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How Deficit Reduction Proposals Would Affect Communities of Color

Recent Reports Find Cuts to Medicaid and Social Security Put These Groups at Great Risk

SOURCE: AP/J. Scott Applewhite

Members of the Joint Select Committee on Deficit Reduction hold a public hearing on Capitol Hill in Washington, Wednesday, October 26, 2011.

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The deficit-cutting 12-member panel in Congress, otherwise known as the super committee, is quickly approaching its Thanksgiving deadline to find an additional amount of at least $1.2 trillion in deficit savings over the next 10 years. Unfortunately, as the holiday approaches, the members are in a familiar deadlock over taxes versus spending cuts to important programs such as Medicaid and Social Security.

Two important reports released last week outline why a deficit reduction plan that includes significant cuts to these programs would disproportionately put communities of color at great risk.

Medicaid and communities of color

The first report, released by Families USA and entitled “Medicaid: A Lifeline for Blacks and Latinos with Serious Health Care Needs,” finds that Medicaid plays a critical role for people of color. Decades of research document racial and ethnic health disparities, showing that blacks, Latinos, and some Asian American populations suffer from a severe health gap. This report focuses on subsets of blacks and Latinos with serious health care needs: cancer, diabetes, chronic lung disease, and heart disease or stroke.

Approximately 46 percent of people on Medicaid are people of color, and if it weren’t for this program, an additional 25 million people of color would not be insured. Yet for individuals with serious health care needs, cuts to Medicaid prove even more dire, as disrupted service and unmet medical needs often lead to costly and sometimes deadly complications.

The report finds that Medicaid provides coverage for a significant portion of blacks and Latinos suffering from serious health care needs:

  • Cancer
    • Blacks: 21.9 percent of blacks with cancer are covered by Medicaid
    • Latinos: 24.5 percent of Latinos with cancer are covered by Medicaid
  • Diabetes
    • Blacks: 24.4 percent of blacks with diabetes are covered by Medicaid
    • Latinos: 25.6 percent of Latinos with diabetes are covered by Medicaid
  • Chronic lung disease
    • Blacks: 37 percent of blacks with chronic lung disease are covered by Medicaid
    • Latinos: 39.8 percent of Latinos with chronic lung disease are covered by Medicaid
  • Heart disease or stroke
    • Blacks: 21.6 percent of blacks with heart disease or stroke are covered by Medicaid
    • Latinos: 23.2 percent of Latinos with heart disease or stroke are covered by Medicaid

This is why potential cuts to Medicaid, a program that not only disproportionately helps communities of color but also provides health insurance to 60 million low-income Americans, should be taken seriously.

For instance, conservatives in Congress suggest block-granting Medicaid in order to cut government spending: The House leadership included such a proposal in their budget, and Senate Finance conservatives recently submitted a plan to the deficit committee suggesting block grants as well.

Yet block grants—federal lump-sum payments to states—would fundamentally alter the program and significantly shift financial risks and costs to the states. States would either have to contribute more of their own funds (unlikely) or cut back on the numbers enrolled (likely).

Moreover, block-granting various antipoverty programs has been a part of the conservative agenda for a couple of decades. Progressive antipoverty advocates argue that these proposals are typically accompanied by funding cuts and declines in the quality of services. The TANF block grant, for instance, instituted in 1996, demonstrated the failure of the block-grant structure. When the Great Recession hit, TANF’S block-grant structure resulted in a substantially weakened safety net that was unable to respond effectively to increased need.

Block-granting Medicaid would be similarly ineffective. And since communities of color rely disproportionately on Medicaid for health insurance, cutbacks would disproportionately affect these communities the most.

Social Security and communities of color

The second report, “Plan for a New Future: The Impact of Social Security Reform on People of Color,” was released by the Commission to Modernize Social Security. It argues that Social Security benefits should not be included in the deficit reduction proposals because such measures would disproportionately harm people of color.

The report’s authors argue that these benefits are especially important to workers of color and families of color because they are more vulnerable to economic instability and are the least likely groups to possess wealth. Currently more than 25 percent of blacks and Latinos rely on these benefits for more than 90 percent of their family income. As we move closer and closer to becoming a country where communities of color collectively comprise the new majority, Social Security benefits will be vital to protect these communities from poverty.

The report finds that people of color use Social Security differently than whites. For instance, the vast majority of whites (74 percent) use Social Security primarily for the program’s retirement benefits. But 45 percent of all black beneficiaries and 58 percent of “other” beneficiaries (who are neither black nor white) use the program for its survivor and disability benefits.

This finding points to socioeconomic factors such as low educational attainment, as well as the effects of occupational segregation, where people of color are more likely to work in physically challenging jobs that might result in temporary or permanent disability.

Racial and ethnic disparities in life spans also underline why Social Security benefits are so important for communities of color. Given the longer life spans of Asian Americans and Latinos, Social Security’s annual cost-of-living adjustment is particularly important to these communities. It makes sure their benefits retain their purchasing power over more years. Alternatively, African Americans and Native Americans, who have lower life expectancies than whites, appreciate the early retirement feature, which allows workers to retire at 62 years of age.

In sum, the report argues that Social Security should not be included in deficit reduction debates. Not only does the program ensure the welfare of an increasingly diverse America but, by law, the Social Security program cannot contribute a single penny to the national debt.

Instead of punishing a program that has been fiscally responsible in meeting its own obligations, the Commission to Modernize Social Security suggests reforming the program to make it stronger without sacrificing economic security for future workers.

A good number of the CMSS report’s policy recommendations also align with an earlier report from the Center for American Progress on strengthening the Social Security program. Both agree on policy recommendations such as eliminating the cap on Social Security payroll contributions, increasing benefits for Americans 85 years of age and older, treating all salary reduction plans like 401(k)s, providing caregiving credits, and creating a minimum benefit level.

More information about the CAP proposal to modernize Social Security is available here.

Looking forward

As the super committee’s deadline draws closer, it will be imperative to link the resistance to inequality we see in the growing Occupy Wall Street movement to the deficit reduction debates. After all, a budget is about choices and the priorities that we as a nation want to make. Do we want to protect tax breaks for the wealthiest while sacrificing programs such as Medicaid and Social Security that help the middle class and poor simply survive? Or do we want to find a balanced approach to taxes and spending that will ensure the shared prosperity of 100 percent of Americans?

The OWS protesters unite behind a call for fairness—something that is hopefully not falling on deaf ears during the deficit reduction debates. Yet conservatives still call for slashes in federal funding for core education, health, human services, and labor programs that help the middle class get by while protecting tax breaks for the wealthiest Americans and highly profitable companies.

Though the OWS movement initially received criticism for not including enough protesters of color—despite the fact that people of color are often most economically vulnerable to social program cuts and rising unemployment—the movement has seen a recent surge in diversity. Efforts such as the Occupy the Hood movement try to bring more people of color into the conversation, while people of color steering committees and working groups have been working in various cities to show that the 99 percent is a broad cross-section of the American people.

Looking forward, it will remain vital for this movement to represent and include the people hurt most by the distorted priorities of conservatives in Congress: communities of color.

Julie Ajinkya is a Policy Analyst for Progress 2050 at American Progress.

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