3.8 What’s at Stake: Federal Policy Decisions in 2012 and Beyond


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3.8 What’s at Stake: Federal Policy Decisions in 2012 and Beyond

Speaker: Liz Schott

The deficit reduction deal and further decisions made by Congress to reduce the federal deficit have made, and will continue to make, a tremendous impact on low-income housing and homeless assistance programs for many years to come. This workshop will cover the important funding decisions of the past months with an outlook on select programs for the upcoming year and beyond. Presenters will discuss ways in which advocates can make an impact at this incredibly important time to preserve and increase funding for key programs.

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  • Here you can see federal outlays, or spending, for FY 2010. What’s clear from this chart is that most direct federal spending is on popular and effective insurance programs and on defense.Let me note that this chart leaves out spending through the tax code, which is actually quite significant,Let’s look more closely at the two major categories that you may be most unfamiliar with, “non-defense appropriations” and “Other Entitlement Programs.” Let’s start with “Other Entitlement Programs,” which represented 14% of federal spending in FY 2010.
  • This category includes unemployment insurance—5 percent of federal spending--and several major anti-poverty programs, including SNAP, formerly food stamps. and the refundable portions of the Earned Income Tax Credit and Child Tax Credit, and SSI, a key income support program for people who are elderly, disabled, blind, and needy. These percentages were higher than usual in FY 2010. After the recession, these programs will not grow faster than the economy.Other includes TANF, SSBG
  • Low-income programs composed a little more than one-fifth of this category, including job training, rental housing assistance, the Community Services Block Grant, education funding, and some nutrition, health and social services funding. The other categories, like “health” exclude low-income programs. Now that we have some sense of where our tax dollars go, let’s look at our debt and deficit situation. It’s useful to ask how we got into our current fiscal situation where we forecast debt held by the public to grow unsustainably as a percentage of the economy.------------------------------------------------------
  • First, discretionary spending cuts under the BCA are now already in place, through caps, for security spending and for non-security spending, through 2013.-------------------------------Second, the BCA established the now failed Supercommittee.-------------------------------Failure of Supercommittee triggered sequestration—or automatic cuts--which we’ll discuss later in more detail. Importantly, these automatic cuts are split 50-50 between defense and non-defense spending. These cuts will not go into effect until January 2013. The Supercommittee’s failures also sets up new firewalls for discretionary budget cuts between defense and non-defense categories from 2013 through 2021, so that non-defense cuts cannot be substituted to protect defense spending under the law as enacted.-------------------------------
  • But first, let me point out that sequestration exempts all low-income individual entitlement programs. This was a remarkable success, as Republicans fought hard to ensure that programs like Medicaid were NOT exempt from the automatic cuts.------------------------------------------------(Mandatory programs that are not exempt include SSBG and Child Support Enforcement)
  • What is other mandatory spending – yellow bar – here? Mandatory programs in federal budget terms that are NOT exempt from sequestration – examples?SSBG and CSE
  • First, discretionary spending cuts under the BCA are now already in place, through caps, for security spending and for non-security spending, through 2013.-------------------------------
  • So, if Congress chooses to limit defense cuts, this protection should be paid for by additional revenues, not by additional cuts to non-defense or low-income entitlement programs.We should pay for our national security needs, and not shield defense spending at the expense of other priorities.-----------------------------------------
  • There may be significant leverage at end of 2012, i.e. next year, depends on not giving away defense sequester and the 2001-2010 tax cuts—we need to keep people off of bills next year that would lock-in these tax cuts. And it also depends on what offsets are used for things like the Medicare Doctor’s “fix”, the payroll tax cut extension, and unemployment insurance extension. Policymakers are looking at cuts to low-income and non-defense appropriations programs now, but enacting these cuts now will not inoculate these programs from being cut further as we search for another $3 trillion of deficit reduction over the coming decade.---------------------------------------don’t let Congress give these up before the Lame Duck session!
  • To sum up, policymakers would ideally take these four steps.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 other vulnerable people from harm.----------------------------------
  • 3.8 What’s at Stake: Federal Policy Decisions in 2012 and Beyond

    1. 1. What’s At Stake: Federal Budget Decisions in 2012 and Beyond Liz Schott Senior Fellow, Family Income Support Nat. Conf. to End Family and Youth Homelessness Los Angeles, CA, February 2012
    2. 2. Center on Budget and Policy Priorities 2 Federal Budget 101 What Just Happened? What Does This Mean? What’s Next? cbpp.org
    3. 3. Center on Budget and Policy Priorities 3 Federal Budget 101 FY 2010 Budget Mostly Defense and Popular Entitlements cbpp.org
    4. 4. Center on Budget and Policy Priorities 4 Federal Budget 101 Safety Net Programs Compose “Other Entitlements” cbpp.org cbpp.org
    5. 5. Center on Budget and Policy Priorities 5 Federal Budget 101 Non-Defense Discretionary Includes Important Low-Income Programs cbpp.org
    6. 6. Center on Budget and Policy PrioritiesEconomic Downturn and Legacy of Past Policies Drive Record Deficits in the Decade Ahead cbpp.org Source: CBPP analysis based on Congressional Budget Office estimates. 6
    7. 7. Center on Budget and Policy Priorities cbpp.org Source: CBPP analysis based on Congressional Budget Office estimates. 7
    8. 8. Center on Budget and Policy Priorities Deficit Reduction under Budget Control Act (BCA)1. Cuts discretionary spending by nearly $1 trillion over ten years.2. Set up a second stage (with two parts) to secure another $1.2 trillion in deficit reduction.3. Bipartisan, bicameral Joint Select Committee (JSC) tasked with identifying an additional $1.5 trillion or more, failed to reach agreement by November 23.4. $1.2 trillion, 9-year sequestration—triggered by JSC failure—begins January 2013. cbpp.org cbpp.org 8
    9. 9. Center on Budget and Policy Priorities Early Success Protecting Core Low-Income Entitlement Programs$1.2 trillion sequestration, or “across-the-board cuts,” due to Super Committee failure, but domestic low-income, individual entitlement programs exempt: • Medicaid and Children’s Health Insurance Program • Supplemental Nutrition Assistance Program (Food Stamps) • Child Care Entitlements (mandatory) and Child Nutrition • Earned Income Tax Credits (EITC), Child Tax Credit (CTC), ACA Premium Credits [but NOT cost-sharing subsidies] cbpp.org cbpp.org 9 • Supplemental Security Income (SSI) and Temporary
    10. 10. Center on Budget and Policy PrioritiesSequestration Means Deep Cuts Throughout Budget cbpp.org2/16/2012 10
    11. 11. Center on Budget and Policy PrioritiesSequestration Means Deep Cuts Throughout Budget cbpp.org2/16/2012 11
    12. 12. Center on Budget and Policy PrioritiesSequestration Cuts are on TOP of DiscretionaryCaps cbpp.org2/16/2012 12
    13. 13. Center on Budget and Policy Priorities Congress DID Reduce the Deficit This Year!Under current law…• the deficit will be reduced by about $2.1 trillion over the period 2012-2021, through legislation enacted this year.• This amounts to 40% of what’s needed to stabilize our debt as a percent of our economy if the tax cuts for the wealthy are extended (50% if they end in 2012)• BUT 100% of this comes from spending cuts, not from a balanced deficit reduction plan with both spending cuts and revenues• Of the cuts, half comes from nondefense domestic appropriations (49%), 42% from defense and the rest from entitlements (sequester). cbpp.org cbpp.org 13
    14. 14. Center on Budget and Policy Priorities What’s Next? Low-Income Programs at Risk Again• Policymakers have expressed desire to partially or fully shield defense spending from sequestration• Congress could make changes to the BCA to shift where cuts fall• Only additional revenues should be allowed to reduce defense cuts under sequestration• Other risks from proposals to block grant key entitlement programs – like SNAP and Medicaid cbpp.org 14
    15. 15. Center on Budget and Policy Priorities What’s Next? Fiscal Policies Collide at End of 2012• 2001-2010 tax cuts expire at end of 2012• Debt ceiling my need to be raised by early 2013• $1.2 trillion sequestration scheduled to begin in January 2013• Key leverage comes from the tax cuts expiring & the sequester (unless squandered) 15 cbpp.org
    16. 16. Center on Budget and Policy Priorities 16 What’s Next? Policies for Deficit Reduction• Ensure a balance of spending cuts and revenues in a comprehensive budget plan• Gradually let 2001-2010 tax cuts expire, or pay for extension for low and middle income• Reduce inefficient, regressive tax subsidies• Control system-wide health cost growth• Ensure deficit reduction does not increase poverty or income inequality cbpp.org cbpp.org