House Spending Cuts Would Mean Massive Job Losses

March 2, 2011

I suppose this is self-evident, but I think it’s worth saying. Spending cuts as deep and wide as the House Republicans want would throw many thousands of people out of work.

Based on the total non-security cuts that went to the House floor, the Economic Policy Institute estimated somewhat over 800,000. Mark Zandi, Chief Economist at Moody’s Analytics, projects job losses at 700,000 by the end of 2012 — this apparently based on the bill the House passed.

Add to the jobless an uncounted number of workers who would be subject to reduced work hours or furloughs.

In the latter camp would be employees in the Social Security Administration. So much for getting timely action on benefits claims — let alone hearings on the large percentage of disability claims the agency initially rejects.

But it’s not only federal employees that would be affected. Think of all the state and local public service workers who’d find themselves on the unemployment rolls — Head Start and K-12 teachers, staff in one-stop centers for job seekers, etc.

A fact sheet from the Senate Democratic Policy and Communications Center says that the Head Start and Title I (Education for the Disadvantaged) cuts alone could cause an estimated 65,000 layoffs. Not a disinterested source, but not necessarily out of the ballpark either.

And then there are all the private-sector workers indirectly paid by federal grants to the states, e.g., the professionals and other staff in the community health centers that would close or shrink. The centers’ national association estimates job losses totaling 7,434.

Add to these the jobs that would be lost in the maternal and child health centers the Republicans would totally defund. And the 80,000 public service jobs funded by AmeriCorps — also targeted for extinction.

And what about the construction workers who won’t be rehabbing public housing or building new affordable housing because of cuts in the Department of Housing and Urban Development’s budget?

And the workers that we devoutly hope will be maintaining the Washington metro area’s rapid transit system, but probably won’t be if the proposed $150 million WMATA cut is approved?

I could go on generating examples, but I think you’ve got the picture.

Confronted with the loss the federal jobs, House Majority Leader John Boehner replied, “So be it. We’re broke.” Which is stuff and nonsense. But then so is the notion that the proposed spending cuts will reduce the deficit that’s got our policymakers — Republicans and Democrats alike — so agitated.

When people don’t work, they don’t owe as much — or anything — in income taxes. They also don’t buy as much. Business profits go down and, with them, corporate tax payments.

So federal revenues decline, as they did when the recession set in. Meanwhile, mandatory safety net spending, e.g., for food stamps and Medicaid goes up, because more jobless people means more people poor enough to qualify.

So how is the deficit shrinking?

I think just about everyone agrees that federal spending is on an unsustainable upward curve. But the programs the House Republicans would slash have virtually nothing to do with that. The pie chart and analysis on Dustin’s Our Dime blog show why.

Maybe the House Republican leadership has put itself in a box. It pledged to immediately cut at least $1 billion in federal spending while holding the military and programs for veterans and seniors harmless.

This helped get a bunch of Tea Partiers elected. And now they’re insisting that the House make good on the pledge, though the very conservative chairmen of the Budget and Appropriations Committees apparently didn’t want to go there — at least not during the shrinking remainder of this fiscal year.

Whatever the case, I think EPI is right when it warns that the House proposal would magnify the ongoing labor market crisis.

Also right when it says the proposal “suggests that Americans take on unnecessary pain with no long-term gain.” I’d just add that some Americans are going to have lots more pain foisted off on them than others.


What Would DC Lose Under The House Budget Bill?

February 26, 2011

I’ve been trying to get my mind around what the spending cuts passed by the U.S. House of Representatives would mean for the District of Columbia.

Still working on it. There are, after all, a great many cuts and many different formulas for distributing such funds as remain.

Fortunately, the Center on Budget and Policy Priorities has come to the rescue with big parts of the answer — a state-by-state breakout of the major cuts in five broad categories.

It’s an heroic effort, but not exhaustive. Missing, for example, are breakouts of the $747.2 million cut to WIC (the Special Supplemental Nutrition Program for Women, Infants and Children)* and cuts to several other health-related programs.

One of these would totally wipe out long-standing federal funding for family planning and related preventive health care. Another would cut funding for community health centers by $1 billion — about a third of their total federal funding, says Joan McCarter, Senior Policy Editor at Daily Kos.

The CBPP figures reflect the continuing resolution as it was introduced. The version of House passed included numerous amendments. But so far as I know, only one of them affected the cuts CBPP calculated. I’ll post an update if I learn I’m wrong about this.

So, with caveats, here are some of the top-line figures for programs that are especially important to low-income District residents.

Education

The District would lose a total of $8.6 million in grants for K-12 education programs. (I’m assuming here that the funds the House restored for special education would be offset by the larger funding cut approved for school improvements.)

About 44,000 local college students would see their Pell grants reduced or altogether eliminated. The maximum grant they could receive would be $845 less than it is now. Because all grants are based on the maximum, the cut would affect all recipients.

Vocational and adult education programs would be cut by a total of $190,000.

Workforce Development

The job training and related services funded under the Workforce Investment Act would take a much bigger hit than the vocational and adult ed. programs — bigger even than CBPP originally reported.

WIA programs operate on a fiscal year that begins on July 1 — three months before new federal appropriations become effective. So they customarily get advance funding to carry them through. The continuing resolution doesn’t provide any.

So according to CBPP’s recalculation, the District would stand to lose $8.2 million for its WIA Fiscal Year 2011 program year. An estimated 20,900 adults now eligible would lose opportunities for skills assessments, training, job search help and the like, as would about 450 youth.

Affordable Housing

The District’s capital fund grant for public housing would be cut by $9.2 million. This is the grant that helps cover the costs of upgrading and repairing public housing units.

An additional $900,000 would be lost for affordable housing development and rental assistance funded under the HOME Investment Partnerships program.

Community Development

The District would also lose $12.4 million of the funds it receives from the Community Development Block Grant. That’s about 63% of what it received in Fiscal Year 2010.

The block grant can be used for a broad range of activities, including affordable housing development, neighborhood revitalization, improvements to public facilities like neighborhood centers and assistance to businesses for economic development activities that will benefit principally low and moderate-income people.

Mental Health and Substance Abuse

Two other block grants provide the District with funding for mental health services and for substance abuse prevention and treatment. Both would be cut, leaving the District with $471,000 less.

And, once again, the District would be banned from using its own funds for needle exchanges to help control the spread of HIV/AIDS.

Funding Exclusively for the District

CBPP understandably doesn’t cover the impending cut to funding the District receives because it’s the nation’s capital — and a unique state-city hybrid created and still controlled by Congress.

Under the continuing resolution, federal payments to the District would reportedly be cut by more than $80 million. Our Metro system would lose an additional $150 million.

“Another serious blow to the District’s precarious financial situation,” says Mayor Vincent Gray. He warns that the cuts “will probably result in the elimination of key services for residents of the District.”

Unquestionably, especially if he’s talking about the total prospective losses.

On the brighter side, the District almost certainly won’t lose all the funds the pending continuing resolution would take away. The Senate won’t pass the bill as written. President Obama has all but said he’d veto it if the Senate did.

However, the House Republican leadership has made clear that it won’t agree to even a short-term bill to avert a government shutdown unless it includes some cuts in current spending levels.

As so often in these cases, low-income people are likely to get thrown under the bus.

* This is the figure in a just-released budget report by the Coalition on Human Needs. CBPP’s overview for the state-by-state tables and my own calculations put the figure at a rounded-down $752 million.

UPDATE 1: After posting this, I found a state-by-state breakout for the cut to community health centers. According to the national association that represents them, the District would lose $865,826, and 3,755 patients would lose access to care.

UPDATE 2: I originally reported that K-12 education would be cut by $5.4 million. This was an error on my part. The correct figure is in the text above.


House Jobs/Tax Bill Spells Trouble

May 30, 2010

As many of you probably know by now, the House passed the latest version of the jobs/tax cut extender bill just before it broke for the Memorial Day recess.

The Senate had already packed up. So, once again, jobless workers dependent on expanded unemployment benefits will, at least temporarily, be without checks.

But that’s hardly¬† the worst of it. The bill that passed had suffered several surgical excisions to satisfy the requisite number of deficit-obsessed Blue Dog Democrats.

First, a month was lopped off the UI benefit and COBRA health insurance subsidy extensions. Blue Dogs still hung back. So the COBRA subsidy extension was dropped altogether, along with the extension of the enhanced federal match for state Medicaid programs (FMAP).

I don’t know whether I’m more angry, frustrated or alarmed.

I’m angry about the values the package reflects. The price tag on the bill didn’t have to be reduced by tossing out the COBRA subsidy and FMAP extensions. Lead Democrats could have pared back those tax break extensions–if what Blue Dogs wanted was a smaller bill.

Do we really care more about helping NASCAR race tracks, restaurants and rum producers or about making sure that jobless workers and their families can afford health insurance? Didn’t we just go through the agonies of health care reform to make benefits affordable for more low-income people?

I’m frustrated because anyone concerned about the short-term deficit ought to know that it results from depressed tax revenues as well as spending, including the financing of two costly wars.

The American Institute for Economic Research reports that April 2010 federal tax collections were the lowest for which it could find monthly data. Individual income tax revenues down 44% since just last year. Corporate income taxes down 64%.

It doesn’t take an advanced degree in economics to know that unemployed people typically don’t owe much, if any income tax. Also that they cut back on spending, thus depressing business revenues. They apply for benefits, including entitlements like food stamps. Up goes federal spending.

So how does the House leadership placate some of the deficit hawks? It takes out of the bill further urgently-needed fiscal aid to the states.

Virtually every state has already cut way back on spending to balance its budget. The cuts have imposed pressures on local governments, which were already struggling with their own budget shortfalls. So they’ve reduced spending too–or soon will.

In March, the Center on Budget and Policy Priorities reported that state and local governments have eliminated 192,000 public sectors jobs since last August. They’ve also undoubtedly cut spending on contracts for goods and services. More job losses there.

We’ll see still more job losses in the months to come–an estimated 275,000 in education alone. The ripple effect of these could result in the loss of an additional 82,000 jobs.

But job losses thus far have been somewhat mitigated by FMAP, which has helped states cope with their rising Medicaid rolls and freed up funds for other core programs.

Without an extension, FMAP will expire at the end of the year–halfway through most states’ fiscal years. Both the House and Senate earlier passed FMAP extensions to carry states through their entire fiscal years. So many states budgeted on the assumption they’d have the funds.

Now, as the CBPP’s President says, Congress “may pull the rug out from under them.” As many as 900,000 more jobs are at risk.

Set aside for a moment the human costs–something clearly not top-of-mind for a number of House members. Does saving $24 billion on a six-month FMAP extension make any sense from a deficit control perspective? Sure looks like penny wise, pound foolish to me.

I’m alarmed because the House bill seems a foretaste of things to come. The Senate, after all, needs 60 votes to pass even what got through the House. Over there, the top-ranking Republican on the Budget Committee has already said that we must stop extending unemployment benefits “right now.”

Consider too that emergency funding to avert the impending teacher layoffs has stalled–maybe died–because neither the House nor the Senate sponsor could round up the votes.

What more can we expect as Congress dives into the Fiscal Year 2011 budget? I shudder to think.


Deficits Don’t Matter When It Comes To Tax Breaks For the Rich

December 8, 2009

When is a budget-buster not a budget buster? Apparently when it benefits the wealthiest–those whose heirs would enjoy millions of tax-free dollars under legislation the White House wants and the House of Representatives just passed.

President Obama said that health care reform had to be deficit-neutral. Lead Democrats and Republicans in the Congress agreed. We’ve had months of wrangling, countless cost analyses and successive retrenchments in the interests of producing a bill that costs no more than it saves.

The economic stimulus package was cut back because of fears about the deficit. We’re given to understand that further investments to address the alarming unemployment rate will be limited because the President wants to deliver on his promise to cut the deficit.

But the President’s proposed Fiscal Year 2010 budget included a permanent extension of the Bush administration estate tax cuts. Without it, the estate tax will revert to its pre-Bush level after a year of no estate tax at all. With it, the maximum tax rate will remain 45%, levied only on estates valued at $3.5 million per person and $7 million per couple.

The House adopted the permanent extension last Thursday on a vote of 225 to 200. The Center on Budget and Policy Priorities estimates the prospective revenue loss at $391 billion over the first 10 years.

But the cost won’t have to be offset by spending reductions. The House made a specific exemption for estate and gift taxes when it passed the Statutory Pay As You Go Act to enforce fiscal discipline.

You’d think that our cost-conscious legislators would be satisfied with the proposed give-away. But no.

Senator Max Baucus (D-MT), Chairman of the Finance Committee, reportedly wants to index the tax for inflation. Firedoglake blogger David Dayen says this would cost an additional $23 billion.

Meanwhile, Senators Jon Kyl (R-AZ) and Blanche Lincoln (D-AR) are again (or still) pushing for an even bigger tax break. Their proposal would lower the top rate to 35% and exempt the first $5 million per individual and $10 million per couple. CBPP estimates the cost for the first 10 years at $100 billion more than the straightforward extension of the current rates.

Just think what $491 billion could do for the 15.4 million Americans who are out of work. But, of course, when it comes to helping them, we’ve got to consider the deficit.


Benefits Will Jump Start Economic Recovery

January 29, 2009

The Coalition on Human Needs has done us all a great service. It has issued a summary of the provisions in the House economic recovery package that will benefit low-income people and others at immediate risk of hardship. Anyone who’s tried to read the legislation–or even the Appropriations Committee’s summary–knows how useful this is.

CHN also identifies shortcomings in the package, including the short shrift given to affordable housing. No funding for additional housing vouchers, despite the rising tide of homelessness. No funding to support the construction of new affordable housing, despite the job creation potential. To me, these are glaring gaps.

However, CHN’s most important message is that the provisions targeted to low-income people and laid-off workers will do more than alleviate hardship. Combined with proposed increases for K-12 education programs, they will save or create nearly two million jobs.

This is because they will quickly put money into the hands of people who will spend it to meet their needs. Mark Zandi, chief economist for Moody’s Economy.com has translated this obvious truth into dollars and cents. He says, for example, that a $1.00 increase in food stamps will generate an estimated $1.73 in near-term economic growth.

The Economic Policy Institute has crunched the numbers another way. Its analysis for CHN shows that the food stamp provisions in the House package will save or create about 185,000 jobs. Think grocery store clerks, drivers for distribution companies, workers in food processing plants, etc.

Experts, including Zandi and the Congressional Budget Office, say that tax cuts are a less effective economic stimulus. CBO is particularly unenthusiastic about reductions in the corporate tax rate. As it says, businesses will not spend more money on labor or produce more just because they have more after-tax income. They need increased consumer demand. And that’s what the proposed food stamps increase and other measures targeted to low-income people will deliver.

Nevertheless, Congressional Republicans want less spending and more tax relief in the economic recovery package. And on the House side, they clearly won’t budge. Not a single Republican voted in favor of the package the House passed yesterday.

Now, there’s a reasonable argument to be made for paring down the spending part to focus it more on jump starting the economy and perhaps also for expanding the tax part. But substituting tax relief for the major measures CHN endorses should be a non-starter. Fortunately, it looks as if it will be.


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