SOURCE: AP/Susan Walsh

In this June 2012 picture, President Barack Obama looks back at students as he calls on Congress to stop interest rates on student loans from doubling. One year later, Congress must again act to keep rates low.

On July 1, 2013, interest rates on federal subsidized Stafford student loans, which are provided to low- and middle-income students, are scheduled to double from 3.4 percent to 6.8 percent. Congress acted to prevent an identical rate hike from going into effect on July 1, 2012, and is preparing to act to keep rates low again this year. There are key differences, however, between the various proposals to do so and unfortunately some of the proposals are worse than the status quo.

This column analyzes the potential interest rates in coming years under the key proposals—by President Barack Obama; Rep. John Kline (R-MN), whose proposal the House of Representatives approved today; and several proposals introduced in the Senate.

Determining student-loan interest rates

The goal of the student-loan program is to help increase access to postsecondary education, as education beyond high school remains critical for millions of students and their families as they seek to move into or remain in a part of the middle class. Recent reports from the Bureau of Labor Statistics now show that college graduates are nearly twice as likely to find work as those with only a high school diploma. An advanced degree provides individuals with a clear path to the middle class, a higher likelihood of gainful employment, and life-long financial and personal benefits. College education also provides for a skilled workforce that is crucial to rebuilding the entire American economy.

The best solution for determining student-loan interest rates is a long-term plan that is variable and would allow borrowers to take advantage of today’s historically low interest rates. A variable plan, however, must also include a cap that protects students against high interest rates in the future. Such high interest rates on student loans could discourage some students from enrolling and persisting in postsecondary education. The add-on interest rate amount should be as low as possible and avoid additional deficit reductions that shift the national debt onto students.

In addition, expanding protections such as Pay As You Earn—which lets borrowers limit their monthly payments to an affordable percentage of their income—to include all borrowers, along with the addition of a refinancing mechanism, would further strengthen the federal student-loan program. The PAYE expansion—outlined in the president’s budget for fiscal year 2014—would ensure that all federal student-loan borrowers could cap their monthly loan payments to 10 percent of their income so that the payments are affordable and achievable. A refinancing and loan modification mechanism would provide borrowers the option to switch their loans from their current interest rate model into the new system.

We recognize that a short-term fix may ultimately be necessary to prevent interest rates from increasing for subsidized student-loan borrowers. This is far from ideal, however, and Congress should only consider a short-term fix if competing priorities interfere with the passage of high-quality, long-term legislation. It is also critical that any savings needed to pay for the short-term fix should come from sources other than the federal student aid system.

Key variables

The first key variable is whether the interest rate should remain a fixed rate set by Congress or should instead become tied to a market variable that rises and falls according to market conditions. Fixed interest rates can quickly fall out of sync with the market, and this is especially unfair to students in the context of the historically low rates currently being provided for other forms of debt. Today, for example, a borrower can receive a 30-year fixed-rate mortgage at 3.6 percent or a 15-year fixed-rate mortgage at 2.75 percent—significantly lower than the rates of 6.8 percent and higher than student borrowers would have to pay in the absence of student-loan legislation.

An easy market variable to employ would be the rate the federal government pays for borrowing money. Since student loans are generally repaid in about 10 years, using the 10-year Treasury note, which currently has an interest rate around 2 percent, seems to be a straightforward option. Another option would be to use the 91-day T-Bill rate, the rate that the federal government pays for short-term borrowing, which is currently around 0.5 percent. The 91-day T-Bill rate, however, tends to be more volatile. A variable rate approach could be structured to have the rates for all loans made after July 1, 2013, change annually, or it could be used to determine the interest rate that would be fixed for all loans made that year.

The second key policy decision is to determine the level at which to set interest rates if they remain fixed—or what percentage of interest to add to the 10-year Treasury note or 91-day T-bill. This is known as the add-on and determines whether the student-loan proposal is budget neutral, costs money, or actually generates savings. By charging a higher interest rate, more money is generated, but students accumulate more debt. The lower the add-on or interest rate, the less debt the students accumulate.

Third, for variable-rate proposals, policymakers must decide whether to include a ceiling on which interest rates can be charged. This is to ensure that even if the variable that the interest rate was based on hit higher levels, such as 8 percent, the interest rate being charged to students could not surpass the given cap. This is an especially important protection for a complete variable model where the interest rate on all loans reset from year to year.

Fourth, some of the proposals also introduce various other protections to students or changes to the program that are more structural in nature—for example, including a refinancing provision to allow existing borrowers to move into the new interest rate model or expansions of repayment tools such as Pay As You Earn.

Primary student-loan interest rate proposals

There are three major proposals currently on the table regarding student loans that have been gaining momentum.

President Obama’s proposal

In his budget, President Obama used a variable model to determine loan rates at the point they are issued. After that time, the interest rate remains fixed for the duration of the loan. The president’s model also expands Pay As You Earn and sets the interest rate to the 10-year Treasury note plus an additional 0.93 percent for subsidized Stafford loans, 2.93 percent for unsubsidized Stafford loans, and 3.93 percent for PLUS loans, which are awarded to parents of students and to graduate school students. Under Congressional Budget Office projections, that would result in 2013-14 interest rates of 3.43 percent for subsidized Stafford loans, 5.43 percent for unsubsidized Stafford loans, and 6.43 percent for PLUS loans. It unfortunately does not include a cap on interest rates. The proposal is intended to be budget neutral and neither costs new money nor generates new savings.*

Rep. John Kline’s proposal

Rep. John Kline (R-MN), chairman of the House Committee on Education and the Workforce, recently put forth his own student-loan interest rate proposal. It is a completely variable proposal, meaning that the rates on all loans fluctuate from year to year. It is tied to the 10-year Treasury note, adds an additional 2.5 percent to both subsidized and unsubsidized Stafford loans, and adds 4.5 percent to PLUS loans. It also includes a fairly high cap on interest rates—8.5 percent for Stafford loans and 10.5 percent for PLUS loans. Unfortunately, the 2.5 percent and 4.5 percent add-ons are more than necessary and result in $3.7 billion in additional revenue, which would go toward paying down the federal debt. It does not include the PAYE expansion or a refinancing mechanism. Sens. Tom Coburn (R-OK) and Richard Burr (R-NC) have a similar proposal with a 3 percent add-on for all Stafford and PLUS loans. The Coburn-Burr proposal is more generous to the PLUS borrowers, however, than any other proposal.

Sen. Tom Harkin, Sen. Harry Reid, and Sen. Jack Reed’s proposal

Sen. Tom Harkin (D-IA), chairman of the Senate Health, Education, Labor and Pensions Committee, put forth legislation with Senate Majority Leader Harry Reid (D-NV) and Sen. Jack Reed (D-RI) to extend current student-loan interest rates for two years. The legislation, which has 20 co-sponsors, proposes that subsidized Stafford loans would remain at 3.4 percent for two years, and other interest rates would be unaffected. This legislation would cost $8.3 billion but is fully paid for through a package of three non-education offsets. This is designed to provide additional time to determine the best long-term solution through the reauthorization of the Higher Education Act.

Sen. Elizabeth Warren (D-MA) has also introduced a proposal that is a one-year plan to set subsidized Stafford loan interest rates at a lower rate than it is currently. She accomplishes this by tying interest rates to the Federal Reserve discount rate, which is the rate they charge their member banks for borrowing money. Sen. Warren is also a co-sponsor of the two-year extension.

Conclusion 

Congress should move forward with a long-term solution that ensures students do not have to pay rates out of sync with the market and protects them from unmanageable debt. This long-term solution should not tax students to pay down the federal debt. If consensus on a long-term solution is unattainable in the next six weeks, however, Congress must act now and pass a short-term solution to prevent interest rates from doubling.

David Bergeron is the Vice President for Postsecondary Education at the Center for American Progress. Tobin Van Ostern is the Deputy Director of Campus Progress. Carmel Martin and Anne Johnson also contributed to this column.

* The Obama administration created its proposal based upon analysis of costs provided by the Office of Management and Budget and was designed to be budget neutral. It has been scored differently by the Congressional Budget Office as actually generating a savings. The administration has indicated that it intends to modify the proposal to make it budget neutral under CBO scoring rules.

SOURCE: AP/Gary Kazanjian

Norma Alvarez looks out the door of a shuttered domestic abuse shelter that was forced to close due to cuts in government funding.

Author’s note: On Capitol Hill “sequestration” may mean a percentage point or two in lower GDP growth, but beyond the Beltway it is more than an abstract economic concept. It means real pain for real people.

Each week in our “Sequestration Nation” series, we will highlight examples of the many ways in which the federal budget cuts may hurt you and your neighbors. This week we explore sequestration’s impact on victims of domestic violence and sexual assault.

According to the Department of Justice, more than 1 million women will fall victim to domestic violence this year alone. For these women and their children, however, sequestration is another form of victimization.

In “Sequestration Nation,” we have highlighted the appalling irony of Congress’s determination to resolve the flight delays caused by sequestration while ignoring the effects of sequestration on the most vulnerable Americans. From homebound seniors who rely on Meals on Wheels for nutrition and human interaction to low-income families being pushed to the brink of homelessness, sequestration is taking an immense toll on those who can least afford it. As is the case with dialysis patients in Canton, Ohio, where sequestration may literally be a matter of life or death, victims of domestic violence and sexual assault are similarly at risk. According to our analysis of the most recent data available, sequestration will cut more than $26 million this year from services that support victims of domestic violence and sexual assault.

Sequestration’s cuts will reduce the federal government’s ability to enforce the recently reauthorized Violence Against Women Act, or VAWA, and the Family Violence Prevention Services Act, or FVPSA. VAWA provides funding to state and local agencies to assist in the prosecution of domestic-violence crimes, while FVPSA provides state and local grants to run support and prevention programs, as well as shelters for women and children. Kim Gandy, president and CEO of the National Network to End Domestic Violence, recently characterized these programs as “really vital services to people who are already in a terrible situation and really in need of emergency services—and there aren’t alternatives.”

The effects of the cuts are already being felt across the country. Last month we highlighted the plight of the Shade Tree, a Las Vegas shelter for abused women whose federal funding was cut by 15 percent beginning on March 1. Marlene Richter, executive director of the Shade Tree, explained that the shelter was going through reserves to the tune of $50,000 a month even before sequestration, so the reduced funding was “[t]he last thing [the shelter] needed.”

What’s more, these sequestration cuts come on top of decreases in public and private funding for domestic-abuse shelters as a result of the weak economy. In Shreveport, Louisiana, the Sexual Assault Nurse Examiners group, a local nonprofit that provides sexual-assault examination services, may be forced to close entirely, as sequestration will result in its annual budget being slashed in half—from $400,000 to $200,000.

Meanwhile, in Portland, Oregon, the American Overseas Domestic Violence Crisis Center, which operates a 24-hour crisis hotline to assist abused American women in 175 countries around the world, may also have to close due to sequestration. Founder Paula Lucas, a survivor of domestic abuse in the United Arab Emirates, is troubled by this prospect. “To think that there would be hundreds of women, and maybe now with the sexual assault piece, thousands of women that maybe need help and we’re not there,” Lucas said. “That would be very tragic for a lot of people who rely on us for that support.”

And in Ogden, Utah, the Your Community Connection center is literally turning away domestic violence victims due to their lack of funding. Julee Smith, the director of the center, recalls that, “We literally had a lady call, she had four children and begged to get in our shelter. She said, ‘I have 45 minutes to get out.’ And we said ‘We’re sorry, we don’t have any room.’ And then the police call and say that she has been abused again.”

Sequestration’s effects on victims of domestic violence in communities nationwide are occurring while there has been heightened scrutiny over sexual assault in the military. In January of this year, Paula Coughlin, the whistleblower of the infamous Tailhook scandal in 1991, noted on Capitol Hill that the piecemeal reforms that have been made to prevent military sexual assaults are simply insufficient because prosecution rates for these crimes in the military lag far behind those among the general public. And just as sequestration is hampering the prevention of domestic violence and sexual assault in the civilian population, it is also making it more difficult for the military to prevent these crimes within their ranks.

Sen. Kirsten Gillibrand (D-NY) is currently leading the congressional effort to reform the Uniform Military Code of Justice to improve the reporting and prosecution of sexual assault in the armed services. This April, however, U.S. Army officials reported that the $7.6 billion in required sequestration cuts to the Army will, among other things, force cuts to the Army’s Sexual Harassment/Assault Response and Prevention Program, doing everything “from slowing hiring actions, to delaying lab results which hinders our ability to provide resolution for victims,” said Army Secretary John McHugh and Army Chief of Staff Gen. Raymond Odierno in a written statement to the Senate Armed Services Committee

While many agree that the Pentagon’s budget should be trimmed, preventing and prosecuting the sexual assault of people who risk their lives in our country’s defense is not an area that should be cut. Ironically, just two weeks ago the U.S. Air Force’s top official in charge of preventing sexual assault within their ranks was arrested on a charge of sexual assault. Herein lies the painful irrationality of sequestration: It indiscriminately lumps in good cuts with bad cuts.

Rather than continuing to lump in the good with the bad, Congress should replace the required across-the-board cuts with a balanced approach to spending cuts and increased revenue.

Elsewhere around the country, sequestration continues to affect the lives of Americans. Below are just a few of the many examples.

In Montgomery County, Maryland, housing officials say low-income housing cuts affect everyone

The loss of low-income housing vouchers due to sequestration affects everyone, and Adrianne Todman, executive director of the District of Columbia Housing Authority, wants you to “[b]e upset. Because what will happen if we can’t house families, the families don’t disappear, they don’t vanish. … They’re on the streets. They’re in your neighborhoods. They’re next to your 7-Elevens and your Starbucks.”

Just outside the nation’s capital in Montgomery County, Maryland, the problem is particularly acute due to the Washington, D.C. area’s high housing prices. While the average housing-voucher recipient in Montgomery County makes about $1,333 a month, apartments in the county rent for an average of $1,442 a month.

Despite her two bachelor’s degrees and a master’s degree currently underway, Merceda Gooding of Gaithersburg “can’t even find a job that pays a living wage so [she] can get off the [housing voucher] program.” As a result of the $5 million to $6 million cut in the county’s program, the Montgomery County Housing Opportunities Commission will be forced to eliminate 18 jobs as well as scale back on vouchers to recipients such as Gooding who are on the brink of homelessness.

Localities such as Ravalli County, Montana, are affected by sequestration more than others

Sequestration is hitting some local governments harder than others. Ravalli County, Montana, is one such county that is being hit particularly hard by federal budget cuts. This is because, according to The Missoulian, “For almost 100 years, counties whose borders included national forest lands were paid a quarter of the revenue from timber sold on federal lands.” The annual Payment in Lieu of Taxes check sent to Ravalli County by the federal government is meant to help compensate for the fact that the county is prohibited from developing the national forests located within its borders in order to spur economic growth and increase local tax revenues. This annual payment from the federal government will be reduced by 5 percent this year as a result of sequestration. The funds received by Ravalli County are dedicated to maintaining the county’s roads and public schools. County Commissioner Greg Chilcott sees this as “a contractual obligation that the federal government has failed to honor. Before they came in and claimed the national forests, those were county lands that were open to economic opportunity.”

Sequestration is reducing Nebraska’s ability to prepare for floods

One unfortunate theme of sequestration that has begun to emerge is the extent to which federal budget cuts are reducing communities’ ability to prepare for and respond to natural disasters. From hurricane preparedness in South Florida to fighting wildfires in California, sequestration is making communities less safe.

Similarly, in the Midwest, sequestration is forcing the U.S. Geological Survey, or USGS, to quit operating several of the stream gauges that are critical to providing flood warnings because they continuously monitor the amount and quality of water in a particular waterway. In Nebraska, officials must cope with the shutdown of four stream gauges in rivers around the state. In addition to keeping officials appraised of conditions that could indicate an impending flood, according to Tim Boyle of the USGS, they also “help monitor possible effects of climate change and unusual weather events over long periods of time.”

Luzerne County, Pennsylvania, is turning children away from Head Start due to sequestration

Sequestration will force Luzerne County’s Head Start program to “reduce the number of slots by 49 children, cut the staff by six to eight employees and no longer provide transportation for 80 children in response to an approximately $420,000 cut.” These service reductions come despite the fact that the county’s annual waiting list for Head Start can grow to up to 700 children. Thanks to sequestration, this waiting list will grow in spite of the large body of research indicating that, “Head Start generates long-term improvements in important outcomes such as schooling attainment, earnings, and crime reduction.”

According to Karen Grimm-Thomas, assistant director of the Pennsylvania Head Start Association, these cuts come at a particularly difficult time for local agencies. “Head Start programs already don’t serve the number of children who are eligible,” she said. “Now we’re going to see a greater percentage of children come to kindergarten ill-prepared.”

Kwame Boadi is a Policy Analyst at the Center for American Progress.

SOURCE: AP/Orlin Wagner

Third-grade teacher Cindy Rasmussen works with students at Ware Elementary School at Fort Riley, Kansas. Cuts in Impact Aid funding for education will hurt schools on military bases.

Author’s note: On Capitol Hill “sequestration” may mean a percentage point or two in lower GDP growth, but beyond the Beltway it is more than an abstract economic concept. It means real pain for real people.

Each week in our “Sequestration Nation” series, we will highlight examples of the many ways in which the federal budget cuts may hurt you and your neighbors. This week we explore sequestration’s effect on schoolchildren from military households and Native American reservations.

In the aftermath of Congress’s rapid response to address sequestration-related flight delays, Secretary of Education Arne Duncan stated that, “Budgets aren’t just numbers, they reveal our value choices.” By choosing to ease sequestration-related inconveniences for air travelers while others deeply affected by sequestration continue to wait in line for relief, Congress cast a negative light on our national priorities.

According to the World Bank, in 2009 the United States ranked 44th in the world in education spending as a percentage of gross domestic product. This has become ever more clear under sequestration as children whose schools rely on federal Impact Aid continue to wait in line for relief from the draconian cuts. Impact Aid funding was established in 1950 to level the playing field for schools on military bases, Native American reservations, and near other large federal lands compared to other public schools. Schools on or near federal lands are negatively affected by their inability to receive as much tax revenue from local property and sales taxes the way that most other public schools can.

These school districts deal with very different tax regulations than other parts of the country. Military bases and military housing are not subject to local property taxation, and base commissaries charge no sales taxes for purchases. Because many military families are not permanent residents of the states in which they reside, they are not subject to income tax in those states. In the case of Native American reservations, longstanding treaties between tribes and the federal government prevent the tribes from being subject to taxation. Similar difficulties are faced by schools near large federal annexes. Illinois’s Burr Ridge School Superintendent Tom Schneider said he “can’t help but think about the money that would be coming to the district if a large corporation owned the Argonne [National Laboratory] property, rather than the federal government.”

Sequestration means this gap in school funding will be harder to close. In places such as Burr Ridge, where 67 percent of students are from low-income homes, Impact Aid is particularly important. Yet across the country schoolchildren on and near military bases, Native American reservations, and other federal lands will have to make do with less. In 2013 alone sequestration will reduce the federal government’s $1.2 billion Impact Aid contribution by more than $60 million.

Some Impact Aid schools are more dependent on the funding than others. This past month we discussed sequestration’s effect on schoolchildren living on Naval Air Station Lemoore in California. Schools in that district rely on Impact Aid for 30 percent of their entire budget. As Heiko Sweeney, principal of the base’s Akers Elementary School, explained, “For us, Impact Aid is critical.” The students and staff of Akers Elementary School are not alone in this regard: Federal Impact Aid accounts for more than half the budget for the Dulce Independent School District in New Mexico. In Mascoutah, Illinois, Superintendent Todd Koehl is expecting a 20 percent reduction in Impact Aid this year. “State and federal dollars are some of our biggest revenues,” said Koehl. And according to Dawn Kirby, vice president of the Travis Unified School District in California, Impact Aid provides them with “a lot of money. … That money has to come from somewhere. A lot of our students come from military families.”

While some school systems might be able to rely on reserves to make up some of the shortfall resulting from Impact Aid cuts, others such as the Tomah School District in Wisconsin are not as fortunate. “The only thing left is to reduce salaries and benefits or eliminate programs,” said Greg Gaarder, the district’s business manager. “There are no tools left in the toolbox.”

On the Wind River Indian Reservation in Ethete, Wyoming, a loss of $1.7 million in Impact Aid to School District 14 means a cut of 11 percent of the district’s overall budget. Such a drastic cut in Impact Aid will only serve to make a bad situation worse on reservations across the country. Native Americans have the lowest educational attainment of any racial or ethnic group in the United States. “We are at the mercy of the federal government,” said an unnamed District 14 school official. According to Michelle Hoffman, superintendent of District 14, Impact Aid is critical in addressing a host of problems: “Poverty, alcoholism, drug abuse.” She continued, “We have two full-time nurses in our district, which the state model does not cover. We pay for that through Impact Aid.”

Sequestration’s $85 billion in cuts to federal spending in 2013 alone were meant to hurt. The president and Congress intended the cuts to be so painful that no one in their right mind would allow them to occur. Unfortunately, due to the federal government’s inability to agree on how to avoid sequestration, the cuts are happening, and they are causing a lot of pain. But while air travelers no longer have to be concerned with how sequestration will affect their travel plans, some of the country’s most vulnerable schoolchildren are facing the prospects of fewer teachers, counselors, nurses, and other resources. “The FAA got relief, so maybe we will, too,” said Burr Ridge Superintendent Schneider. Hopefully, he’s right.

Elsewhere around the country, sequestration continues to affect the daily lives of Americans. Below are just a few of the many examples.

Sequestration reduces health services to Native Americans in Mission, Oregon

Unfortunately for Native American communities across the country, federal Impact Aid cuts are not the only consequence of sequestration. In Eastern Oregon health services to tribes such as the Walla Walla, Cayuse, and Umatilla are also being scaled back because of federal budget cuts. Tim Gilbert, CEO of the Yellowhawk Tribal Health Center, believes that these sequestration-imposed cuts violate longstanding rights established through treaties between Native American tribes and the federal government. “The treaty represents a federal trust responsibility,” said Gilbert. According to Gilbert and others, the free health services provided by the Department of the Interior are not free at all. “It was pre-paid with a whole bunch of land,” said Gilbert. Health and Human Services Secretary Kathleen Sebelius said that sequestration cuts to the Indian Health Services agency could result in “3,000 fewer inpatient admissions and 804,000 fewer outpatient visits.”

Rebuilding after Hurricane Sandy on Long Island is a taller task thanks to sequestration

Across the greater New York City area, local officials have been implementing plans to bolster wastewater and drinking water facilities damaged by Hurricane Sandy last October. Sequestration cuts will unfortunately make their efforts more difficult. Although Congress promised $600 million for New York and New Jersey to repair their water infrastructure and make it more resilient against any future storms, sequestration will now reduce this funding by $25 million. According to Rep. Tim Bishop (D-NY) of Long Island, “Any reduction in this badly needed funding will limit our ability to recover from the damage caused by Sandy and ensure our wastewater and drinking water infrastructure can withstand Hurricane Sandy-sized storms.”

Gov. Rick Scott discusses sequestration’s effect on hurricane preparedness in Fort Lauderdale, Florida

While New York and New Jersey contend with sequestration’s effect on their ability to recover from Hurricane Sandy, Florida officials are wringing their hands over how federal budget cuts might affect their ability to prepare for the upcoming hurricane season. “My biggest concern is that while they say sequestration will stop during a disaster, are they going to be ready in the meantime,” said Florida Gov. Rick Scott. Gov. Scott and other officials along the Atlantic and Gulf coasts worry that the $1 billion in sequestration cuts to the Federal Emergency Management Agency, or FEMA, will leave their communities underprepared to address the onset of a major storm. Officials in Florida are particularly concerned because the lack of a direct hit from a hurricane over the past seven years may have lulled some residents into a false sense of security. “Let’s hope it’s a quiet hurricane season,” said FEMA Administrator Craig Fugate. “But in our business, it ain’t about hope. It’s about being ready.”

National Guard furloughs could make wildfire season in California more dangerous

The potential furloughs of the National Guard’s 2,000 technicians has California officials concerned about their ability to fight fires during what some expect to be a particularly intense wildfire season. According to Bloomberg, a recent wildfire in Ventura County burned an area the size of San Francisco. The sequestration-related furloughs would put most of the Pentagon’s civilian employees on unpaid leave one day each week, meaning the time available for National Guard technicians to keep firefighting aircrafts operable would be reduced by 20 percent, “which during fire season can be decisive,” said Maj. Gen. David Baldwin. “If these furloughs go through, it will have a direct and immediate impact.”

Sequestration will lead to a less enriching summer for low-income students in Davis County, Utah

In Davis County, Utah, education officials see the district’s summer school programs as a critical element in helping low-income students close the achievement gap. “By the time they get to fifth grade, we’re looking at a two-to-three-year gap in education, unless we do something to fill that gap during the summer time,” said Janet Sumner, principal of Wasatch Elementary in the county. Sequestration’s cuts in federal Title I funding—education dollars dedicated to supporting children from low-income households—mean that Davis County may have to scale back its summer reading and math programs due to impending cuts of $600,000. According to the local CBS News affiliate, summer school students at the Davis Community Learning Center “will only have one hour of learning rather than the 2.5 hours per four-day week the summer school program had been providing for the past two years.”

Kwame Boadi is a Policy Analyst at the Center for American Progress.

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SOURCE: AP/ Jeff Chiu

Scientists Matt Drever and Charlie Holst conduct an experiment at the Pfizer laboratory at the University of California at San Francisco. Sequestration will result in substantial cuts to federal funding for research and development.

Author’s note: On Capitol Hill “sequestration” may mean a percentage point or two in lower GDP growth, but beyond the Beltway it is more than an abstract economic concept. It means real pain for real people.

Each week in our “Sequestration Nation” series, we will highlight examples of the many ways in which the federal budget cuts may hurt you and your neighbors. This week we explore sequestration’s effect on the nation’s future innovation and economic competitiveness, as well as some of the other ways it is affecting communities around the country.

Some of the most insidious effects of sequestration are those whose full effect will not be felt for years to come. Such is the case with the $95 billion in federal research and development, or R&D, spending that will be eliminated from the budget between 2013 and 2021. Cutting R&D spending is one of the most glaring examples of the shortsightedness of sequestration because any benefit of deficit reduction accomplished this way could be far outweighed by the negative impacts it will have on future economic growth.

As President Barack Obama described in his 2011 State of the Union address, decreasing R&D spending in order to reduce the deficit is “like lightening an overloaded airplane by removing its engine. It may make you feel like you’re flying high at first, but it won’t take long before you feel the impact.” Sustained economic growth relies upon sustained increases in productivity, and much of the productivity in the U.S. economy stems from consistent technological innovation. According to Alan Leshner, CEO of the American Association for the Advancement of Science, or AAAS, “Over 50 percent of the U.S. economic growth has come from science and technology advances since World War II.”

Sequestration’s R&D cuts will exacerbate an already troubling trend of decreasing R&D spending in the United States. Federal investment in research and development as a share of discretionary spending has fallen from 17 percent in 1962 to 9 percent today. Through 2021 sequestration will reduce federal spending on R&D by $95 billion, resulting in a reduction in GDP of at least $203 billion, according to a report by the Information Technology and Innovation Foundation, or ITIF. According to the same report, another effect of decreased R&D spending could be 800,000 fewer jobs over the next four years.

To make matters worse, the continuing trend of reducing R&D spending is taking place at the same time that economic competitors such as China are increasing their commitment to research and development. Whereas the United States increased R&D expenditure by an average of less than 6 percent per year between 1992 and 2009, China’s annual growth in R&D expenditure was almost 19 percent over the same time period. According to the AAAS, federal funding of research and development already decreased by 18 percent between 2009 and 2012.

While private industry has picked up some of the slack by increasing its share of national R&D spending as the federal government has been decreasing its share, not all research and development is created equally. Private investment in research and development tends to focus narrowly on applied uses and incremental improvements of existing technology, while federal investment—largely conducted in universities and federally funded labs—tends to focus on more long-term basic research. It is this sort of basic research that helped pave the way for groundbreaking developments such as the internet, which began as a Defense Department-funded project, and the human genome project—a joint project of the Department of Energy and the National Institutes of Health, or NIH, that has generated economic output far in excess of the money devoted to it. It is precisely this kind of research that is at risk as a result of sequestration. “To put it kindly, this is an irrational approach to deficit reduction,” said Hunter R. Rawlings, III, president of the Association of American Universities. “To put it not so kindly, it is just plain stupid.”

To be sure, the $12 billion cut in R&D spending in 2013 alone is having significant short-term impacts as well. The University of Texas, Austin, stands to lose $18 million this year in research grants, while the University of North Carolina, Chapel Hill, could lose up to $28 million. For Moffitt Cancer Center CEO Alan List, sequestration “means there will be less money coming in. It means we will have to let people go. … Ultimately, it’s a real problem for the [patients] for whom we’re trying to get closer to new breakthroughs and discoveries.

In university and federally funded research labs across the country, research directors are concerned that sequestration will create a “generational gap,” according to Elias Zerhouni, former director of NIH. A decrease in grants to universities and federal laboratories means that some projects that are midstream may be suspended, some projects may never begin, and some researchers may have to find new lines of work. “We’re driving a bunch of young people out of science,” said Jonathan Chernoff, chief scientific officer for Fox Chase Cancer Center. Moreover, the lack of consistent federal support for research and development could lead future science and technology graduates, particularly those who come from abroad to obtain a university education, to take their talents elsewhere to countries that display more of a commitment to scientific innovation.

In order for deficit reduction to truly benefit the country, it must not hamper the nation’s prospects for long-term economic growth and global economic competitiveness. Sequestration cuts to research and development, however, do just that.

Elsewhere around the country, sequestration continues to affect the lives of Americans. Below are just a few of the many examples from the past week.

Canton, Ohio

For Deborah Flowers and nearly 20 other dialysis patients around Canton, Ohio, sequestration means the end of the medical transport service that these patients rely on to get to and from their weekly treatments. Due to federal funding cuts to Asset-Based Community Development, Inc., or ABCD, which runs the service around Stark County, Ohio, patients such as Flowers will be forced to find other means to make it to their treatment. Getting to and from treatment is not optional for these Ohio residents—it’s mandatory. “It is life or death,” said Flowers, “Even missing one or two treatment forces your body to start to shut down.” Will Dent, CEO of the nonprofit, noted the overlooked irony of last week’s fix to Federal Aviation Administration cuts that left other critical services suffering. When it came to air-traffic controllers’ furloughs, “people thought ‘oh, we need to make an exception,’ but for dialysis patients, the transportation means life or death.”

Newport News, Virginia

While many agree that the nation’s defense budget could stand to be trimmed, the unintended local effect of Defense Department cuts can go overlooked by national media. For the Hampton Roads region of Virginia, home to one of the world’s largest naval ports and largest air stations, sequestration’s effect on the area’s economy is coming into focus. The civilian-contractor furloughs and cuts to Defense Department programs could result in a loss of almost 7,000 local jobs in 2013, according to Gary Wagner, an economics professor at Old Dominion University. The secondary effects of decreased spending on restaurants, hotels, and other businesses are estimated to result in a loss of $799 million to the region’s economy this year. “It’s going to have this ripple effect all throughout the community,” said Wagner.

San Francisco, California

As a result of cuts to the Department of Homeland Security, the Coast Guard is cutting back on its patrols in the San Francisco Bay. “What they’re not going to be able to do is some of the preventative searches and that’s a little disturbing,” said Monique Moyer, San Francisco port director. According to the local ABC News affiliate, the local police and fire departments have been asked to take up some of the slack by increasing their patrols—a cost that will have to be borne by state and local governments.

Orlando, Florida

Beverly Hougland, CEO of the Osceola County Council on Aging, refuses to let elderly residents in her community go hungry as a result of sequestration. “I’m not going to tell some 90-year-old, ‘We aren’t feeding you today.’ That’s not going to happen,” said Hougland. Nevertheless, due to federal cuts in funding to community programs that provide senior services, cuts will have to be made in other services. In Seminole County, for example, Meals on Wheels Etc. is making up for a $63,000 cut by eliminating housekeeping services for elderly residents. For 80-year-old double amputee Willie Bryant, this means finding another way to get household chores such as dishes and laundry done despite being confined to a wheelchair.

Columbia, Missouri

According to the local ABC News affiliate, “Central Missouri Community Action [or CMCA] is making extreme changes to its Head Start program,” in order to deal with the loss of $300,000 in federal funding. In addition to eliminating 105 Head Start slots, the organization will be laying off 20 employees and changing some centers to half-day schedules. “Without assistance programs like Head Start, I do worry that those [children] aren’t going to be ready for school,” said Darin Preis of CMCA. Preis fears that with poverty on the rise in Columbia, cuts to the area’s Head Start program will only make the problem worse. “[Poverty has] gone up over the last ten years, it hasn’t gone down and it just seems like the wrong time to cut programs and services that are designed to help those people in poverty,” he said.

Kwame Boadi is a Policy Analyst at the Center for American Progress.

SOURCE: AP/Damian Dovarganes

Travelers stand on line at the LAX International Airport in Los Angeles. It was a tough start to the week for many air travelers, as thousands of air traffic controllers were forced to take an unpaid day off because of federal budget cuts.

Author’s note: On Capitol Hill “sequestration” may mean a percentage point or two in lower GDP growth, but beyond the Beltway it is more than an abstract economic concept. It means real pain for real people.

Each week in our “Sequestration Nation” series, we will highlight examples of the many ways in which the federal budget cuts may hurt you and your neighbors. This week we explore sequestration’s inconvenience on the nation’s air travelers, as well as some of the other effects it is having around the country.

If the past couple of weeks have taught us anything, it is that the prospect of low-income families being kicked off of housing assistance and pre-K students being removed from Head Start may not move Congress to act, but delayed airline flights will get everyone on Capitol Hill worked up.

In response to angry passengers and airlines, Congress sprang into action last week to ease the effects of sequestration on air travel. On Thursday night the Senate passed by unanimous consent, which does not require a vote, legislation that would give the Federal Aviation Administration more flexibility in implementing the spending cuts that the agency is required to make under sequestration. The House of Representatives passed the legislation on Friday, and President Obama is expected to sign the bill this week.

In the meantime, the legislation does nothing to address the reduced access seniors have to Meals on Wheels, the reduction in border security, the decrease in unemployment insurance for the 2 million Americans unable to find work, or any of the other negative effects of sequestration.

Nonetheless, Congress took such swift action because on Sunday, April 21 many air travelers across the country started experiencing the pain of sequestration firsthand. Due to sequestration, the FAA is required to make $637 million in spending cuts this year. To account for those spending reductions, the FAA initially ordered air-traffic controllers to give up one payday during each two-week pay period. The result of this policy would be that on any given day about 10 percent of the nation’s 15,000 air-traffic controllers would be on unpaid leave. The FAA reported that as a result of furloughs to air-traffic controllers, 400 flights were delayed across the country that Sunday evening.

The havoc caused by these furloughs has been particularly significant at major air-traffic hubs such as New York’s LaGuardia Airport, which reported delays of more than an hour, and Los Angeles International Airport, which reported delays of up to two hours. According to the Los Angeles Times, the delays were enough to cause David Brooks of Los Angeles to miss a funeral in Boston. “We had to cancel our whole trip because the funeral is tonight, and we’re not going to make it in time,” said Brooks.

Some in Congress accused the FAA of not being creative enough to find areas to cut that would not impact air travel. Moreover, the Airline Pilots Association and two airline-industry trade associations filed suit against the agency to halt the furloughs. In the face of the criticism, however, the agency maintains that with 70 percent of its operational costs going toward payroll—costs that are subject to sequestration—there is very little fat left over in its budget to cut.

Though few things garner much bipartisan support on Capitol Hill these days, the effort to ease the hardships faced by air travelers received near-universal support. The Reducing Flight Delays Act of 2013 was introduced last week by Sen. Susan Collins (R-ME) and co-sponsored by several Democratic and Republican senators.

To be sure, while the pain of a 75-minute flight delay at Baltimore-Washington International Airport may not necessarily compare to the pain of an elderly cancer patient being unable to obtain treatment or a low-income family facing the possibility of becoming homeless, it is certainly an inconvenience for many people. What’s more, continued flight delays could negatively impact the country’s fledgling economic recovery. The Global Business Travel Association raised this point, warning, “If these disruptions unfold as predicted, business travelers will stay home, severely impacting not only the travel industry but the economy overall.”

Sequestration’s impact is unquestionably negative, and Congress should take steps to end it. According to the Congressional Budget Office, sequestration could cost the economy 750,000 jobs and reduce GDP growth by 1.5 percent. But the narrow focus on whether or not planes leave on time indicates that, “We’ve got our priorities upside down,” according to Sen. John McCain (R-AZ). Congress should instead focus on all of sequestration’s impacts and replace the required across-the-board cuts with a balanced approach to spending cuts and increased revenue.

Until then, we will continue to update you on the effect sequestration is having across the country. Below are just a few of the many examples from the past week.

Lemoore, California

Similar to their counterparts across the country, the military families of Naval Air Station Lemoore have sacrificed a great deal over the past several years. According to The Nation, sequestration is requiring these families to sacrifice even more as the base’s school district now faces severe cuts in funding. The school district relies on the federal Impact Aid program to cover 30 percent of its budget, but because of sequestration cuts, federal spending on the Impact Aid program will be reduced by 7 percent. As Heiko Sweeney, principal of Akers Elementary School, explained, “For us, Impact Aid is critical.” Sequestration will reduce the district’s budget by $350,000 due to cuts to Impact Aid at a time when the district is trying to cope with the loss of nearly 20 percent of its teaching staff over the past several years. If the sequester cuts are not rolled back and become permanent, “It would be … devastating,” said Sweeney.

Las Vegas, Nevada

The Las Vegas Review-Journal recently reported on a woman who may no longer have a safe place to sleep because of sequestration. That is because the Shade Tree, which provides shelter for the woman who asked not to be named and 350 other abused women and children, had its federal funding cut by 15 percent beginning on March 1. This 15 percent cut comes in addition to several state and local funding cuts that the Shade Tree has had to absorb recently. In spite of the fact that the shelter reported an increase in the number of victims of domestic violence and sexual assault seeking assistance, sequestration threatens to make North Las Vegas less hospitable to abused women and children in search of a safe place to sleep.

Yuma, Arizona

Seniors in Yuma, Arizona, face a wide variety of sequestration-related difficulties, ranging from less access to Meals on Wheels programs to the inability to pay the increased rent required by the Section 8 housing-assistance program. The way Dan Weber, president of the Association of Mature American Citizens, sees it, “the sad truth is that seniors, in particular, are being made to suffer for the sake of political brinksmanship.” And although sequestration is intended to save the federal government money, according to the Leadership Council of Aging Organizations, “Any ‘savings’ from the sequester would pale in comparison to the added costs, resulting in premature nursing home placement for seniors who can no longer stay in their homes and communities because of reduced federal funding.”

Atlanta, Georgia

For Georgia students enrolled in technical colleges, sequestration may mean decreased educational opportunities. According to Georgia Public Broadcast News, “the state’s technical schools are anxious about how … sequestration[] could impact their students.” Though Pell Grants, a federal program to help students of limited means pay for college, are exempted from sequestration until at least the 2014 or 2015 academic year, the effects of potential future cuts if sequestration becomes permanent are being felt now. That’s because Georgia lawmakers, in anticipation of future cuts to Pell Grants and other federal programs, raised the GPA requirement on their state scholarship program in 2011, resulting in 9,000 students leaving the state’s technical schools. Ron Jackson, commissioner of Georgia’s Technical College System, believes this will extend beyond individual students because, “It could hurt Georgia’s economic development” by limiting Georgia’s ability to “[create] the workforce we need.”

Kwame Boadi is a Policy Analyst at the Center for American Progress.

SOURCE: AP/David Goldman

A passenger sits in the international terminal at Hartsfield-Jackson Atlanta International Airport, Friday, April 26, 2013.

The preposterous legislative sideshow taking place around sequestration gives a pretty clear picture of how little the people who were elected to run the government actually know about it.

Exactly four days after long-anticipated sequester furloughs began for air-traffic controllers, Congress decided the furloughs were not such a good idea after all. It also decided that perhaps it wasn’t a problem caused by an administrator trying to showboat the evils of across-the-board cuts but in fact a problem with the legislation that the members of Congress had crafted themselves—legislation directing that across-the-board cuts be taken from each program project and activity within the $7.5 billion appropriated for air-traffic operations.

The legislation that the House passed overwhelmingly today would take funds from the Airport Improvement Fund—an account that Congress had previously exempted from any across-the-board cuts altogether—and redistribute it elsewhere within the Federal Aviation Administration, or FAA, thus ending the four-day-old crisis.

On one level, the traveling public should be pleased that this absurd, self-created crisis has been defused. But why did it happen in the first place, and why does Congress fail to address so many of the looming crises that will soon confront the citizens it represents?

The comments made by various participants in the FAA drama over the past few days are enlightening. A number of Republican lawmakers argued that there was no need to furlough any of the 15,000 FAA controllers because the agency has 47,000 total employees. The whole furlough problem could be solved by simply by increasing layoffs in the noncontroller workforce.

Ironically, the people offering this solution just months earlier were attempting to alleviate the defense sequestration cuts by larger cuts in nondefense programs. Now they seem to recognize for the first time that there are nondefense activities of the government that actually do matter to people. But what were these 32,000 noncontrollers at the FAA doing? What would happen if we increased their furlough days in order to eliminate furlough days for the controllers?

It turns out that about 15,000 of those employees install, maintain, and service the equipment used by air-traffic controllers and airline pilots. How much equipment are we talking about here? The FAA has radar, radio relays, transmitters, and other electronic equipment operating at more than 64,000 locations across the United States. Failure to maintain that equipment could be as catastrophic to the safe and orderly functioning of our air-transportation system as the understaffing of control towers.

How about the rest of the employees? Well, there are another 7,500 who work in what is called “Aviation Safety.” Some of these people inspect and certify aircrafts and aircraft equipment before it can be put into service by the airlines. Others monitor airplane maintenance by the airlines and certify the training programs and procedures of the airlines in ensuring proper maintenance of the planes that carry the traveling public hundreds of millions of air miles each day.

The fact that all of the uproar over the FAA furloughs was centered on the controllers and not those who ensure proper aircraft maintenance is a measure of how the current congressional decision-making process is nothing more than a series of knee-jerk reactions to whatever problems happen to make it onto the evening news. And those problems may very well be less of a real threat to our safety and well-being than others that we have not heard about.

The game that Congress is now playing is to impose serious cutbacks across thousands of programs, projects, and activities of the government and then figure out which to restore based on press reports and public outrage.

What will be the next item that Congress will have to fix to deflect the public’s wrath? Maybe it will be the growing lines that airline passengers will face to get through airport security due to the hiring freeze and inability of the Transportation Security Administration to pay for the overtime necessary to surge their workforce at peak travel times. Perhaps it will be a salmonella outbreak in certain fruits or vegetables because Congress responded to the meat industry’s demand to prevent furloughs at the Department of Agriculture but would not do the same for the Food and Drug Administration, which is responsible for all other food products. Maybe an early season hurricane will expose the degradation of the U.S. Weather Service’s data-collection capabilities.

Maybe the press will turn their attention to the fact that more than 70 percent of the staff at military hospitals are civilians and subject to furlough. It is obvious that all of those hospitals are at serious risk of not meeting minimal standards for cleanliness, safety, and quality of care. Perhaps an unexpected slowdown in construction starts will be linked to the growing backlog of unapproved multifamily mortgage applications at the Federal Housing Administration. Maybe we will have an early start to the wildfire season in the western United States, and the hazard posed by the lack of training and preparation already occurring in federal firefighting efforts will be linked to the possible unnecessary loss of millions of acres of forestland and dozens of communities caught in the path of wildfires. Perhaps the furlough of epidemiologists and other health professionals at the Centers for Disease Control will become a topic of public concern with the spread of a new generation of viruses or other infectious diseases.

The one thing you can be sure of, however, is that Congress is not examining these problems in advance and looking at issues across the government in a way that will allow them to be anticipated and resolved before they begin to create enough pain and inconvenience. But with a work schedule that requires them to be in Washington only a few full days a month, how could it?

Scott Lilly is a Senior Fellow at the Center for American Progress.

SOURCE: AP/Damian Dovarganes

A China Southern Cargo jet takes off at Los Angeles International Airport on Monday, April 22, 2013.

Last summer I thought several times of my old friend Bob Williams, who is now retired but who for many years was the head of government affairs for United Airlines. Bob was a strong Republican, and I was just as strong a Democrat. We argued about a lot of things over the years, but one thing I came to appreciate was the fact that there was never a bill introduced in Congress, much less brought up for a hearing or reported by a committee, that Bob did not know inside out if it affected the airline industry.

I thought of Bob’s efforts for United as I worked to explain the probable impact that the sequester legislation might have on the nation’s air traffic control system and on air transportation in general. I argued that there were two options, given how the law was written: Shut down about 100 smaller airports or permit a significant degradation in air-traffic control services between major hub airports. Remarkably, although so much seemed to be at stake, the airlines and their Washington representatives seemed to be missing in action. Bob would have likely been all over this problem before I even realized it was an issue, but there was not a peep from any of the well-heeled current representatives of the airline industry.

Recently the story grew even more bizarre. Nick Calio, president and chief executive officer of Airlines for America, an association that represents the major airline carriers, filed suit against the Federal Aviation Administration for making the furloughs that I had predicted almost a year ago. He gave several press interviews claiming that, “The FAA has a budget of $15.6 billion dollars. A budget that big, surely they can find the money to not furlough the air traffic controllers and have this kind of rolling impact on the [U.S.] economy—it’s gonna cost a lot more.” Hello?

OK, so not every lobbyist is going to be the stickler for detail in the way that Bob Williams was. But we aren’t talking about legislation pending before a committee. We aren’t talking about legislation being debated on the floor. We are talking about a law that has been on the books for a year and a half. Surely someone at Airlines for America had the time to read the law since then.

Chapter 20 of Title II of the U.S. Code, otherwise known as “EMERGENCY POWERS TO ELIMINATE BUDGET DEFICITS,” provides in excruciating detail, written into 17 separate sections of the chapter, instructions to the president of the United States on how to prepare a sequestration order. Not only does Congress forbid agencies from picking and choosing which programs in the agency will be targeted for cuts, but it also forbids them from singling out projects and activities within any of the programs they manage for disproportionate reductions. As a result, the FAA cannot choose the obvious candidate for absorbing the 2013 sequester reduction—grants for airport construction, a program that will have virtually no near-term impact on the country or the traveling public. It cannot even choose among the various projects or activities within Air Traffic Operations to identify programs or activities that could be cut more than others. Everything must be cut the same.

If one were to quibble with the FAA’s implementation of sequestration, it could be argued that the agency has assumed more latitude in implementing the cuts than the law allows. In particular, they have attempted to make major reductions in the contract-tower program, a grant program that subsidizes the hiring of controllers for mostly smaller local airports. If the courts see this as a “program” within the sequestration definition of program, project, and activity, however, these reductions would not be permitted by the law. There is little doubt that the agency is trying to protect the public from increased danger and inconvenience by eliminating air-traffic-control services to these small airports with few flights and passengers in order to avoid even larger cuts at larger more heavily used airports, but it appears to me that they are vulnerable in court if the disproportionate cuts they are exacting against the contract-tower program are challenged.

Now Calio is suing the FAA, saying they shouldn’t do what Congress has ordered. His lawyers make the remarkably lame argument that the FAA is not bound to follow the across-the-board requirements for programs, projects, and activities because the funding was provided in a continuing resolution rather than a regular appropriation bill. That argument is not likely to take the association very far, however, if the judge bothers to read the pertinent sections of the continuing resolution. Section 1102 of Division F states, “Appropriations made by (this act) shall be available to the extent and in the manner that would be provided by the pertinent appropriations Act.” Section 1105 of that same division states, “Except as otherwise expressly provided in this division, the requirements, authorities, conditions, limitations and other provisions of the appropriations Acts … shall continue in effect.”

Perhaps it would have been better to spend some money to have lawyers read the legislation while there was still time to repeal it, rather than paying for a meritless lawsuit to provide cover for the industry’s inept performance in protecting its own interests.

Scott Lilly is a Senior Fellow at the Center for American Progress.

SOURCE: AP/ Seth Perlman

Gov. Pat Quinn (D-Il) speaks to reporters in his office at the Illinois State Capitol. In the fiscal year 2014 budget, Gov. Quinn outlined plans for Illinois to become the second state to launch a Social Impact Bond program.

Media attention following the release of the White House fiscal year 2014 budget last week focused on the big programs and the usual issues: tax provisions, entitlement reforms, and new investments in early childhood education and physical infrastructure. But it is a little-noticed government reform proposal that should be making waves.

The idea is simple and appealing: Pay for Success. In this innovative new approach to financing social programs, government agencies pay for concrete and measurable social outcomes only after they are achieved. Pay for Success mechanisms, such as Social Impact Bonds, leverage private and philanthropic resources to finance social interventions upfront in exchange for a modest return on investment if the program is successful. This ensures that taxpayer dollars truly flow to what works.

Take, for example, a Social Impact Bond aimed at reducing recidivism rates among former convicts. In such an agreement, a city might contract with an outside organization that pledges to achieve a specific, measurable outcome such as reducing the juvenile offender reconviction rate by 15 percent over a period of five years. If the organization is successful, the city will pay an agreed-upon amount, which may be based in part on the anticipated savings in incarceration costs. Pay for Success programs spend government money only on programs with proven results, provide an innovative way to form effective public-private partnerships, and deliver the best outcomes possible at a lower cost to government over time.

This isn’t the first time the White House budget proposed Pay for Success. In fiscal year 2012 there was a modest $100 million request to support Pay for Success models in domestic discretionary spending programs to reduce recidivism, provide workforce training, and combat homelessness. In fiscal year 2013 a similar request was made but for $109 million. Neither of these proposals went anywhere in Congress. In fact, very little attention was given to the idea of Pay for Success, even at a time when budget deficits were a big part of the discussion in Washington.

In this year’s budget proposal, the Obama administration increased support for Pay for Success programs significantly by requesting nearly $500 million to support these programs. The 2014 budget request for domestic discretionary dollars is similar to those in fiscal years 2012 and 2013 and includes a $195 million request this fiscal year in analogous program areas. But the big news is the recently proposed $300 million fund designed to incentivize state and local governments to develop Social Impact Bonds, which will be administered by the Treasury Department.

This minor provision could greatly impact the way our government thinks about and pays for certain social services. A wide range of organizations, from foundations to investment banks to social service providers, see promise in Pay for Success and Social Impact Bonds. These financing tools can provide new capital to scale highly effective social programs, particularly preventive interventions in areas such as homelessness, recidivism, workforce development, health care, education, and other human services.

The Social Impact Bond concept was conceived and tested in the United Kingdom. In 2010 the United Kingdom announced a $13 million deal to bring down recidivism rates among inmates released from Peterborough Prison. Since then the United Kingdom has launched 14 deals to improve everything from foster care to workforce training. The United States enacted its first Social Impact Bond last August in New York City, where Mayor Michael Bloomberg’s administration hoped to reduce recidivism among adolescent males imprisoned at Rikers Island. A host of states, including Massachusetts, Illinois, New York, Texas, Maryland, and New Jersey, are at various stages of exploring how they too can use these programs. Congress hasn’t followed suit, but the new White House budget proposal presents an opportunity for Democrats and Republicans on Capitol Hill to work together to push Pay for Success forward.

Pay for Success and Social Impact Bonds aim to change the way government does business. Governments at all levels in the United States routinely contract out the provision of social services. A study by the Urban Institute found that nearly 200,000 contracts and grants were issued to some 33,000 service providers in 2009. But many social programs and grants aren’t regularly evaluated for effectiveness, even if they track information on program outputs. Of 47 federal programs for workforce development, 41 tracked some outcome measures, but only five programs had completed an impact study since 2004, according to a 2011 Government Accountability Office report.

Pay for Success and Social Impact Bonds include an impact assessment in the funding model since the government does not make payments until positive outcomes are achieved and verified. This allows governments at the local, state, and national levels to pilot new preventive programs with the potential to save money down the line without shouldering all of the financial risk for whether the programs will succeed or fail.

Of course these deals are considerably more complicated than traditional government contracts. First, they begin with a clearly defined, measurable set of outcomes that must be achieved to trigger payment. Second, savings from successful preventive programs can accrue across different budgets and at different levels of government, which causes accounting complications for agencies that wish to use reduced expenditures to repay investors. Third, investors need to assess their appetite for risk with the understanding that some of the deals being considered will adhere to an all-or-nothing model; partial outcomes will not provide partial payments. Finally, different levels of government are best suited to very different roles in Pay for Success, as we recently explained in the Community Development Investment Review. State and municipal governments are much more likely to actually launch Social Impact Bonds, while the federal government’s role is primarily to set standards, galvanize interest, and support the pipeline of deals.

The proposed $300 million Treasury Department incentive fund would be a big deal for Pay for Success in the United States for two reasons. First, the fund would provide incentives for local government by creating a federal budget to partially finance outcome payments for Social Impact Bond deals created by cities and states. This would help mitigate the complicated accounting challenges these agreements pose. Second, the fund would provide credit enhancements for philanthropic organizations’ investments in Social Impact Bonds, offering partial guarantees to reduce the risk that the investor organization will lose all of its capital if a deal fails.

This $300 million Treasury fund, the White House budget explains, is partially modeled on the U.K.’s Social Outcomes Fund. Its £20 million fund “will be used to provide a ‘top-up’ contribution”—a portion of the outcome expenses beyond what any single budget is able or willing to contribute—to help finance payments for complex Social Impact Bond agreements where benefits will cut across multiple budget lines.

To be sure, there are challenges ahead for the proposals in the White House budget and for Social Impact Bonds generally. There’s no guarantee that any part of the White House budget, including Pay for Success, will be enacted by Congress. And Social Impact Bonds are still a work in progress. We need to learn from our experiences with the deals currently in progress in New York, Massachusetts, and elsewhere and continue to modify our approach as we learn what works and what does not. In other words, while Social Impact Bonds are enormously promising, they are not yet proven.

But just because Pay for Success and Social Impact Bonds are complex doesn’t mean we should miss the opportunities they can offer. They provide an improvement, albeit limited, compared to the vast majority of government expenditures on social services that are made without evaluating whether the programs actually work. They allow the government to focus more effort on preventive programs. When budgets get tight, effective preventive services such as reducing reoffending rates among prisoners to break the cycle of recidivism are more likely to get cut than emergency remedial services such as imprisonment. The nearly $500 million the White House proposes for Social Impact Bonds and Pay for Success in a budget that totals $3.7 trillion is a modest proposal with the potential for a tremendous impact.

The Obama administration has taken a big step in proposing the Treasury Department incentive fund, as well as asking for more flexibility in discretionary dollars for Pay for Success financing. These innovative approaches are good for the government, moving them toward paying for outcomes. They are good for nonprofits because they provide more flexible, multiyear funding streams focused on outcomes and not on processes. And they provide an opportunity to align the interests and financing of philanthropic causes and the private sector to achieve real results. Over the next decade the government will be forced to fundamentally change its habits. Rather than relentlessly cutting services, efforts such as Pay for Success provide a good start to finding new ways to effect positive social change.

Sonal Shah is a Senior Fellow at the Case Foundation and at the Center for American Progress. She was previously the director of the White House Office of Social Innovation and Civic Participation. Kristina Costa is Speechwriter to the Chair and Research Assistant in Economic Policy at the Center for American Progress.

SOURCE: AP/Ross D. Franklin

Former Census Bureau Director Robert Groves talks about filling out the 2010 Census forms during a news conference Monday, March 15, 2010, in Phoenix.

Endnotes and citations are available in the PDF version of this issue brief.

The U.S. Census Bureau’s surveys and data underlie many of our national statistics, and their results are used to guide federal policymaking and business decision making. But the agency is once again under attack in Washington, with budget cuts threatening some of the bureau’s core functions and an ideological challenge brewing from some of the most hardcore, antigovernment congressional Republicans.

The automatic across-the-board cuts known as sequestration, combined with additional cuts enacted in the continuing resolution funding the government through this September, will reduce the Census Bureau’s requested budget for fiscal year 2013 by nearly 13 percent, to $845 million from a requested $970 million. At the same time, the American Community Survey, or ACS—the annual sampling survey that replaced the “long-form” census after the 2000 census—is in the crosshairs of the House Republicans who last year voted to fundamentally alter and defund the survey.

Both of these efforts are certainly pound foolish, but they can’t even be said to be penny wise. Census Bureau statistics are essential to the effective functioning of our government and our economy; the bureau is responsible for accurately collecting, analyzing, and reporting much of the data underpinning crucial government operations.

At a time when we need more data-driven decision making in government, it shows an utter lack of foresight on the part of policymakers to reduce financial and political support for the agency.

Cutting the Census Bureau’s budget and eviscerating the American Community Survey will lead to less-informed government and a more expensive decennial count in 2020, as well as endanger data sources essential to government, researchers, and businesses alike. Let’s consider each of these issues in turn.

Reckless budget cuts to the Census Bureau will lead to less-informed government 

The Census Bureau faces an estimated $46 million budget cut under sequestration, the automatic across-the-board spending cuts that took effect at the beginning of March. In a letter last month, acting Commerce Secretary Rebecca Blank wrote that sequestration would force the agency to delay the economic census, the once-every-five-years survey that forms the basis for a wide range of economic indicators from gross domestic product, or GDP, to unemployment. Blank described the move as “putting at risk our ability to take accurate stock of current economic conditions and well-being and potentially impacting policymaking and economic decisions in the private sector.”

It’s unclear exactly how the Census Bureau will actually deal with sequestration now that the cuts are beginning to take effect. Blank’s letter also mentioned reducing contract work, letting open positions in the census workforce go unfilled, and potentially delaying or canceling tests of new methodologies for conducting the decennial census—tests that are necessary to implement cost-saving measures in 2020.

Delaying the release of data from the economic census is a problematic proposition at a time when Congress is potentially planning to address large-scale economic issues such as comprehensive tax reform. The most recent economic census data date to 2007, before the Great Recession. “We have one of the fastest-moving economies in the world,” said Phil Sparks, co-founder of the Census Project, an advocacy group for local governments, businesses, and other census advocates in an interview with The Huffington Post. “To have data that is this dated and dog-eared, we’re just tying one hand behind our backs economically.”

The economic census isn’t the only Census Bureau survey that directly impacts government and business decision making. Data collected in the much-maligned American Community Survey help direct more than $400 billion in federal money to states and localities each year. Highway planning and construction, special education, Section 8 housing assistance, and transit grants are among some of the program areas where ACS data guide state-by-state spending.

“We already suffer too much from what might be referred to as ‘policymaking by anecdote,’ where lawmakers seek to pass legislation before sufficiently examining the severity—or sometimes even the existence—of a perceived problem,” American Enterprise Institute scholar Andrew Biggs said in 2012 testimony before the House Oversight and Government Reform Committee supporting the American Community Survey. “Reducing the quantity and quality of data available to policymakers, analysts and researchers threatens to exacerbate this problem.”

Cutting the Census Bureau budget today means a more expensive count in 2020

While the census gets the spotlight during the year of the decennial count, the Census Bureau is far from idle during the rest of the decade. In addition to running surveys such as the economic census, the Current Population Survey, and the American Community Survey, the early and middle parts of the decade give the agency time to analyze on the recently completed decennial survey and begin planning for the next population count.

This planning period is critical if the Census Bureau is to counteract the rising cost of counting each household. In 2010 it cost $96 per household to conduct the decennial survey, up from just $39 in 1990. Absent actions to control the cost of the count, the 2020 census could cost as much as $25 billion overall, according to the Government Accountability Office. That’s a 92 percent increase from the Census 2010 price tag of $13 billion.

The Census Bureau has pledged to keep the cost of counting each household from rising in the 2020 decennial census. In order to do that, the agency will need to design and pilot programs and statistical methods that could save money on the decennial count, and they will need to launch those pilots in the next few years in order to be ready for 2020. Budget cuts today could doom the potential for offering an Internet response option for the decennial count. This option allows households to reply to the census online, cutting printing, labor, and mailing costs considerably. In addition, some Census Bureau tests have shown that the Internet option also boosts the initial response rate of households, which reduces the need to hire door-to-door canvassers to follow up with nonresponding households. Budget cuts could also prevent the Census Bureau from finding cost-effective ways to use administrative records—data collected by other agencies through things such as tax records and benefit claims—while preserving individual privacy and survey accuracy during the 2020 count.

The Census Bureau simply will not be able to deploy potentially cost-saving methods in the 2020 decennial census if they do not have adequate time and resources to field test those methods well in advance. As a result, the population count could wind up costing billions more than it needs to cost.

Without being able to test these new approaches, the Census Bureau in the later part of the decade will have only two choices: ask Congress for more money to conduct an accurate count, or diminish the quality of the survey. The Census Bureau doesn’t want either of these outcomes, and both possibilities could easily be avoided if Congress adopts a more long-term view of the census budget.

The deficit hawks in Congress should take note. Not all budget cuts are created equal; accurate and timely data on the economy, the demographic composition of the population, and socioeconomic measures are necessary for efficient government and data-driven decision making. These are compelling reasons why policymakers should protect the Census Bureau’s budget.

The debate over the American Community Survey is more about messaging than governing, and will have real-world consequences 

For 150 years a long-form census was distributed to a sample of the population as part of the decennial census process. The survey asked a range of detailed questions about everything from housing characteristics to how respondents commuted to work in order to guide federal policymaking. After the 2000 census the Census Bureau transitioned the long-form census from a decennial count to a continuous sample survey, which is conducted on an ongoing basis to provide more current socioeconomic data. This is the American Community Survey, an annual exercise that provides policymakers, researchers, and businesses with granular, real-time information about our constantly changing nation.

In 2012 the Republican-controlled House voted first on an amendment to make responding to the American Community Survey voluntary rather than mandatory, which would make the survey less accurate and much more expensive to administer, as more manpower would have to be devoted to following up in person or by phone with nonresponsive households. In the same debate, the House voted on another amendment to defund the survey entirely, claiming that it was unconstitutional. The Senate didn’t take up either proposal, and the American Community Survey was preserved.

But Rep. Ted Poe (R-TX) and Sen. Rand Paul (R-KY) have now introduced new legislation concerning the American Community Survey. Much like the 2012 amendment, the legislation would make ACS response voluntary. But it goes further than that. First, it would require the Census Bureau to explicitly note in the survey instructions that responding to the bulk of the form is not mandatory. Second, it would bar the Census Bureau from asking questions related to religious affiliation or practice. Because the agency is already prohibited by law from asking these questions, an amendment such as this would merely waste congressional time and resources.

Poe claimed in a press release that the survey is “intrusive” and that he hears from “countless Texans” who “feel intimidated” by the survey. In last year’s floor debate over defunding the American Community Survey, Iowa Republican Steve King summed up his support for the amendment to defund the survey, saying, “I think it’s important to have the information, but it’s important that people have freedom and liberty and we do not have an intrusive federal government that would impose a fine on people if they didn’t let the information come out about whether they had a flush toilet.”

Every question asked on the American Community Survey, however, must have a direct federal purpose. Housing questions, for instance, are used to determine fair market rents for housing-assistance programs, while questions about educational attainment and household income are used to help direct federal education dollars to low-income areas. The Census Bureau provides extensive information on its website about how the government uses the data collected. A 2010 analysis found that seven of the questions in the American Community Survey have been asked in every long-form census since 1850.

Businesses also use ACS data in a range of decisions, including where to build new stores. In a Bloomberg Businessweek story about last year’s attempt to defund the survey, the Chamber of Commerce’s chief economist, Martin Regalia, is quoted as saying that the survey “is especially important to some of our bigger members for trying to understand geographic distinctions and other granularity in the economy.” Tom Beers, the executive director of the National Association of Business Economists, said that ACS data prevent businesses from “flying blind.”

Simply put, there is no valid policy motivation behind legislation to make the American Community Survey voluntary. Not only is the Census Bureau already barred from asking questions related to religious affiliation or practice, but making the American Community Survey voluntary would also raise costs and make the results of the survey less accurate. We need only look to our neighbors to the north for evidence that voluntary censuses don’t work.

Canada conducts a short- and long-form census every five years, and after the 2006 count, the conservative Harper government made responding to the long-form survey—but not the short-form survey—voluntary. Canada is the only country to have made part of its census process voluntary, and the results are staggering. In 2006, when the long-form census was last mandatory, Statistics Canada, our neighbor’s Census Bureau equivalent, saw a 94 percent response rate. In 2011, when that same survey was made voluntary, the response rate dropped to just 69.3 percent. What’s more, the survey cost about $30 million more than its predecessor because Statistics Canada increased the sample size in an attempt to maintain data reliability.

The Census Bureau produced a report on the expected costs of a voluntary American Community Survey following last year’s attempts to defund it. They found that maintaining the current level of data reliability if the American Community Survey became voluntary would require a larger sample size and, ultimately, a bigger price tag—about $90 million higher in 2013.

Since the policies proposed in this legislation would be actively detrimental to the American Community Survey—or outright illegal—the astute observer is forced to conclude that the legislation is more about messaging than it is about governing.

Conclusion

The Census Bureau needs champions. When the House voted last year to defund the American Community Survey, business groups and researchers on both sides of the political spectrum spoke out in passionate defense of the survey’s purposes and the Census Bureau’s professionalism. But that broadside was just clearly the beginning of challenges to the agency’s ability to gather and publish data on the well-being, population, and socioeconomic status of the nation—data essential to the effective functioning of our government and our economy.

Kristina Costa is Speechwriter to the Chair of American Progress. She also conducts research and writes on social impact bonds and other topics in government reform. 

SOURCE: AP/Charles Dharapak

President Barack Obama speaks about his proposed fiscal year 2014 federal budget, Wednesday, April 10, 2013, in the Rose Garden of the White House in Washington.

In its latest budget proposal to Congress, the Obama administration has requested $526.6 billion in baseline funding for the Department of Defense, a $1 billion increase from the administration’s defense budget request last year. In accordance with the long-term budget plan it announced last year, the Obama administration’s FY 2014 defense budget request holds the baseline defense budget steady at historic highs after a decade of tremendous growth.

This is a missed opportunity to realign our national security priorities. Unnecessary defense spending does not make us safer; it diverts resources away from other critical investments here at home that create jobs and rebuild our infrastructure. Moreover, many of the big-ticket items in the Pentagon’s budget request are ill suited for dealing with the complex transnational threats facing the country today, serve only to reinforce the United States’ overwhelming superiority in conventional and nuclear weaponry, and come at a considerable cost to American taxpayers.

If Congress and the administration are serious about deficit reduction and serious about cracking down on wasteful federal spending, they should both aim to return the baseline defense budget to pre-9/11 levels as soon as possible.

A budget that’s holding steady

In unveiling its FY 2013 budget request last year, the administration announced its plans to reduce baseline defense spending by $487 billion over the next decade, as mandated by the Budget Control Act. These proposed “cuts,” however, came from projected increases in defense spending; the administration’s plan would have actually held the defense budget steady over the next 10 years in inflation-adjusted dollars.

With its FY 2013 budget proposal, the Obama administration ended the irresponsible increases in baseline military spending that have occurred since 9/11, but its long-term budget plan did nothing to reverse this growth or bring the budget down from near historic highs. And unfortunately, the proposed FY 2014 budget maintains this unwillingness to return military spending to prewar levels or historical norms in real terms.

Simply put, the United States can—and should—safely reduce military spending by more and can do so more quickly than the administration’s current plan envisions.

Despite the national concern about the size of the federal deficit, the Pentagon’s budget has remained relatively stable in real terms in recent years, as shown in Figure 1. In fact, the only noteworthy reduction in defense spending since 9/11 occurred this year, in FY 2013, when sequestration required a $41 billion cut.

An alternative to sequestration

In its latest budget proposal, the administration outlines a deficit-reduction plan, including both new revenues and spending cuts, which can replace sequestration and its across-the-board cuts. This plan includes about $100 billion in cuts to the defense budget beginning in 2017.

Sequestration, with its across-the-board cuts, is not a smart way to reduce defense spending, and the administration’s desire to replace these automatic cuts with a more targeted deficit-reduction plan is understandable. By cutting all programs evenly, sequestration denies Pentagon officials the ability to manage the budget drawdown by targeting underperforming programs while protecting initiatives that have proven effective.

Yet if the administration is truly serious about deficit reduction and cracking down on wasteful federal spending, the Pentagon can afford to cut more than $100 billion, and these cuts should begin before 2019. In fact, as shown in Figure 2, U.S. military spending reached unprecedented peaks during the wars in Iraq and Afghanistan. As the United States winds down its involvement in Afghanistan, it can return the budget to peacetime levels, which will require reductions of nearly $100 billion per year, not $100 billion per decade.

Responsible defense cuts

Over the past four years, the Obama administration has demonstrated that it is serious about protecting the United States and its interests abroad. But the country needs a defense budget that’s effective, not just enormous. In 2011 we spent more than China, Russia, the United Kingdom, France, Japan, India, Saudi Arabia, Germany, Brazil, Italy, South Korea, Australia, and Canada combined on our military.

Last year the Center for American Progress released an issue brief outlining politically feasible defense cuts. If implemented, these reductions would present a moderate first step toward returning the budget to sustainable levels. Here are the ideas we proposed:

• Eliminate the Navy’s purchase of the troubled over-budget F-35C jet and instead purchase the effective and affordable F/A-18E/F jet. Savings: about $17 billion over 10 years.
• Reduce the size of our ground forces to their prewar levels. Savings: about $16 billion over the next decade.
• Reform the Pentagon’s outdated health care programs. Savings: roughly $40 billion over 10 years.
• Reduce the number of deployed nuclear weapons to 1,100 by 2022 from about 1,700 today. Savings: more than $28 billion over 10 years.

Further, Congress must also accept many of the administration’s common-sense cost-savings proposals, including modest changes to health care benefits for military retirees, the creation of a new Base Closure and Realignment Commission to close down unneeded military installations, and targeted reductions or slowing down the procurement of over-budget or ineffective weapons systems.

The United States faces no existential threats or rival superpowers. We should not be spending as much on defense as we did during the Cold War. Returning the defense budget to historical norms will force the Pentagon to better manage its affairs and will help ensure that taxpayer dollars are spent responsibly.

Lawrence J. Korb is a Senior Fellow at the Center for American Progress. Alex Rothman and Max Hoffman are Research Associates at the Center.

SOURCE: AP/J. David Ake

President Barack Obama, accompanied by acting Budget Director Jeffrey Zients, speaks in the Rose Garden of the White House in Washington, Wednesday, April 10, 2013, to discuss his proposed fiscal year 2014 federal budget.

President Barack Obama’s compromise fiscal year 2014 budget offer to conservatives in Congress would result in spending and revenue levels that are lower than those proposed by former Sen. Alan Simpson (R-WY) and former White House Chief of Staff Erskine Bowles in 2010 in their bipartisan budget plan. The spending cuts included in the president’s offer largely mirror those of the Simpson-Bowles proposal, but the overall amount of new revenue falls far short of Simpson-Bowles. If that plan is a marker for the “middle ground” in the budget debate, then the president’s offer is actually to the right of center.

The president’s FY 2014 budget reaffirms his willingness to accept the budget compromise that he offered House Speaker John Boehner (R-OH) in December 2012. That compromise offer entails:

• $200 billion of additional discretionary cuts, bringing the total amount of discretionary cuts enacted since the start of FY 2011 up to well more than $1.6 trillion
• $400 billion in health care savings
• $200 billion in cuts to other mandatory programs
• $230 billion in deficit reduction stemming from the switch to an alternative measure of inflation
• $580 billion in new revenue
• $200 billion in interest savings

When added to the deficit reduction already accomplished, the president’s offer includes more than $3 trillion in spending cuts and just $1.3 trillion in revenue. In addition to the enacted deficit reduction, projections of federal spending have been reduced for a variety of other reasons, primarily the recent slowdown in health care costs. Put it all together, and the president is willing to accept overall federal spending levels that are an average of about 0.5 percentage points of gross domestic product less than those in Simpson-Bowles, and revenue levels that are a full percentage point below those in Simpson-Bowles.

Notes on methodology

Spending and revenue levels for the president’s compromise offer include only the proposals designated in the budget as “December Compromise Deficit Reduction Package.” They do not include other policy proposals in the president’s budget. The spending level does assume a drawdown in “overseas contingency operations” spending, however, as specified by the president’s budget.

The chart above shows spending and revenue levels only through 2021 because the most recent estimates of the original Simpson-Bowles plan extend only through that year.

Michael Linden is the Managing Director for Economic Policy at the Center for American Progress.

SOURCE: AP/ John Bazemore

President Barack Obama gestures as he speaks at the Decatur Recreation Center in Decatur, Georgia, about his plans for early childhood education. On April 10, 2013, President Obama called for significant investment in pre-school education in his fiscal 2014 proposed budget.

Two months ago in his State of the Union address, President Barack Obama pledged to dramatically expand access to high-quality preschool. Today in his fiscal year 2014 budget proposal, the president made good on this pledge by calling for a bold new $75 billion investment in preschool over 10 years. This investment would significantly shrink the preschool-access gap by helping states establish and expand high-quality programs.

The president’s budget also includes important investments to support the nation’s youngest children and working parents, including $1.4 billion in FY 2014 to expand high-quality child care for infants and toddlers and $15 billion over 10 years to expand states’ home-visiting programs for at-risk families.

Some might be skeptical of the federal government’s role in expanding preschool. But today’s budget makes clear that the president’s preschool plan is a true state-federal partnership. The president’s plan will help states grow their own preschool programs—an effort that is already well underway in many states. Thirty-nine states have already established state-funded preschool programs, and Mississippi is now poised to join their ranks.

At the state level preschool is not a partisan issue. Red states such as Oklahoma and Georgia are among the leaders in enrolling 4-year-olds in preschool, and Republican leaders in states such as Mississippi, Alabama, and Michigan are also working to invest more in preschool.

Under the president’s plan, states will be eligible to receive new federal dollars in return for investing their own dollars. And while the federal government will ensure that state programs meet high quality standards, states will continue to run their own programs. This state-federal partnership would cover all 4-year-olds from low- and moderate-income families at or below 200 percent of the poverty line. In addition, the new federal resources would free up state dollars to reach 3-year-olds and children from higher-income families and to provide full-day kindergarten.

We’ve known for many years that preschool can provide children with enormous lifelong benefits. But mounting evidence now shows that large-scale programs in states such as Oklahoma and Texas are highly effective. Research suggests that while low-income children and English language learners usually reap the greatest benefits from attending preschool, higher-income children receive substantial benefits as well.

Critics will argue that we cannot afford to make these new investments in the current fiscal climate. But studies show that investing in preschool will pay for itself by increasing future tax revenues and decreasing future spending obligations.

In addition, the president’s budget fully offsets the cost of his preschool plan by increasing the tax on cigarettes and other tobacco products by 94 cents. This has the added benefit of promoting a healthier population and reducing the number of kids who take up smoking.

State leaders throughout the country are working across party lines to invest in young children. Congress should follow suit.

Melissa Lazarín is the Director of Education Policy at the Center. Sasha Post is Special Advisor to CAP President and CEO Neera Tanden.

SOURCE: AP/ Charles Dharapak

President Barack Obama, accompanied by acting budget director Jeff Zients, speaks about his proposed fiscal 2014 proposed budget, April 10, 2013, in the Rose Garden at the White House in Washington.

President Barack Obama’s budget proposal for fiscal year 2014 would eliminate $39 billion of special tax breaks for Big Oil companies over the next decade as part of comprehensive business tax reform. These companies earned billions of dollars in recent years due to high oil and gasoline prices and do not need additional support from taxpayers. These tax breaks emerged over the past 100 years to help the then-nascent industry develop, and they relieved the oil and gas industry of $466 billion in tax payments to the federal treasury between 1918 through 2009, according to DBL Investors. Now that the oil and gas industry is fully developed and mature, President Obama’s budget would end this century of largesse.

The five largest oil companies—BP, Chevron, ConocoPhillips, ExxonMobil, and Shell—earned a combined total of $255 billion in 2011 and 2012, largely a result of higher oil prices. Meanwhile, these companies are producing less oil, have $72 billion in cash reserves, and are using one-quarter of their profits to buy back their own stock to enrich their largest shareholders. (see Table 1) Reuters reported last year that Chevron, ConocoPhillips, and ExxonMobil—the three largest American oil companies—paid half or less of the standard corporate tax rate. President Obama’s budget recognizes that oil companies no longer need tax relief.

In contrast, the House of Representatives would continue to provide tax subsidies for one of the richest industries in the world. It passed an FY 2014 budget authored by Rep. Paul Ryan (R-WI) that retains these existing special tax preferences and provides yet another tax break on top of them. What’s more, the House budget cuts the corporate tax rate by nearly one-third, which would provide more than $2 billion annually in additional tax relief to the five largest oil companies.

The American Petroleum Institute, or API, serves as Big Oil’s lobbying arm and is spending tens of millions of dollars on ads and lobbying to pressure Congress to retain these special tax breaks. API equates eliminating special tax breaks with tax increases, when in actuality such legislation would simply make Big Oil pay its fair share of taxes. Economists recognize that tax breaks are simply federal government spending through the tax code, which also contributes to the budget deficit.

Donald Marron, the director of the independent nonpartisan Washington research group Tax Policy Center, explains that “a great deal of government spending is hidden in the federal tax code in the form of deductions, credits, and other preferences—preferences that seem like they let taxpayers keep their own money, but are actually spending in disguise.”

Many influential conservatives also understand that tax expenditures have the same budgetary impact as direct government expenditures. Martin Feldstein, for instance, who chaired the Council of Economic Advisers under President Ronald Reagan, notes that tax expenditures are “those features of the tax code that are a substitute for direct government spending.” And in 2010 Rep. Dave Camp (R-MI), the current chair of the House Ways and Means Committee, observed that:

… we must admit that not all of that spending has been through increased appropriations or expanded entitlements; much of it has been through the back-door proliferation of “tax expenditures”—provisions that technically reduce someone’s tax liability, but that in reality amount to spending through the tax code.

The House-passed Ryan budget would keep existing special tax breaks and give Big Oil additional tax cuts, while also slicing vital middle-class programs, including education, science, and infrastructure. Meanwhile, President Obama’s proposal to eliminate $40 billion of special tax breaks for Big Oil as part of comprehensive business tax reform would make the tax code more fair.

Daniel J. Weiss is a Senior Fellow and the Director of Climate Strategy at the Center for American Progress.

SOURCE: AP/Susan Walsh

President Barack Obama, accompanied by acting Budget Director Jeffrey Zients, speaks in the Rose Garden of the White House in Washington, Wednesday, April 10, 2013, to discuss his proposed fiscal year 2014 federal budget.

President Barack Obama’s fiscal year 2014 budget is unlike any previous presidential budget request in recent history. It is not a statement of the president’s vision for the federal budget. It does not represent what he thinks is the best course of action for spending, taxation, and broader federal fiscal policy. It is not, in short, his preferred budget plan. Rather, for the first time ever, it is a preemptive compromise budget.

It includes more than $1 trillion in additional spending cuts, on top of the $1.9 trillion that the president has already accepted and signed into law. It includes significant changes to entitlement programs, as well as further cuts to a portion of the budget that was already cut down to historic lows. And it includes far less new revenue than the president has called for in the past. All told, President Obama’s compromise budget would raise less revenue and set government spending at approximately the same levels as the much-ballyhooed bipartisan plan proposed by former Republican Sen. Alan Simpson and former White House Chief of Staff Erskine Bowles in 2010. By that standard, the president’s compromise budget is to the right of Simpson-Bowles.

And yet, for all the president’s willingness to make major concessions, conservative leaders in Congress already appear to have rejected the compromise out of hand. Last Friday before the full budget was even released, House Speaker John Boehner characterized it as “no way to lead and move the country forward.”

This immediate refusal to even consider the president’s generous offer is remarkable and indefensible when you consider the full scope of the deficit reduction it contains. Since the start of fiscal year 2010, Congress has already passed and the president has signed into law about $2.4 trillion of deficit reduction. Of that amount, nearly three-quarters were spending reductions, while only one-quarter was revenue increases. When you add to that the additional spending cuts that the president is willing to accept in return for some additional revenue, the totals swell to approximately $3 trillion in spending cuts and to about $1.3 trillion in revenue. This is a ratio of well over $2 in cuts to every $1 in revenue. Considering that the ratio of spending cuts to revenue increases in the Simpson-Bowles proposal was only about 1.4-to-1, the president’s proposal goes well past halfway to try to meet his political opponents on common ground.

Indeed, in nearly every portion of the federal budget, the president signaled his willingness to accept policies that fall far short of what he considered optimal in the past. To start with, his new compromise budget includes additional cuts to a category of spending known as “non-defense discretionary.” This blandly titled category actually includes most of the critical, foundational public services and economic investments that make up the day-to-day operations of the federal government. Despite this, it has already absorbed enormous spending cuts as the lion’s share of the programmatic spending cuts that Congress already passed was directed at this one category of spending. As a result, funding for everything from education to highways to food safety is now—even without additional cuts—projected to decline to its lowest levels on record. Yet the president is willing to accept even further cuts in this area.

The president’s compromise budget also again signals his willingness to make significant changes to entitlement programs. “Again” is an important descriptor here. Proposing reforms in health care programs to save the government money is nothing new for the president. In each of his previous budget plans, President Obama put forward policies to improve efficiency in Medicare and to reduce spending. In this new compromise budget, the president upped his offer to $400 billion in reforms to federal health care programs. In fact, the president’s compromise offer includes more Medicare savings than does the House Republican budget.

On top of the $400 billion in health care reforms, the president also proposed $200 billion in changes to other mandatory programs. He also included a change to the way that inflation, commonly called “chained CPI,” is calculated. These changes would reduce Social Security benefits compared to what is scheduled in current law, producing another $130 billion in reduced spending.

This proposal to change the indexing formula for Social Security is an especially large concession, given that conservatives in Congress have given no reciprocal movement on revenues, and given that they may not accept this proposal as the final parameters of a large-scale budget deal. And while a few progressive groups, including the Center for American Progress, in the past called for the switch to chained CPI in policy proposals, it was always done in the context of a comprehensive plan to resolve the long-run shortfall in Social Security. Additionally, it was always paired with progressive reforms to the payroll tax and always included protections for low-income families and the elderly—populations for whom the chained index likely understates inflation. To the president’s credit, he does include the latter protections, but his compromise offer does not include a comprehensive strengthening of the Social Security system, nor any reforms whatsoever to the payroll tax. Even the Simpson-Bowles plan, which also proposed switching to the alternative measure of inflation, included revenue-raising reforms to the payroll tax as well.

All told, the president is proposing more than $1 trillion in additional spending cuts. And what is he asking for in return? With his oft-stated commitment to a “balanced plan,” one might expect him to propose a similar amount of new revenue. But that is not the case. The president’s budget includes only $580 billion in new revenue, plus another $100 billion in additional tax revenue generated from the switch to chained CPI. And recall that the deficit reduction to date is already significantly tilted toward spending cuts. Even combined with the $600 billion in revenue generated from the American Taxpayer Relief Act, better known as the fiscal cliff deal, that still leaves him well short of the revenue of his previous budgets, which were already lower than the levels proposed by bipartisan experts. Yet another compromise.

Of course, compromise means both sides giving up something to reach an agreement. And certainly the president is hoping and expecting that conservatives will be reasonable and accept his proposal for this eminently moderate amount of additional revenue. Moreover, the president’s specific proposals for how to raise that revenue are equally reasonable. Right now, for example, itemized deductions such as those for mortgage interest and income exclusions such as the one for employer-provided health insurance benefit higher-income households more than middle- and low-income households. President Obama’s budget wouldn’t eliminate these breaks for anyone, but would limit their value for higher income tax payers so that the benefits aren’t quite so skewed. That alone would raise $530 billion.

The president’s compromise proposal also includes numerous other smart offers. It includes $50 billion in immediate job-creating investments—an absolute necessity given the fact that getting our budget in order will be impossible if unemployment remains high. In the realm of health care, the president’s suggested policies focus on improving the efficiency of Medicare without harming beneficiaries. Indeed, his reforms largely mirror those proposed by the Center for American Progress. The president also proposed some additional cuts to military spending, though certainly less than he could have.

But it is outside the confines of his compromise budget offer where one can find the president’s best ideas. The president’s call to expand quality pre-kindergarten to all 4-year-olds, for example, is an important step toward ensuring the country’s future competitiveness in a global economy. He correctly identifies billions of dollars in inefficient, unnecessary, and wasteful business tax breaks that are ripe for reform. And we sorely need to reinvest in transportation infrastructure, as the president suggests.

Unfortunately, most of these good ideas are relegated to a kind of second-class status. They are not part of the president’s compromise budget offer, despite the fact that each and every one of them is fully paid for and would not add to the deficit or debt. As a result, the president’s compromise budget is fundamentally constrained despite the presence of many good ideas. It is constrained not by actual fiscal limits, but by perceived political limits. And those constraints have produced a budget offer that looks decidedly compromised when compared to the president’s previous budget plans, when compared to other progressive budget plans, and even when compared to bipartisan budget plans.

Michael Linden is the Managing Director for Economic Policy at the Center for American Progress.

SOURCE: AP/J. Scott Applewhite

House Budget Committee Chairman Rep. Paul Ryan (R-WI), appears before the House Rules Committee to testify on his party’s budget proposal at the Capitol in Washington, Monday, March 18, 2013.

House Budget Committee Chairman Paul Ryan’s (R-WI) budget plan for fiscal year 2014 allocates nearly 97 percent of its proposed cuts to the portion of federal spending that is already projected to decline over the next 10 years. To the portion of the federal budget that is expected to rise, Rep. Ryan allocates just 3 percent of his proposed cuts. These simple numbers put the lie to the notion that the Ryan budget is in any way a responsible solution to the legitimate fiscal challenges the country will face in the coming years.

You often hear conservative leaders claim that the United States has a “spending problem.” This isn’t really true, of course. Under current policies, as defined in Rep. Ryan’s latest budget plan, total noninterest spending—that is, all spending except for interest payments on the debt—is already projected to decline from 20.8 percent of U.S. gross domestic product, or GDP, this year to 19 percent of GDP by 2016, and to remain at around 19 percent of GDP through 2023. It is hard to see a “spending problem” in those numbers, especially since noninterest federal spending has averaged 18.7 percent of GDP since 1967.

It is true, however, that a certain portion of federal spending is projected to rise somewhat over the next 10 years: retirement-program spending—specifically Social Security and Medicare, which both serve mainly senior citizens. And the country is about to experience a dramatic increase in the number of senior citizens, as the baby boom generation retires. Federal spending on these two programs this year will total about 8.2 percent of GDP and will make up approximately 40 percent of all noninterest federal spending. Under current projections—and again, using the same assumptions that Rep. Ryan does—spending on Social Security and Medicare will rise to 9 percent of GDP by 2023 and will claim 47 percent of all federal noninterest spending.

But if overall spending is projected to decline and then remain stable, while Social Security and Medicare are projected to rise, that must mean that all other programmatic spending is actually projected to decline. And, in fact, that is exactly the case. All federal spending aside from Social Security, Medicare, and interest payments on the debt will total 12.6 percent of GDP this fiscal year. Under current policies, that total is expected to decline to 10.1 percent of GDP by 2023. In other words, if we have a “spending problem” at all, it’s certainly nowhere to be found in the half of the budget that is actually getting smaller.

Why, then, does Rep. Ryan’s budget plan allocate nearly all of its massive spending cuts to the portion of the federal budget that is shrinking and nearly none to the portion of the budget that is growing? Rep. Ryan’s budget calls for a total of more than $3.9 trillion in noninterest spending cuts over the next 10 years relative to current policies, as defined by Rep. Ryan himself. About 97 percent of those cuts—more than $3.8 trillion—are apportioned to programs other than Social Security and Medicare. As a result, all federal programmatic spending other than Social Security and Medicare would decline from 12.6 percent of GDP today to just 7.9 percent of GDP by 2023 under the Ryan budget. By contrast, spending on Social Security and Medicare would still rise from 8.2 percent of GDP today to 8.8 percent of GDP by 2023. In fact, Rep. Ryan’s cuts to the “all else” category are so deep that by 2021 the federal government will be spending more on Medicare and Social Security than on every other program in the budget combined.

Defenders of the House Republican budget claim that their draconian spending cuts are necessary to solve a “spending problem.” But nearly all of those cuts would be applied to a chunk of the federal budget that is already expected to decline substantially, while the parts of the budget that are expected to see a modest rise in costs are left mostly untouched. Perhaps the Ryan budget isn’t actually designed to solve a “spending problem” after all.

Michael Linden is the Director for Tax and Budget Policy at the Center for American Progress.

SOURCE: AP/M. Spencer Green

This March 12, 2013, photo shows the air traffic control tower at Chicago's Midway International Airport.

This column was originally posted on The Huffington Post.

In recent weeks, several highly regarded journalists have embarrassed themselves on the subject of sequestration. Brian Williams on the “NBC Nightly News” suggested that in implementing its budget cuts the White House may be “picking its targets, looking to make its point in a big showy way.” The network’s senior investigative correspondent, Lisa Myers, elaborated on Williams’s thesis, offering several examples of misplaced priorities in the choices being made by the White House in implementing the sequester. Myers observed, “The Federal Aviation Administration says it may need to furlough air traffic controllers and close towers, creating delays — yet it’s spending $20 million giving away money to tiny airports … that might get one private plane landing a week.”

CNN’s Candy Crowley made much the same point two weeks earlier in an interview with Transportation Secretary Ray LaHood. “As far as we can figure out, the FAA budget … is about $15 billion give or take. They’re going to have to cut $600 million, about 4 percent. Why is that enough to cause planes to be delayed for an hour and a half? There surely must be things inside the FAA budget where can you get rid of 4 percent.”

Both Myers and Crowley are correct in saying that it would be possible to cut the Federal Aviation Administration budget in a far less disruptive way than the sequestration plan outlined by the agency’s administrator, Michael Huerta, on February 22. Cutting grants to airports would in my judgment be an excellent place to start. It is true as Myers suggests that some of the funding goes to airports that have a very low volume of passengers. Further, these grants won’t even be awarded until later in the current fiscal years, and they will fund improvement projects that generally take a good while to start and a long time to complete. As a result, cutting them will have a fraction of the impact on the economy that laying off air traffic controllers will have. A less than 20 percent whack at this $3.5 billion pot of money would mean that nothing else in the FAA would have to be touched.

So why did the FAA administrator along with Transportation Secretary Ray LaHood and the White House make the decision to cut the controllers instead? Was it about grandstanding and budget hype? All I can say to the producers, editors, and reporters at these two networks and the numerous other journalists who have made similar mistakes in recent weeks is that it is time you read the legislation Congress passed more than 19 months ago.

The Budget Control Act, which raised the debt limit, averted national default, and in return required the president to issue a sequester order if the so-called super committee failed to reach agreement, also directed the president in how he was to prepare that sequester order. Those instructions are codified in Chapter 20 of Title 2 of the U.S. Code, which is entitled “Emergency Powers to Eliminate Budget Deficits.” Among the thousands of words of instructions that the president must comply with is Section 905, entitled “Exempt Programs and Activities.” This section goes through numerous categories of programs that will not be subject to sequestration excluding more than 150 from the process. The final subparagraph of this section essentially exempts the seven programs under the spending jurisdiction of the House Transportation and Infrastructure Committee and its Senate counterpart, the Committee on Environment and Public Works. These are the only discretionary programs that are controlled by committees other than the House and Senate appropriations committees and their masters had the clout to make them exempt. Among those seven programs are Federal Aid Highways and Ms. Myers’s Grants-In-Aid for Airports.

As a result the president can order no cut in airport grants and as a result must make somewhat larger cuts in all other nondefense discretionary programs.

Even if Congress had not exempted the airport grants from sequestration, the strategy for averting flight delays and averting tower closures suggested by both Myers and Crowley—take the bulk of the money out of lower priority programs—would not be permitted by the sequester legislation.

Granting the president the authority to unilaterally decide where and how to cut appropriated funds represents a major transfer of power from the legislative branch to the executive. It goes to the very heart of the issue of separation of powers and the system of checks and balances. Congress’s ability to control and define the resources made available to the executive is the foundation of that system.

Since the process of sequestration was started in 1985, all sequestrations as well as all legislation periodically attached to appropriation bills mandating across-the-board cuts has required that cuts be applied equally not simply across all programs but among each project within each program and each activity within each project.

The reason for this degree of specificity is the result of practical and immediate concerns by members of Congress as well as ones that are high minded and constitutional. Broad discretion in slashing billions of dollars from the federal budget would give any White House interested in the opportunity a once-in-a-lifetime chance to settle old scores with uncooperative members of Congress. Applying the same percentage cut to each activity, within each project and program, also protects earmarks and other activities on which the legislative and executive branches are in disagreement.

Several weeks ago, Dylan Mathews of The Washington Post posted a story on the paper’s blog (it is important to note that the editors did not see it having sufficient gravity to include in the print edition) that would have kept a lot of egg off the face of a lot of reporters if they had ventured to read it. Mathews delved into the definition of the term used in the original Gramm-Rudman-Hollings legislation to insure that the cuts were truly across the board, “program, project and activity.” He interviewed Barry Anderson, a retired civil servant who had a long career at the Office of Management and Budget and served as director of that organization’s Budget Review Division during the 1991 sequestration under President George H.W. Bush. Part of Anderson’s job was to be the government wide interpreter of “program, project and activity” so that agencies implemented the order in a consistent manner. Anderson told them to go as low as possible. He told Mathews:

Within the Commerce Department, there’s a program for nautical navigation, and then within that there’s a project to approve specific buoys, and then you finally get to the activity, which is this buoy. And Congress said you couldn’t remove them. I got a call from somebody at Commerce saying, “I have to go as low as I can go, and the lowest I can go is this buoy, so how do I cut 5 percent?” I asked, “Do you do anything with the buoys?” And they said, “Twice a year we send somebody to scrape off the bird poop.” So I said, “Scrape five percent less poop.”

Returning to the Myers example at the FAA, it should be noted that the agency budget contains four broad categories of programs. The biggest is Operations, which accounts for about two thirds of the agency budget. Others include Facilities and Equipment, Research, Engineering and Development, and finally Grants-in Aid for Airports—the area of the agency budget that is exempt from the sequestration.

But within the Operations grouping, there are seven separate program areas. These include Air Traffic Organization, which is what we normally think of as air traffic control, but also things like Aviation Safety, which examines and certifies airplanes and flight equipment. Another major program area within Operations is development of the Next Gen air traffic control system that will eventually convert much of management of air traffic from a system that is radar based to one that relies primarily on satellite-based positioning systems.

The Operations program area Air Traffic Organization, or ATO, accounts for about $7.5 billion or roughly half of the FAA’s total annual budget. There are 11 subprogram areas within ATO, three of which account for 80 percent of the total ATO budget. These are “En Route and Oceanic” flight control operations, $1.9 billion a year; terminal flight control operations, $2.2 billion; and technical operations, which pays for the purchase and maintenance of all of the radars, runway lights, display terminals, and other equipment necessary to operate the system and accounts for another $2 billion in spending.

Within each of these subprogram areas are dozens if not hundreds of projects and activities. How far down into the details of agency activities does the administration have to go in applying across-the-board cuts? It strikes me that Barry Anderson’s standard is extreme. But even if a much more flexible standard is applied, one might well conclude that the administration, based on the information that they have disclosed to date, has assumed much more flexibility in applying the cuts than the law actually allows. Has En Route and Oceanic flight control been cut by the same amount as terminal flight control? That is hard to determine based on the information provided thus far. But with another area of spending within the FAA, the answer is quite clear.

There are 264 airports in the United States in which the control tower is staffed by federally employed air traffic controllers. There are another 248 airports that have control towers, but those towers are staffed by the local airport authority with a majority of the cost of that staffing being paid by the FAA under a contract with the local authority. That arrangement is referred to in the FAA Budget Justifications submitted to Congress as the “Contract Towers” program, but it has been singled out for much deeper cuts than the rest of terminal flight control. The list of tower closures submitted by the FAA on February 22 include 195 or more than 75 percent of the contract towers, but only 43 or less than 20 percent of noncontract towers.

There is little question in my mind that what the FAA is doing is the right thing in terms of policy. Every dollar saved by closing these small towers reduces the chance that a larger tower with significant passenger and cargo traffic will need to be closed. In the analysis I did last summer of the FAA’s options in dealing with the sequester, I speculated that they might have to close as many as one hundred of the larger noncontract towers. That could affect airports handling as many as 600,000 passengers a year with a huge economic ripple effect. One reason that is not happening is that the FAA has decided that they have the authority to close a raft of little airports.

But the question that must be answered is whether the contract tower “program” is or is not a “program, project and activity”? That may well be for the courts to decide as one of the many untold horrors of the sequestration policy is the almost unlimited opportunity for litigation. Section 922 of the U.S. Code’s chapter on “Emergency Powers to Eliminate Budget Deficits” states that in addition to the normal rights of citizens and business to challenge the sequestration order, “any Member of Congress may bring an action, in the United States District Court for the District of Columbia, for declaratory and injunctive relief on the ground that the terms of an order issued under section 904 of this title do not comply with the requirements of this title” and further provides that such action, “shall be heard and determined by a three-judge court in accordance with section 2284 of title 28.”

Contrary to a drum beat of misinformation from far-right think tanks and Tea Party sympathizers, misinformation that all too often finds its way into the mainstream media, the mischief that this legislation can inflict is difficult to exaggerate. Program managers are forced to do remarkably stupid and destructive things that affect the services necessary to millions of ordinary citizens and numerous sectors of the economy such as airlines, tourism, meat and poultry production, energy exploration, pharmaceuticals, and many others.

Reporting that says that the blame for this hare-brained exercise is to be shared is probably not wrong. But among those who should be at the forefront of sharing that blame are the nation’s newspapers and broadcasters.

For years there has been speculation as to what the demise of our newspapers would mean to our democracy and the general wellbeing of our society. What happens when most of the nation’s veteran reporters are forced to take early retirement or simply get pink slips? What happens when the corporations that now control our broadcast networks demand such high margins on their news programing that only a fraction of the money they collect in advertising fees is reinvested in investigative reporting or solid journalism?

I don’t think anybody knows at this point how sequestration will finally turn out, but it may well provide us with the answer to those questions—an answer that none of us will enjoy.

Scott Lilly is a Senior Fellow at the Center for American Progress.

This column was originally posted on The Huffington Post.

SOURCE: AP/Carolyn Kaster

House Budget Committee Chairman Paul Ryan (R-WI) gestures as he speaks about the 2014 budget resolution, Tuesday, March 12, 2013, during a news conference on Capitol Hill in Washington.

For each of the past two years, House Budget Committee Chairman Paul Ryan (R-WI) released budgets filled with giveaways to the wealthiest Americans at the expense of everyone else. Those hoping that his fiscal year 2014 budget would be different were disappointed last week. Like his FY 2013 budget, Rep. Ryan’s latest budget offers huge tax cuts to the wealthy while proposing to cut down the safety net that supports the most vulnerable among us.

The budget aims to balance the national debt within a 10-year period, but since Rep. Ryan’s plan includes no new revenue increases, the debt will have to be reduced by cuts to nondefense discretionary spending instead. Based on projections provided last August by the Congressional Budget Office, meeting the 10-year timeline without any revenue increases would require a reduction of 20 percent of federal spending, or $5.7 trillion, over the next decade. The budget’s austerity would bring down the share of nondefense discretionary spending to just 2.1 percent of U.S. gross domestic product by 2023—one-third lower than it has ever been in modern history. While Rep. Ryan forcefully speaks of the impending “pain” of a fiscal crisis if we do not control our debt, the huge cuts that define his plan simply shift this pain onto low-income communities and communities of color.

Communities of color still bear the brunt of the last economic recession. Unemployment remains high: As of January, 9.7 percent of Latinos and 13.8 percent of blacks were unemployed, compared to only 7 percent of whites. Federal unemployment benefits, already cut under sequestration, would face greater cuts under Rep. Ryan’s budget, as he proposes an additional $900 billion in cuts to nondefense discretionary spending.

Significant economic opportunities eroded faster for communities of color than for whites during the Great Recession, and those opportunities have also come back much slower for communities of color during the recovery, resulting in slower job growth, fewer job opportunities than other groups, and a drastic decrease in household incomes. What’s more, poverty rates, which were already higher for communities of color, rose faster in recession and recovery than for whites. African Americans and Latinos experienced poverty rates of 24.2 percent and 24 percent, respectively, in 2010, compared to poverty rates of 9.3 percent for Asian Americans and 7.3 percent for whites in that same year.

The budget would also cut a total of $1.2 trillion from public investments in education and job-skills training, science and technology research, and infrastructure development. These investments are not only essential for the United States to remain economically competitive, but they also provide critical jobs and services for communities of color. These cuts would greatly impact programs such as YouthBuild, which connects low-income youth to education and training and serves mostly youth of color. Cutting infrastructure development would also kill jobs that are important to these communities, as sectors such as construction and public transit disproportionately employ people of color. Such deep cuts would bring the steady job growth of the past three years to a grinding halt, and communities of color would be the hardest hit.

The proposed budget also seeks to repeal the Affordable Care Act, which has given millions of people of color improved access to health care. The U.S. Department of Health and Human Services estimated that in 2011, there were 54 million Americans benefiting from expanded preventive service coverage under the Affordable Care Act. This includes approximately 5.5 million African Americans, 6.1 million Latinos, 2.7 million Asians, and 300,000 Native Americans—all of whom would lose access to a number of preventive services if these reforms were repealed. Millions of young people under age 26 who are currently receiving health care under their parents’ health insurance plans would also lose their coverage, including approximately 736,000 Latinos, 410,000 African Americans, 97,000 Asian Americans, and 29,000 American Indian and Alaska Natives. Taken together, these youth comprise more than half of the 2.5 million young adults that became insured under the act’s new dependent coverage provision.

Rep. Ryan’s budget would also make major changes to Medicaid. The Medicaid expansions that took place under the Affordable Care Act would be repealed, as the Ryan budget proposes a rollback of the reforms that are considered the single-most important provision of the Affordable Care Act for people of color. By the time the law goes into full effect, it is expected to expand Medicaid coverage to roughly 16 million Americans—three out of four of those affected will be people of color. The law would expand coverage to 9 million Latinos alone. Instead, the Ryan budget plans to repeal these reforms and turn Medicaid into a block-grant program, shifting the burden onto already cash-strapped states and reversing the huge gains for communities of color under the Affordable Care Act.

What’s more, the Ryan budget would change Medicare as we know it. The proposed budget would replace the current system by giving seniors the option of purchasing private insurance on an exchange and receiving “premium support” payments, which are essentially vouchers. In 2010, 23 percent of seniors of color relied on Medicare as their only source of health care coverage. Though Rep. Ryan’s budget promises to “help [seniors] pay the premiums,” seniors will be paying more money out-of-pocket for this vital service.

On education, the Ryan budget will reduce funding to programs designed to close the achievement gap, such as Pell Grants—most often given to students whose family’s income is less than $20,000 to help them offset the costs of a college education. In 2011 almost a quarter—24 percent—of Pell Grant recipients were African American while 21.5 percent were Latino. While the budget’s prose acknowledges that an increasing number of jobs will require secondary education in the coming years, the budget itself will effectively limit access to higher education. As part of the campaign to cut government spending, Rep. Ryan’s budget intends to maintain the maximum Pell Grant amount at $5,645 per year over the next 10 years. This will hardly keep pace with the rising average cost of tuition, which climbed an average of 15 percent at four-year institutions from 2008 to 2010 alone.

While low-income communities and communities of color are expected to take the biggest hit from the budget, Rep. Ryan wants to offer enormous tax relief to the wealthiest individuals and corporations. The budget would cut the top individual tax rate from 39.6 percent to 25 percent, amounting to a tax break of more than $1 trillion to the wealthy. The budget would also repeal the alternative minimum tax—a tax imposed by the federal government on income above a certain threshold—and cut the top corporate tax rate to 25 percent. The result would be a loss of $7 trillion in revenue to the federal government, which the Ryan budget does not account for.

Rep. Ryan’s latest budget, like his last two, is a continuation of sequester policies that will gut the social safety net, slow growth, and kill jobs and investment—all disproportionately impacting low-income and middle-class communities. Rep. Ryan intends to make the majority of Americans sacrifice so he can offer extravagant tax breaks for the wealthy. It is clear that this budget is not a balanced approach to meeting our fiscal needs, and once again communities of color will suffer the most.

Morriah Kaplan is an intern with Progress 2050 at the Center for American Progress. Daniella Gibbs Léger is the Senior Vice President for American Values and New Communities at the Center.

SOURCE: AP/J. Scott Applewhite

Sen. Patty Murray (D-WA), chair of the Senate Budget Committee, prepares for a day of work on the Democrats' spending strategy during a markup session of the budget on Capitol Hill in Washington, Thursday, March 14, 2013.

If you wanted to design a budget plan that would help accelerate the economic recovery, promote job creation, lay the foundations for future growth, and set federal finances on a sustainable course for the foreseeable future, what would it look like? First and foremost, you’d probably want to make sure not to do anything that would actually hamper the economy—or in medical parlance: First, do no harm. So that should rule out immediate massive cuts. Second, you’d want to protect—and probably even enhance—critical investments in things such as infrastructure, science, and education. Third, you’d want to pursue modest, responsible changes in future fiscal policies so that the national debt doesn’t rise faster than economic growth. And you’d certainly want to accomplish the latter without unduly burdening the middle class—and without making it harder for people in poverty to reach the middle class.

In other words, if you wanted to design a pro-growth budget, it would look absolutely nothing like the budget that was released earlier this week by Rep. Paul Ryan (R-WI). It might, however, look much more akin to the one released yesterday by Sen. Patty Murray (D-WA).

Sen. Murray’s budget has a lot to recommend it when it comes to growth and fiscal responsibility, taking a nearly opposite approach to the one taken by Rep. Ryan’s on essentially every key economic question. Whereas the Ryan budget includes more than $500 billion in spending cuts over the next two years, Sen. Murray’s budget repeals the sequester and delays all of its proposed spending cuts until 2015. At a moment when the economy finally seems to be on the verge of a robust recovery—with unemployment at its lowest level in four years, new jobless claims down to their lowest levels in five years, and housing and consumer spending all appearing to growing at a healthy clip—it would be pure folly to drop the anchor by cutting back enormously on government consumption and investment.

In addition to making rapid and immediate cuts that are sure to hamper the recovery right away, the Ryan budget also includes absolutely enormous cuts to long-term investments in our economic future in areas such as education, infrastructure, and scientific research. The Murray budget, on the other hand, understands that cuts in these areas are going to be counterproductive, reducing growth, reducing jobs, and therefore making it difficult—if not impossible—to improve our fiscal situation over the long run. Instead of making enormous cuts in productive economic investments, the Murray budget protects these areas and even includes room for a $100 billion boost in the near term. In education, for example, the Murray budget allocates approximately $200 billion more over the 10-year period than does the Ryan budget, including boosted investments in early childhood education. Sen. Murray allocates about $150 billion more than Rep. Ryan to transportation infrastructure. And scientific research receives about $20 billion more in Sen. Murray’s budget. Although these areas deserve significantly more attention and resources than this, relative to Rep. Ryan’s, Sen. Murray’s budget is much more likely to produce faster growth, more jobs, and therefore more deficit reduction.

But even without accounting for the relative effects on economic growth, Sen. Murray’s approach to deficit reduction is by far the more responsible—not to mention moral—one. Rep. Ryan asks absolutely nothing of the wealthiest and most powerful people and corporations in the country; in fact, his budget includes a call to dramatically reduce their tax bill.  Conversely, Sen. Murray seeks more than $900 billion in new tax revenue, accomplished by reforming tax expenditures and closing tax loopholes that benefit the rich and powerful. This is an eminently reasonable goal. The Center for American Progress has previously identified more than $1 trillion in savings from cutting tax expenditures, so Sen. Murray’s target is easily within reach. And note that the revenue levels in the Murray budget are still well below those proposed by former Sen. Alan Simpson (R-WY) and former White House Chief of Staff Erskine Bowles in their plan developed as part of the president’s 2010 fiscal commission.

When it comes to spending, the Murray budget is almost precisely in line with the original Simpson-Bowles plan, whereas Rep. Ryan’s budget calls for draconian and unrealistic cuts. Both Sen. Murray and Simpson-Bowles envision government spending totaling 21.8 percent of gross domestic product, or GDP, in 2021. By contrast, Ryan’s budget calls for spending at just 19.2 percent. How does Rep. Ryan accomplish this remarkably low level of spending? By imposing enormous cuts to Medicaid, stripping health insurance from more than 30 million people, and sending nondefense discretionary spending down to a level one-third below its lowest levels in modern history. Sen. Murray’s budget does include spending cuts, but it doesn’t rely exclusively on taking away protections from the middle class and assistance to those in poverty—as Ryan’s budget does. Instead, it spreads the cuts much more evenly, asking the military, Medicare providers, the wealthy, and corporations to contribute to deficit reduction as well.

Both the Ryan budget and the Murray budget should properly be seen as guidelines, as statements of priorities, and as indications of general approaches to budgeting. Certainly, both budgets have holes and areas where more details would be appreciated—though not in equal measure. Nevertheless, it is clear that one budget plan—Rep. Ryan’s—would set back the recovery, undermine future growth, and further skew the economy toward the rich at the expense of the middle class, while the other budget plan—Sen. Murray’s—would promote immediate job creation, lay the foundations for future broad-based growth, and responsibly pursue deficit reduction.

Michael Linden is the Director for Tax and Budget Policy at the Center for American Progress.

SOURCE: AP/Patricia McDonnell

AmeriCorp volunteers Derek Haddad, left foreground, and Eddie Galan, right, both of Boston, applaud Friday, October 19, 2001, as they join some 1,000 new AmeriCorps members—who volunteer for one year to work in community service—during a rally to kick off their year of service.

We are in the midst of AmeriCorps Week, which takes place from March 9 to March 17. It is a time for the country to celebrate the remarkable impact of the iconic federal community-service organization that—over the course of the past 20 years—has engaged tens of thousands of corps members in efforts to construct affordable housing, guide and mentor students in underperforming schools, feed hungry Americans, and tackle countless other pressing challenges facing communities across the nation. So it is more than a bit ironic that as we celebrate the work of AmeriCorps, budget fights in Washington, D.C.—highlighted by the release of the House Republican budget on Tuesday and the recent allowance of the sequester—threaten the program and put at risk the creative approaches that it employs to better the lives of countless Americans and their families.

Sequestration means devastating cuts for national service—4,200 AmeriCorps positions, which represent 4.3 million hours of critical service, will be cut over time. These cuts are in addition to the $100 million in cuts that occurred between 2010 and 2012. Thus, the stakes are high as President Barack Obama and Congress continue to wrangle over the budget and efforts to reduce the deficit.

As our leaders seek to balance the nation’s spending priorities, the value of national service remains clear. In the 20 years since President Bill Clinton signed legislation creating the Corporation for National and Community Service, AmeriCorps, the corporation’s flagship service program, has supported 800,000 service members, 1 billion hours of volunteer service, 4 million volunteers, and $2.4 billion in education aid for service members.

But if AmeriCorps is to survive and thrive going forward, creative strategies must be devised to ensure the future of national service. Recent CAP publications make the case for government-agency investment in service. The report “Service as a Strategy” outlines several reasons why national service is a viable strategy to help move a diverse number of government programs toward reaching their goals, and it offers approaches for public agencies to model when launching their own service programs. A chief example is the recently launched FEMA Corps, which uses resources from both the Federal Emergency Management Agency and the Corporation for National Service to fund emergency-response service workers who are playing a key role in recovery efforts from tragedies such as Hurricane Sandy.

In “The Great Public Service Talent Search,” CAP outlines a course for building upon the existing potential of service to fulfill the talent needs of the public-service field—one that will ultimately improve the outcomes that service agencies achieve. Through commitments of human and financial capital, AmeriCorps already boosts the talent-development capacity of nonprofits across the United States. Many AmeriCorps alumni continue their civic engagement after participating in the program, through careers in government and the nonprofit sector and as social entrepreneurs representing the next generation of public servants. This commitment could be harnessed even more strategically.

Consider just one example: To groom future leaders in the fight against hunger, Joel Berg, CAP Senior Fellow and the executive director of the New York City Coalition Against Hunger, launched the Anti-Hunger and Opportunity Corps in collaboration with the U.S. Department of Agriculture and AmeriCorps VISTA. The program provides young people with an opportunity to lend their skills to food pantries, soup kitchens, and anti-hunger agencies across the country through technical assistance and Supplemental Nutrition Assistance Program, or SNAP, outreach. In 2012 corps members in this program recruited 1,611 volunteers and raised $3,553,176 in grants and $31,920 in charitable giving. Like the broader AmeriCorps program, the Anti-Hunger and Opportunity Corps successfully leverages private-public partnerships and sustains its anti-hunger efforts through matching funds from the Walmart Foundation. Not only do efforts such as the Anti-Hunger and Opportunity Corps advance the goal of talent development, but they are also improving program outcomes in the present as well as in the future, as some graduates of the program consider future anti-hunger work.

AmeriCorps continues to evolve to meet the needs of communities and the nation. The short-term investment in volunteer service pays huge returns, building careers, supporting social innovation, and improving people and communities. National-service programs deliver untold societal benefits, and they deserve greater attention in public policy and budget fights. We need to ensure that the potential of AmeriCorps is maximized and that the program is given the chance to thrive for another 20 years and beyond.

Zach Murray is a Bill Emerson National Hunger Fellow with the Poverty and Prosperity program and Progress 2050 project at the Center for American Progress.