by Alex Mikulich, Ph.D.
The bipartisan debt deal reached between the President and Congress and signed on August 1, 2011, may have averted a catastrophic default on U.S. obligations that would have reverberated throughout the world, but it appears structured in a way that exacerbates the precarious conditions faced by the most vulnerable Americans, including children living in poverty, people who have lost jobs or are underemployed due to the Great Recession, historically disadvantaged communities of color, students, people who are disabled, and seniors.
The debt deal includes four basic parts: First, the President is authorized to increase the debt limit by at least $2.1 trillion so that no further increases will be necessary until 2013, after the 2012 presidential election.
Second, the Budget Control Act of 2011 reduces spending by $900 billion over the next 10 years through binding caps on annual appropriation bills. All of these cuts will be made by reducing discretionary spending. Social Security, Medicare and Medicaid are exempt from this initial round of cuts. Discretionary programs that are subject to the caps that will result in $900 billion in cuts over the next ten years include: discretionary child care assistance; Head Start; Women, Infants and Children (WIC) nutrition program for low-income women, infants, and children; maternal and child health; low-income housing assistance; low-income energy assistance, and Older Americans congregate and home-delivered meals.
Third, a 12-member bipartisan committee is charged with identifying an additional $1.5 trillion in deficit reduction over the next ten years, including from entitlement and tax reform. The committee, formally named the Joint Select Committee on Deficit Reduction, is free to consider more cuts in discretionary spending, entitlement spending, and revenue-raising measures. If this “super-committee” agrees to a proposal, then it is submitted to Congress for an up-or-down vote by the end of this year.
If, however, as many expect, the super-committee does not reach an agreement on a deficit reduction package (the committee is evenly divided between Republicans and Democrats), or Congress does not approve an agreement, or the President vetoes it, this triggers an additional $1.2 trillion in spending cuts over the next ten years.
The membership of the super-committee does not bode well for the most vulnerable Americans. All three Republican House members on the committee, including Dave Camp (MI), Fred Upton (MI), and Jeb Hensarling (TX), voted in favor of Paul Ryan’s legislation to cut spending by $5.8 trillion over ten years and that includes termination of Medicare and Medicaid as entitlement programs. These Republican House members also supported the “Cut, Cap, and Balance” bill that would have cut and capped future spending and added a balanced budget amendment to the Constitution. The Senate Republican members of the super-committee, Jon Kyl (AZ), Rob Portman (OH), and Pat Twomey (PA) also supported Cut, Cap, and Balance legislation.
It appears, in late August, just before Congress is about to reconvene that the Senate Republicans on the super-committee are firmly set against any increase in revenue for any purpose, including protecting the most vulnerable Americans. Republicans also want to extend the tax cuts that President Bush signed into law ten years ago.
Recall that in its downgrade of U.S. credit worthiness, Standard & Poor’s stated that “our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position that we believe Congress reinforced by passing the [Budget Control Act].” See full statement of Standard and Poor’s on the credit downgrade.
Standard and Poor’s continued to describe an “upside scenario” if the Bush tax cuts to the wealthiest Americans were allowed to lapse. “Our revised upside scenario—which, other things being equal, we view as consistent with the outlook on the AA+ rating being revised to stable—retains these macroeconomic assumptions. In addition, it incorporates $950 billion of new revenues on the assumption that the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating.”
If Republicans maintain their support for the Bush tax cuts and Congress extends the Bush tax cuts over the next ten years, Citizens for Tax Justice estimates that the cost will be $5.4 trillion. See Citizens for Tax Justice, Another Decade of Bush Tax Cuts Will Cost More Than Twice as Much as the First Decade.
Moreover, the Republican controlled House of Representatives, led by Speaker Boehner, have made it clear that they will not support revenue increases to help reduce deficits. The super-committee process provides Republicans with an opportunity to advance proposals to end the entitlement status of Social Security, Medicare, and Medicaid and thereby drastically reduce funding of the core of the nation’s historic social safety net. Congressional Republicans are equally univocal in their demand to eviscerate the Affordable Care Act of 2010, the health care reform law which they derisively term “Obamacare.”
In other words, unless American citizens demand a fair approach that increases taxes on the wealthiest Americans and those who have been relatively shielded from the most harsh impacts of the Great Recession, and also provides new opportunities for the jobless and underemployed, the super-committee likely will not reach an agreement. Given the even split between Democrats and Republicans on the super-committee, it seems the process may indeed be headed toward the enforcement mechanism of the bill.
This last component of the Budget Control Act is called “sequestration.” Sequestration is an enforcement mechanism that would take effect in January 2013. This enforcement mechanism “kicks in” if the Joint Committee enacts less than $1.2 trillion in deficit reduction through 2021, or no deficit reduction at all.
If we assume no deficit reduction is enacted, Richard Kogan of the Center on Budget and Policy Priorities explains that defense programs would be cut by a total of 55 billion each year from 2013 through 2021 and that non-defense programs would be cut by the same amount over the same period. (See Richard Kogan, How the Potential Across-the-Board Cuts in the Debt Limit Deal Would Occur, Center on Budget and Policy Priorities, August 8, 2011.)
The non-defense cuts would derive from both entitlement and discretionary programs. The non-defense cuts would include Medicare payments to providers and insurance plans (limited to 2 percent of these payments in any year or approximately $10 billion in 2013). Another 7 billion in cuts would be achieved through other mandatory programs of which the largest portion is farm price supports.
The following programs are exempt from sequestration: Social Security, Medicaid, CHIP, SNAP, child nutrition, Supplemental Security Income, Earned Income Tax Credit, veteran’s benefits, and federal retirement.
This leaves an additional $38 billion in cuts in 2013 of discretionary programs (to reach the total $55 billion mandated by sequestration). Kogan explains that “for fiscal year 2013, [these] cuts would occur through across-the-board, proportional reductions in new funding for each discretionary program in the appropriations bills for the fiscal year…For fiscal years 2014 through 2021, the cuts would occur through reductions in the statutory cap on total funding for non-defense discretionary programs for each of these years.”
Thus, the Budget Control Act of 2011 ought to be disturbing to all Americans for the following reasons. First, it is structured heavily toward cuts that would negatively impact and exacerbate the harsh economic conditions currently faced by the most vulnerable among us. Republicans are poised to eliminate the final floodwalls of the social security safety net. For a more extensive and detailed discussion of impacts on vulnerable communities, see the webinar The Debt and Deficit Debate and the Untold Story of the Impact on Vulnerable Populations hosted by the Joint Center for Political and Economic Studies.
Second, the wealthiest Americans who have sailed through the Great Recession, even benefited from it, are not called upon to contribute their fair share to reduce the suffering of the most vulnerable Americans. Congressional Republicans are poised to fight to maintain Bush tax cuts for the wealthiest Americans while they work to cut food security for women, infants, children, and the elderly. In no way can Republican austerity measures be judged positively from the perspective of the Gospel.
Third, the legislation provides no way to create new jobs or stimulate economic development for the most vulnerable communities. At a time when the infrastructure of the nation is aging and crumbling before us, why does Congress lack foresight to invest in jobs that would benefit the nation both immediately and over the long-term?
The American Society of Civil Engineers (ASCE) reports that the nation’s “roads, bridges, levees, schools, water supply, and other infrastructure are in such bad shape that it would take $2.2 trillion over five years to bring that up to speed. Even if we spent that amount, the Engineers would only raise their grade of the nation’s infrastructure from “D” to “B” in their 2009 Report Card for America’s Infrastructure. If we fail to invest in infrastructure, the Engineers estimate that America would lose at least nearly one million jobs, transportation costs would increase by $430 billion, and the nation’s gross domestic product would under-perform by nearly one trillion dollars over the next decade. Conversely, ASCE argues that for an additional investment of $94 billion per year, the U.S. can create millions of jobs, protect nearly one million current jobs, save nearly 2 billion hours in travel time, save each family $1, 060 per year, and add $2,600 in gross domestic product for every person in the U.S. This is only one example of the foolhardiness of the Congressional Republican political agenda and how it fails to pay attention to the most basic human needs and the vulnerability of the whole nation.
Finally, as Robert Greenstein of the Center on Budget and Policy Priorities warns, “the most terrifying result” of this past summer’s manufactured debt-ceiling crisis may be the precedent that Congressional Republican leaders have established. (Read Greenstein’s full comments.) Senate Minority Leader Mitch McConnell promised that when the debt ceiling must be addressed again in early 2013, he and other Republicans will once again use that event not only to reduce spending but to eliminate the role of government in U.S. society in every way possible.
In his statement after the agreement was reached, McConnell stated that this agreement “creates an entirely new template for raising the nation’s debt limit. One of the most important things about this legislation is the fact that never again will any President, from either party, be allowed to raise the debt ceiling without being held accountable for it by the American people and without having to engage the kind of debate that we’ve just come through.” McConnell continued that this is only a first step in a long-term effort to reduce the size and scope of government.
Greenstein concludes that the now-perpetual Republican threat to allow the nation to default will be used to “entirely dismantle the Great Society and the New Deal, thereby paving the way for vast increases in poverty and deprivation. Even more fundamental is the risk that such tactics would pose to American democracy. The lesson being drawn is that a majority in just one House of Congress may use the threat of default to bring the government to its knees in order to pursue its radical vision for America’s future.”
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