, the unemployed, and workers.  The costs to them are staggering, but there are other costs:

  • The state will get sued repeatedly.  Some of the cuts would violate federal or state laws.  Some would violate existing court orders and consent decrees.  The Attorney General’s office must defend all these cases, but it has its own shrunken budget and would be swamped.
  •  Proposed cuts violate the condition in the federal stimulus law that states not cut Medicaid.  This will cost us billions in federal stimulus funds.    
  • The state would also lose massive sums of federal matching funds and block grant dollars across a range of programs.
  • These lost federal funds come out of the Illinois economy – it is money not spent on goods and services in our state.
  • The Department of Human Services estimates that the cuts to its budget would cause a loss of 170,000 jobs outside of state government.  These are entrepreneurs, independent caregivers, and employees of non-profit or for-profit businesses that provide or support the programs in various ways.
  • Legislators have spent their careers building important programs that will be gutted or eliminated by this process.  Time, talent, and hard-won accomplishment would be wasted. 

The General Assembly’s budget would prolong the recession and hurt the state, not just those who need the programs.  We need to fund the government and not bring about all of the above incalculable costs.

 

 

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