Go quickly through budget basics These are more for participants reference I will focus mostly on what’s next. 12/12/11
(If asked: International assistance represents about 1% of the federal budget, and falls under non-defense appropriations) 12/12/11
Let’s look more closely at the category “Other Entitlement Programs”. After the recession, these programs will not grow faster than the economy 12/12/11
2001-2010 tax cuts, war and economic downturns are major drivers of medium-run deficits. Stabilizing debt as a share of GDP is most important medium and long-term fiscal goal . 12/12/11
In the very long-run, something must be done. 12/12/11
Balancing primary budget is a goal, and this is NOT an annual requirement, and we are not recommending a fixed requirement, and we in fact oppose constitutional balanced budget amendments. I’ll later discuss the principle that deficit reduction should not increase poverty or inequality. 12/12/11
Discretionary spending cuts already in place, through caps, each for security and non-security spending, through 2013 Failure of Supercommittee triggers sequestration that sets up new firewalls for discretionary budget cuts between security and non-security categories through 2021, but big split is between defense and non-defense: 50-50. (Also, debt limit increased by at least $2.1 trillion into 2013 in two stages enabling payment for existing commitments) 12/12/11
Nearly $1 trillion in deep discretionary budget cuts already agreed to, though the cuts, shown here for FY2012, are less deep than what was envisioned under the House-passed budget resolution. Importantly, policymakers seemed to initially agree to fund up to “caps,” rather than below cap levels…for now. But conservatives are not happy with this outcome and will continue to push to fund discretionary programs below these cap levels. 12/12/11
Discretionary spending as share of GDP is now on track to be at lowest point since Eisenhower Administration. 12/12/11
So, how did the Joint Select Committee fail? Essentially, the Democrats started with a balanced plan, but eventually put forward a very conservative plan to call the Republicans’ bluff, and Republicans counteroffered a more radically conservative plan that Democrats could not accept because of inadequate levels of revenues. A bad plan would have been worse than no plan – and some very bad plans were put forward. Earlier, Democrats rejected the Toomey (R-PA) proposal with $200 to $300 billion in new tax revenue but raised taxes on low- and middle income, made the Bush tax cuts permanent, slashed taxes for those at the top, and significantly cut Medicare and Medicaid. Democratic Supercommittee members instead proposed to increase revenues by $400 billion over the next 10 years — much less than in previous Democratic proposals . ($100 billion of Toomey's $400 billion in added revenues was due to &quot;dynamic scoring&quot; that is not traditionally scored as real, while the Democratic plan envisions $400 billion in revenue increases as scored by the JCT. Toomey also counted $100 billion in unspecified increases in fees, premiums, and the like as a revenue increase on top of the $400 billion he otherwise counted in this area, although such amounts are counted by the Congressional Budget Office and the Office of Management and Budget as spending cuts and would be recorded on the spending side of the budget.) The Democratic proposal contained the same amount of specified cuts in Medicare and Medicaid ($275 billion) as the Toomey plan lists. And both plans contained the same reduction in total program spending — $875 billion. (The Democratic plan calls for somewhat less in mandatory spending cuts outside of Medicare and Medicaid than the Toomey plan and somewhat more in discretionary spending cuts.) Including interest savings, both plans call for policies that they say would reduce the deficit by about $1.5 trillion over the next ten years, or $2.6 trillion when one adds the $900 billion in spending cuts from the discretionary spending caps already part of the BCA. Both plans proposed more than $5 in spending cuts for each $1 increase in revenues , measured from a current-policy baseline that assumes the Bush tax cuts will be extended. By comparison, the bipartisan Bowles-Simpson and Gang of Six plans each had $1 in increased revenues for each $1 in spending cuts, relative to the same baseline. (The ratios cited here for the various plans do not count interest savings as a spending cut; if one did count interest savings in that way, the ratios of spending cuts to tax increases would be still higher.) This is rather stunning. To try to secure an agreement, Democrats on the Joint Committee offered a plan that moved significantly toward the Republicans and a considerable way beyond the bipartisan Bowles-Simpson and Gang of Six plans, which conservative senators like Tom Coburn and Mike Crapo had embraced. Yet Republicans have summarily rejected the latest, rather conservative Democratic offer. Ultimately, Democrats rejected a $643 billion Republican proposal that would have resulted in just $3 billion in tax increases from ending tax breaks on corporate jets. This plan reportedly cut $216 billion in domestic appropriations, including education, job training, housing and public health, while asking nothing of upper-income Americans. The Republican offer consists of roughly $542 billion in spending cuts and $3 billion in revenues, meaning the ratio of spending cuts to revenue increases in the plan is 181 to 1 . (These measures would also produce nearly $100 billion in debt-service savings.) When one includes the $900 billion in discretionary spending cuts already enacted in the Budget Control Act, the plan’s total deficit reduction rises to about $1.445 trillion, and its ratio of spending cuts to revenue increases rises to 481 to 1. Important that we did not do enduring damage by making permanent the 2001-2010 tax cuts as JSC Republicans had insisted on doing. A supercommittee agreement that locked in unaffordably low tax rates and made it more difficult to raise additional revenues in the future would set back the cause of deficit reduction, especially since we likely need another $3 trillion or so in deficit reduction above and beyond the $1.2 trillion from sequestration and the $900 billion or so from Budget Control Act’s discretionary caps. 12/12/11
Joint Select Committee failed, but debt as a share of GDP will be lower than still falls, because of sequestration. Failure triggers $1.2 trillion sequestration over 9-years, i.e. through 2021, including $984 billion in budget cuts and the rest coming from interest savings from reduced debt. -------------------------- Membership Senate Democrats Patty Murray, Washington, Co-Chair; Max Baucus, Montana; John Kerry, Massachusetts Senate Republicans Jon Kyl, Arizona; Pat Toomey Pennsylvania; Rob Portman, Ohio House Democrats Jim Clyburn, South Carolina-6; Xavier Becerra, California-31; Chris Van Hollen, Maryland-8; Jen Hensarling Texas-6, Co-Chair; Dave Camp, Michigan-4 Fred Upton, Michigan-5 12/12/11
Half of $110 billion/year in budget cuts under sequestration are defense, with the other $55 billion or so non-defense discretionary and mandatory. About $38 billion of this $55 billion is discretionary. Medicare cuts are limited to 2% and limited to payments to providers and insurance plans. With respect to 2013 only, you may hear that cuts to non-defense discretionary spending will be 7.8 percent. But most non-defense discretionary programs would actually be cut by 9.3% because the 7.8% is just an average. By law, some discretionary programs are exempt from automatic cuts in 2013. Pell and VA Medical Care are exempt from sequestration and Indian health and community and migrant health centers are limited to a 2% cut, so the cut on all other NDD programs is 9.3% (given reasonable guesses about Pell and VA etc. funding in 2013). After 2013, cuts are not exactly across the board for discretionary programs, but instead, sequestration means only lower discretionary caps. Congressional appropriators can still spend more on some programs and cut others more deeply. 12/12/11
Domestic (and international) low-income programs are at risk after Super Committee failure. Policymakers in both Houses have already indicated that they will introduce legislation to undo or modify the defense half of sequestration budget cuts. This could happen as soon as the FY2012 defense authorization bill in the coming weeks , with Sen. John McCain indicating that he will take the lead in the Senate and Rep. Buck McKeon taking the lead in the House. President Obama on 20111121: &quot; Already some in Congress are trying to undo these automatic spending cuts. My message to them is simple: No. I will veto any effort to get rid of those automatic spending cuts to domestic and defense spending. The only way these spending cuts will not take place is if Congress gets back to work and agrees on a balanced plan to reduce the deficit by at least $1.2 trillion. . . . They’ve still got a year to figure it out. ” This gives the President wiggle room to agree to modification of defense sequestration, including a limitation on how much defense spending can be cut, possibly with an offset and/or to pass other policies White House wants, like payroll tax cut and unemployment insurance extension. And while many experts disagree with him, the President’s own Defense Secretary, Leon Panetta, warns that the pending cuts to defense spending under sequestration threaten our national security. This will not be helpful. We must point out why the defense cuts are in place: they are the DIRECT result of Republican refusal to raise taxes. The defense cuts are in place and are essential because they took the place of a revenue sequestration that the White House wanted in the Budget Control Act. Republicans refused to accept a sequestration that would raise revenues, and defense cuts were substituted for automatic revenue increases. The purpose of sequestration is to bring all parties to the table; protecting defense would set-back deficit reduction by removing essential incentives for Republicans to come to the table . Markets may be sensitive to cutting the total sequestration, so policymakers are not likely to simply shield defense without offsetting the cuts. Democrats and others may fear voting against repeals of defense cuts. One major question will be how, if at all, such a repeal would be offset, i.e. paid for. This is where low-income programs are at risk. 12/12/11
We do need to control health care cost growth, systemwide, but keep in mind that Medicaid and Medicare are already more efficient and have seen less cost growth than private sector health coverage. There’s also been recent evidence that Medicaid makes a real difference in people’s lives, and I can share that with folks if you email me. 12/12/11
We’ll need to lower federal health spending growth, but we should also remember that this spending is pushing back against reductions in access to employer-sponsored coverage. 12/12/11
Let’s move to SNAP, also exempt from cuts under sequestration. SNAP was targeted by Cantor & House Budget Resolution The budget designed by Rep. Paul Ryan that the House passed in April would convert SNAP to a block grant and cut it deeply. House Republican Leader Eric Cantor repeatedly pushed for deep SNAP cuts in the grand bargain negotiations initially led by VP Biden earlier this year. House Majority Leader Eric Cantor cited recent SNAP (of food stamps) spending growth to argue for deep cuts to the program in the earlier unsuccessful grand bargain budget negotiations with President Obama. Similarly, the House Budget Resolution written Republican House Budget Committee Chair Paul Ryan proposed over $100 billion in cuts over ten years to the SNAP program, citing “relentless and unsustainable growth”. And here you see that, yes, SNAP has grown, but largely in response to the recession. 12/12/11
But these claims about unsustainable growth cannot be reconciled with the truth. The reality is that SNAP has responded to the recession and its spending will decline as the economy improves. It’s important to set the record straight. 12/12/11
Even in 2010, the safety net pushed back heavily against economic winds, with policies ranging from tax credits like the Earned Income Tax Credit and Child Tax Credit to unemployment insurance , SNAP (food stamps) , Social Security , Supplemental Security Income , veterans’ benefits, public assistance (including Temporary Assistance for Needy Families ), and housing assistance significantly reducing poverty. The EITC lifted 5.4 million people out of poverty, including 3 million children, and SNAP lifted 3.9 million people out of poverty, including 1.7 million children. The safety net was responding to the downturn even without the Recovery Act initiatives. Between 2007 and 2010, the share of Americans that the safety net kept out of poverty rose from 9.5 percent to 10.8 percent. This increase mostly reflects the growth of programs like unemployment benefits and SNAP, which expand automatically to help people hit by the recession and then shrink as the economy recovers. But these automatic increases wouldn’t have been enough by themselves to prevent a large increase in poverty in the recession. Without the temporary Recovery Act initiatives, the poverty rate would have jumped from 14.9 percent to 17.8 percent between 2007 and 2010, and 6.9 million more people would have become poor than actually did. 12/12/11
If for some reason Congress chooses to limit defense cuts, it should be paid for by revenues, not by additional in non-defense programs. We should pay for our national security needs, and not shield defense spending at the expense of other priorities. 12/12/11
Important that policymakers ensure that deficit reduction not increase poverty OR inequality either. Not only is poverty high in the US when compared to other wealthy countries—as you may already know, but the same is true of inequality, which has grown substantially in recent decades. The three major deficit-reduction packages of the last two decades — those enacted in 1990, 1993, and 1997 — all adhered to the core principle that the Bowles-Simpson Commission report set forth and the Senate “Gang of Six” plan also would have honored: deficit reduction must protect the disadvantaged and avoid increasing poverty and inequality. In fact, all three of those enacted packages reduced poverty and inequality even as they shrank deficits, as a result of their inclusion of improvements in programs like the Earned Income Tax Credit (in the 1990 and 1993 packages) and their creation of the Children’s Health Insurance Program (in the 1997 package). Revenues are key to upholding this principle. 12/12/11
This doesn’t seem likely, but this makes the most sense from a fiscal standpoint ---------------------------------------------- Spending and revenues must > historical averages Historical averages are poor benchmark for future spending and revenues Longstanding commitments New federal responsibilities Historical revenues resulted in chronic deficits Interest costs projected to rise Spending and revenues must > historical averages Progressive revenue increases are best answer over next ten years High-end Bush tax cuts are important, but inadequate Bush tax cuts overall are regressive 12/12/11
One can see that letting the 2001-2010 tax cuts expire would stabilize debt as a share of GDP, i.e. the economy over the next decade. 12/12/11
Spending and revenues must > historical averages Historical averages are poor benchmark for future spending and revenues Longstanding commitments New federal responsibilities Historical revenues resulted in chronic deficits Interest costs projected to rise Spending and revenues must > historical averages Progressive revenue increases are best answer over next ten years High-end Bush tax cuts are important, but inadequate Bush tax cuts overall are regressive 12/12/11
Tax expenditures—or spending through the tax code—are substantial, often economically inefficient, and often tilted towards those with the highest income. Higher revenues will likely come in part from reduced tax expenditures. 12/12/11
Health savings after health reform implementation is key to long-term deficit reduction ; we’ll learn from pilots, demonstrations, etc… in ACA, and we don’t know now what more to do ; Congress is already trying to UNDO some of these efforts. Rely on more revenues until then Remember that federal health coverage programs are more efficient than private sector coverage 12/12/11
Medicare physician payment fix (SGR) needs to be extended by end of year, and the big question will be offsets, especially for UI, though extending the payroll tax cut may not need to be offset. 12/12/11
Ideally, we would combine job creation initiatives in the short term, followed once the economy strengthens by tax increases and spending cuts that spare low-income and vulnerable people from harm. As you can see, there is immediate need for stimulus, or at least ensuring that we do no harm to the economy by pulling back expiring unemployment insurance extension and temporary payroll tax cut. The unemployment rate is expected to remain well above 8 percent through 2013. ------------------------------------------------------------ Unemployment Rate Forecasts (4th Quarter): 2010 2011 2012 2013 2014 CBO 9.6 (Actual) 8.9 8.7 8.7 7.9 OMB Alternative 9.1 9 8.5 7.8 Blue Chip 9 8.5 N/A N/A 12/12/11
Must extend unemployment insurance benefits and payroll tax cut. Up and down Wall Street, economists are warning about the severe consequences of inaction on payroll taxes and extended unemployment benefits. Goldman Sachs estimates that expiration of the payroll tax cut would reduce growth by as much as two-thirds of a percentage point in early 2012. Moody’s Mark Zandi adds that if Congress does not extend the payroll tax holiday and unemployment benefits for 2012, “there will be approximately one million fewer jobs by year’s end.” First, unemployment insurance not only directly lifted millions of beneficiaries out of poverty , but according to the Congressional Budget Office, it also did more than almost any other program to save jobs, by maintaining consumer spending and thus shoring up demand and keeping businesses from laying off more workers or shutting down. We have never allowed a temporary UI extension to expire with the unemployment rate anywhere near this high. 12/12/11
Second, the temporary 2% payroll tax cut is putting even more money into the economy—not because it is more stimulative per dollar, but because it is about 3 times larger than UI extension. (Between Thanksgiving and Christmas, Congress has an important tax policy decision to make. With the economy still struggling and one in eleven Americans out of work, January 1 would be an awful time to cut every paycheck in America. But, every paycheck in America will shrink unless Congress acts to extend, and preferably expand, the payroll tax holiday by the end of the year. Failure to extend the payroll tax cut would hurt workers in nearly every job and income category. For example, the nation’s 1.4 million truck drivers, whose salaries average $39,450, would pay $789 more in payroll taxes, on average. The nation’s 2.7 million nurses, whose salaries average $67,720, would lose $1,354, on average.) 12/12/11
Leverage at end of 2012, i.e. next year, depends on not giving away defense sequester and tax cuts—we need to keep people off of bills next year that would lock-in tax cuts. (Tax extenders—retroactively--and AMT could be done next year instead) 12/12/11
December 2011 (now): battle over sequestration and over boosting economy, with important consequences for the future. Outcomes are unpredictable, but can be shaped by you. Important to be prepared. 12/12/11
Presbyterian Church (U.S.A.) Office of Public Witness
Sisters of Mercy Institute Justice Team
Union for Reform Judaism
United Church of Christ
The United Methodist Church - General Board of Church and Society
This webinar is sponsored by:
Sammie Moshenberg Director of Washington Operations National council of Jewish Women
Indivar Dutta-Gupta Policy Advisor Center on Budget and Policy Priorities
After the Supercommittee, What’s Next for Advocates? Indivar Dutta-Gupta Policy Advisor Interreligious Working Group on Domestic Human Needs (DHN) Super Committee Aftermath Webinar – November 29, 2011 cbpp.org 12/12/11
Overview After the Super Committee, What’s Next for Advocates? 12/12/11 DHN Supercommittee Aftermath Webinar
FY 2010 Budget Mostly Defense and Popular Entitlements Federal Budget 101 cbpp.org 12/12/11 DHN Supercommittee Aftermath Webinar
Safety Net Programs Compose “Other Entitlements” Federal Budget 101 12/12/11 DHN Supercommittee Aftermath Webinar cbpp.org
Tax Cuts, Wars Account for Nearly Half of Public Debt by 2019 Federal Budget 101 12/12/11 DHN Supercommittee Aftermath Webinar cbpp.org
Federal Debt Unstable Under Current Policies Federal Budget 101 12/12/11 DHN Supercommittee Aftermath Webinar cbpp.org
Principles for Deficit Reduction What Happened?
Balance primary budget, stabilize debt/GDP within next decade
Contact Info After the Super Committee, What’s Next for Advocates? cbpp.org 12/12/11 DHN Supercommittee Aftermath Webinar
Rev. Dr. J. Herbert Nelson Director, Office of Public Witness Presbyterian Church USA
Faithful Budget Campaign Civil Disobedience in the Capitol Religious Leaders, including Rev. Dr. Nelson, at left, pray for vulnerable people in the Capitol Rotunda prior to being arrested during the budget debate.
Take Action Call your senators and representative.
US Capitol Switchboard: 202.224.3121
I appreciate those members of Congress and on the Supercommittee who stood firm in demanding a balanced package that included revenues and did note include harmful cuts to programs for poor and vulnerable populations.
Congress must now address the country’s deficits in a balanced and responsible way, recognizing that job creation is a necessary part of any sustainable effort to shrink the deficit.
Take Action Write a letter to the editor for your local paper.
The lack of a deal from the Joint Select Committee on Deficit Reduction (aka supercommittee) is a missed opportunity for members of Congress to come together and address the country’s high unemployment and long-term deficit situation.
I appreciate those members of Congress and on the Supercommittee who stood firm in demanding a balanced package that included revenues and did note include harmful cuts to programs for poor and vulnerable populations.
Already, some in Congress are working to change the sequester to exempt or mitigate the defense cuts, which would force low-income programs to take a larger hit. This would also reduce the incentive for all parties to compromise and produce a balanced package.
Rather than focusing on changing the trigger, Congress should prevent the trigger from occurring by passing legislation that addresses the country’s deficits in a balanced and responsible way, recognizing that job creation is a necessary part of any sustainable effort to shrink the deficit.