Not Just Kansas Anymore

April 26, 2017

Back in 2010, Kansas Governor Brownback and his Republican-controlled legislature initiated a “real-live experiment” in a particular brand of conservative economics. It blew up. And we, who don’t live in Kansas, may get hit by a much bigger explosion.

Experiment Blows Gaping Budget Holes

The Kansas Republicans eliminated income taxes for variously-structured small businesses. They also reduced income taxes for individual filers. This, Brownback said, would attract businesses, grow those there and create many thousands of jobs.

Well, Kansas, which must balance its budget every year, saw income taxes fall about $54 million short of projections — and then $333 million. Brownback filled the holes by shifting money from funds meant for special purposes..

Not enough. So Brownback cut funds for a range of programs, e.g., higher education, Medicaid, in-home services for seniors. And he tried to cut funding for K-12 education by $28 million — an action the Kansas Supreme Court found unconstitutional.

Why should we who don’t live in Kansas or have ties to anyone who does care? Because the Trump administration and leading Congressional Republicans have the same theory in mind for their tax cuts. And they’ll predictably trigger cuts in cuts in programs that benefit low-income people.

Faith in Theory Remains

A theory dating back to the mid-1970s, holds that tax cuts will stimulate so much economic growth that the additional revenues gained under the lower rates will offset the seeming losses, even reap more — because business will invest more, people work more, save and invest more.

It’s now commonly known as supply side economics — or pejoratively trickle down. Note how it favors tax cuts for corporations and well-off individuals, since lower-wage workers already have to earn as much as they can and have little or nothing left over to buy stocks and bonds.

Both the theory and some specific features of Brownback’s experiment underpin what the Trump administration and Congressional Republican leaders have in mind for their promised tax reform.

House Speaker Ryan’s Better Way tax reform plan includes large tax cuts on individuals’ investment income, lower tax rates for all businesses and an immediate, instead of a multi-year write-off on their investments.

The promise here is economic growth — in the labor force, productivity and wages. Though the cuts will be larger than “loopholes” and deductions eliminated, the package will, the plan says, be revenue-neutral, i.e. neither more nor less tax revenues collected.

Ryan cites a fairly recent House rule that requires the Joint Committee on Taxation to use dynamic scoring, rather than beginning with the current revenue baseline and then adding and subtracting estimated gains from increases and losses from cuts.

Last year’s concurrent budget resolution, i.e., the basic blueprint for budgets the House and Senate will develop, directed the Congressional Budget Office to do the same, insofar as it responsibly can.

No one with any basic economic smarts doubts that taxes have some effect on choices that affect growth. JCT and CBO factored these in their pre-dynamic scoring.

But the economists must build and use even more complex predictive models for dynamic scores. These — and so the results — can vary widely. But JCT and CBO  must deliver only one score, rather than a range, with explanations as they used to.

And now Trump’s Director of Office of Management and Budget says that both the budget and the administration’s tax reform proposal will reflect some dynamic scoring, but with a considerably higher growth rate than CBO’s.

The plan, he more recently said, ‘”will pay for itself” with growth — nearly $2 trillion over the first 10 years. The Tax Policy Center, on the other hand, estimates a $6.2 trillion loss in revenues, plus another trillion for interest on the mounting debt.

Devil Isn’t Only in Model Details

White House economists are still hammering out details of the tax reform plan, reportedly consulting with Congressional leaders — Republicans only, one infers.

Two things we know for sure. The business tax part will be “phenomenal” and the speaker, whom I trust need not be identified, believes the whole package “bigger than any tax cut ever.”

But what if, as in Kansas, it results in revenue losses? Edward Kleinbard, a former JCT chief of staff, thinks this likely — in part because the models assume that only individuals (and one assumes businesses) make productive investments. But government spending boosts growth too.

Less of that and the deficit will rise. The dynamic scoring partisans will push for deep cuts in investment programs and/or social insurance, he warns.

We know from experience that a rising deficit will prompt a wide range of cuts — both safety net and investments that give low-income people opportunities to earn more, e.g., by gaining more education and marketable skills, better public transportation, renovated neighborhoods that attract businesses.

These all give their children a better chance to do better too.

When Republicans balked at raising the debt ceiling in 2011, the Obama administration brokered a deal. Congress then passed the Budget Control Act — a two-part spending reduction measure.

We first had across-the-board cuts for both defense and non-defense programs that depend on annual appropriations, then caps on each, which Congress and the President later agreed to temporarily modify.

And look what’s happened.

As I’ve said before, programs generally need more funding just to sustain a steady state because costs rise — rent that housing vouchers subsidize, food and beverages that nutrition aid programs pay for* teaching materials, salaries and operating costs in public education programs, from pre-K through college, etc.

But funding for non-defense programs is now 16% lower in real dollars than in 2010. Title I funding targeted to high-poverty schools has remained basically flat, notwithstanding its current Every Child Succeeds Act name.

The Child Care and Development Block Grant — the largest source of federal subsidies for lower-income families serves fewer children in an average month than in any year since 1998, according to the latest official figures.

The Community Development Block Grant, which Trump wants to eliminate, lost $6 million last year alone. Local housing authorities are shy well over $26.5 billion needed to repair and/or renovate deteriorating public housing units merely to avoid further losses, estimated at 10,000 a year.

These are only examples I can readily recall in enough detail and find links for. We will surely have a plethora with those phenomenal tax cuts.

* Most nutrition assistance programs administered by the Agriculture Department must receive enough funding for everyone eligible. This is not true, however, for WIC or two programs that supply food directly, rather than as a cash-equivalent or a reimbursement.

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Looming Threats to Health Centers and Their Low-Income Patients

April 10, 2017

I recently met someone who follows my blog — one of the benefits I treasure. She’d come to the District for a meeting of the National Association of Community Health Centers. I learned a lot about this important piece of our federally-subsidized healthcare system.

I could see right off ways that they and the low-income people they serve are threatened now. But Terri told me about another that’s more than a threat.

Federally Qualified Health Centers

Terri serves as the strategist and advocate for a Southern California network of Federally Qualified Heath Centers — outpatient clinics that have met a set of requirements and receive grants from a Health and Human Services Department agency.

The FQHCs must, among other things. provide specific healthcare services — primary, preventive and emergency, plus education so that patients with diabetes and chronic kidney disease can monitor and control their conditions.

They must serve an otherwise under-served area or under-served people elsewhere. And they must use income and family size as the basis for their fees. So people with no income can get care, even if not enrolled or eligible for Medicaid.

A number of clinics provide additional services, e.g., dental care, mental health and/or substance abuse treatment. The clinic where Terri is based does all this and more.

It has social workers, for example, who link patients to sources of help, according to their individual needs, including navigating them through online enrollment in Medicaid.

The clinic goes beyond its diabetes management requirement by giving its diabetic patients cellphones that read their blood sugar levels and relay them to the clinic.

Terri, her colleagues and counterparts across the country are worried about how they will continue to operate — and what will happen to the low-income they serve if they can’t.

Her network receives some donations. But like all FQHCs, it depends largely on the HHS grants and partial cost reimbursements for patients enrolled in Medicaid.

Raid on Medicaid Still a Threat

California jumped at the chance to expand its Medicaid program when the Affordable Care Act became effective. The clinic Terri works in experienced a large influx of newly-eligible people with untreated conditions, e.g., diabetes, high blood pressure, oral diseases, mental health problems.

Congressional Republicans haven’t block-granted Medicaid or the similarly cost-shifting per capita alternative.

But the Affordable Care Act assured states that the federal government would reimburse 90% of care costs for their newly-eligible enrollees from 2020 on forward — the last phase in the incentive pay scheme.

What with Trump now trying to cut a deal with far right-wing members of the House, one might reasonably expect the product to end this level of funding like the failed repeal-replace bill. All expansion states, including California would face some tough choices then.

Federal Grants in Two-Part Jeopardy

The legislation that authorizes the federal government to award the FQHC grants will expire at the end of September. Without the grants, the health centers will collectively lose about 70% of their federal funding.

So a must-do for Congress is a straightforward extension, like the one included in the same law that kept the Children’s Health Insurance Program alive. Given the lack of hearings, other preoccupations and usual long summer break, simply kicking the expiration deadline forward is the only way to avert a for-sure funding loss.

But that would only give HHS authority to spend as much money as Congress chooses — and the President agrees to. Trump’s budget plan would cut the HHS budget by 17.9% — $15.1 billion less than it’s getting now. We don’t know the details, but we shouldn’t, I think, rule out anything.

Even if Congress won’t go along with such radical spending cuts (a likely response), the Budget Control Act’s cap on spending for non-defense programs will kick in again, after the latest two-year halt.

What this means it that Congress will have to cut spending on these programs by $2.9 billion. So the size and/or number of the FQHC grants are at risk — unless Congress decides to again defer or altogether eliminate the caps.

Immigrant Roundups and Healthcare Needs

The clinic where Terri is based is in a community where many immigrants live, including some unknown number without the documents authorizing them to live and work in this country.

Even immigrants here legally generally can’t qualify for Medicaid for the first five years, though they can receive Medicaid-financed emergency services.

California, as well as some other states provides a few others, regardless of immigration status. But as the Los Angeles Times reports, the community health care centers “treat all comers.”

We all know how federal immigration enforcement authorities have aggressively ramped up raids aimed at deportation. They’re active in the clinic’s community, where local authorities have partnered with them.

The agents have started patrolling side roads, including one leading to the clinic. Staff have witnessed a large drop off in immigrants seeking care.

One day an agent showed up in the building, with a warrant for something (not somebody). He opened the door to the waiting room. Patients fled, dragging children by the hands. What’s going to happen to them and their kids now that fear will keep them away?

These aren’t the only threats to the health of low-income people. The unremitting efforts to defund Planned Parenthood clinics put them at high-risk too, notwithstanding the anti-choice Congress members’ and supporters claim that clinics like Terri’s can fill the gap.

May have more to say about this than I already have.


Do Nothing Congress Gets Something Pretty Good Done

October 30, 2015

So Congress did indeed pass a big package to deal with pressing, undone business. It’s entitled the Bipartisan Budget Act. And one could call it that, though it would have died in the House if still-Speaker Boehner hadn’t relied on Democrats to get it through.

No one, so far as I know, likes everything in it. But it’s a whole lot better than no bill at all — and not only because the federal government was mere days before defaulting on the debt.

I can’t possibly cover every jot and tittle. Here instead is what I’ve learned about several major issues I’ve blogged on.

Spending Caps

The bill doesn’t eliminate the spending caps that the Budget Control Act imposed. It does, however, lift them for this fiscal year and the next. For non-defense programs that depend on annual appropriations, this will mean an extra $40 billion — the same as the extra for defense.

Most of the extra non-defense money applies to the budget for this fiscal year, which Congress still hasn’t produced. Only another half billion or so will be left for the following year. Then the caps kick in again, forcing cuts unless the next Congress and President agree to prevent them.

On the upside, the non-defense programs will have $34 billion more this year than they would have had with no budget deal. On the downside, they’ll have 12% less in real dollars than they had the year before the BCA first cut and then capped spending.

What this means, in practical terms, is that we can’t hope for significantly larger investments in the safety net programs funded as much (or little) as Congress chooses each year — WIC, for example, housing assistance and homeless services.

Nor for significantly larger investments in a wide range of programs that offer low-income people opportunities to fare well without “welfare,” e.g., education, job training, affordable, high-quality child care.

In short, as CLASP says, the cap relief is “a welcome down payment,” but only that.

Disability Insurance Benefits

The bill shores up the trust fund that helps pay for Social Security Disability Insurance benefits. As I’ve written before, the trustees projected total depletion next year. That would have forced across-the-board benefits cuts of about 20%.

The bill preserves full benefits, with no changes in eligibility standards by shifting money from the retirement benefits trust fund, as many experts have recommended ever since insolvency loomed on the horizon.

This should avert a shortfall for seven years. And, no, it doesn’t “rob Social Security,” as the Heritage Foundation (and other right-wingers) claim.

Some funds to offset the costs of the package as a whole will come from the DI program. These include savings expected from beefed-up investigations to identify fraud, plus revenues from steeper penalties.

The bill also eliminates a long-standing pilot program that enabled staff responsible for processing SSDI claims in 20 states to determine eligibility without an independent medical opinion.

All applicants will henceforth have to have two written evaluations from medical experts, either their own doctors or doctors the DI office refers them to.

The fact that the bill anticipates savings from this indicates that the scorekeepers expect it to result in more denials and/or longer delays in approvals. But the projected savings are very small — about 0.3% of benefits paid.

A small price to pay for fending off cost-reduction measures some Congressional Republicans have pushed for, e.g., denying SSDI benefits to recipients who returned to the workforce and then received unemployment benefits because they were laid off.

The bill also requires the Social Security Administration to test an alternative way of encouraging SSDI recipients to try working again.

Seems like a good idea, but probably won’t reduce the DI rolls by much, since most former workers who make it through the screening process are far too disabled to ever “engage in substantial gainful activity” again.

Medicare Premiums

That Medicare Part B premium spike I blogged on earlier this week won’t occur. Well-off seniors will, as always, have to pay more for the outpatient care and other health-related costs Part B covers.

The rest of the 16.5 million or so who were going to get hit hard will have to pay only the same amount more as they would have if all Part B beneficiaries paid a share of the expected spending increase, just as they do virtually every year when Social Security benefits are adjusted to reflect estimated living cost increases.

The unprotected will now have to pay about $15 a month more, plus an additional $3 over a longer period of time so as to restore general tax revenues tapped to cover the costs of the remedy. Rolling the two together, I figure premiums will increase, on average, by about half as much as they would have without the fix.

Not the End of the Story

So Congress packed up for the weekend, having done what seemed impossible. If no one’s altogether happy — and no one ever is with bipartisan deals — reasonable people on both the left and right seem pretty satisfied.

Need I add relieved that we won’t find out how much damage to our economy and economies around the world an unprecedented default on the federal debt would cause?

Now comes the budget or some equivalent to prevent a government shutdown before mid-December. So no one with an interest in any of the multifarious issues can rest easy. But advocates for programs and services that benefit low-income people should feel good about how much they’ve achieved.

 


Budget Cap Will Cap Dad’s and Daughter’s Futures

October 19, 2015

I first met Peter* on a street corner, where he was selling Street Sense, the newspaper for homeless people in the District of Columbia. He now does work for me that I don’t have the strength for.

Peter has in-demand skills, but won’t seek a regular, full-time job because he has to drop whatever he’s doing to pick up his daughter Joanne — and sometimes rush her to a hospital.

She’s prone to seizures due to a severe case of epilepsy. She also has some developmental disabilities. Peter has sole responsibility for her, as well as an older daughter.

Though he must patch together short-term, flexible jobs, the family has a home and basic needs met. For this, we can partly credit the Supplemental Security Income benefits he receives on Joanne’s behalf.

The benefits are far from generous — $733 a month. This is far less than the estimated costs of raising a child with an intellectual disability, including the earnings a parent must forfeit.

Bills introduced in the last Congress would, among other things, have restored the value SSI benefits have lost. But they’d stand even less of a chance now than then.

Meanwhile, the caps on spending for non-defense programs that depend on annual appropriations threaten the special education Joanne is receiving.

She’s entitled to a free and appropriate education under federal law, but the amount states and the District receive to help pay for it comes from one of those programs — the Individuals with Disabilities Education Act.

Peter recently enrolled Joanne in a program that focuses on independent living skills, both work-related and basic everyday. He’s thrilled by the progress he sees and his opportunities for “hands-on” involvement.

He can perhaps look forward to steadier, more gainful employment as Joanne becomes able to manage more on her own — to count cash, for example, wash clothes and prepare meals for herself and her family.

But she’ll gain such skills only if the program continues to receive enough money to provide the high-quality, individualized education that she and her fellow students need. The federal government surely hasn’t been doing its share.

The law that created IDEA commits the federal government to providing states with 40% of the average they spend per student, multiplied by the number of special education students they have.

Funds actually appropriated for the 2013-14 school year fell short by more than $20 billion, the Education Commission for the States reports, saying this is the most recent year it has figures for.

The under-funding didn’t begin with the Budget Control Act that’s responsible for the caps. But both the cut it initially made and the caps have caused IDEA grants for programs like Joanne’s a real-dollar loss of  9.6%, First Focus reports.

Now we’re less than two months away from the end of the short-term bill that’s keeping federal funds flowing to all the programs that depend on annual appropriations. It takes an across-the-board nick from the non-defense programs to keep spending on them below this year’s cap.

Both the House and Senate bills to fund Department of Education programs would provide very small increases for IDEA — nowhere near enough to make up for the shortfall. They may, in fact, not even support the same level and quality of services for the same number of children.

Whether the House and Senate will come together to pass an actual budget for education is an open question. What the squeeze on funding due to the budget cap isn’t.

The caps, recall, were never supposed to go into effect. They were intended as an incentive, if you will, for the bipartisan “super committee” to agree on a sensible plan for reducing the deficit.

A “sizable contingent” of Congressional Republicans still seem bound and determined to preserve the cap for non-defense programs. Defense, as I’ve previously noted, would get an increase through a backdoor.

Senate Majority Leader Mitch McConnell is reportedly mulling over a “major” budget deal that would require cuts to Social Security and Medicare benefits, which don’t depend on annual appropriations. That’s almost surely going to mean no deal at all.

Everybody who lives in this country will suffer harms from the further ratcheting down of federal funding — some more directly than others. Peter and Joanne are mere drops in the ocean. But there are millions like them, doing their best in difficult situations — and vulnerable.

Large coalitions of advocacy organizations are campaigning to get Congress to #StoptheCuts — the hashtag they’ve been using on Twitter and will use for a Twitterstorm, i.e., massive blast of tweets, on Wednesday. This is an opportunity for all of you with Twitter accounts to ramp up the pressure.

You’ll see tweets to many blog posts invited and pulled together by Moms Rising. A shorter version of this post will probably be part of the “carnival.”

*  This isn’t his real name. I’ve changed both his and his daughter’s to preserve their privacy.