Center for American Progress

The Top 10 Reasons Why People of Color Should Care About the Fiscal Showdown

The Top 10 Reasons Why People of Color Should Care About the Fiscal Showdown

If Congress and the president cannot agree on a budget deal by the end of the year, the resulting economic slowdown will have a big impact on communities of color.

House Speaker John Boehner (R-OH) pauses during a news conference on Capitol Hill in Washington, Tuesday, October 8, 2013. (AP/J. Scott Applewhite)
House Speaker John Boehner (R-OH) pauses during a news conference on Capitol Hill in Washington, Tuesday, October 8, 2013. (AP/J. Scott Applewhite)

Thanks to congressional Republicans holding the economy hostage during the debt ceiling debacle in the summer of 2011, a package of automatic, across-the-board spending cuts known as sequestration is set to go into effect on January 2, 2013. At the same time, the Bush-era tax cuts and a number of other tax breaks will expire, meaning that a massive fiscal retrenchment will occur unless Congress and President Barack Obama reach an agreement to forestall the spending cuts and tax hikes. The president has proposed a balanced approach to resolve this crisis, asking the wealthiest Americans to pay their fair share, but congressional Republicans are again playing the hostage game, risking massive and harmful spending cuts and across-the-board tax increases in order to protect tax cuts for the rich.

Sequestration will impact all Americans, particularly communities of color. Many Americans are still recovering from the Great Recession of 2007–2009, and economically we are at a time when investment in growing communities is necessary and preserving middle-class tax cuts is crucial. The majority of Americans agree that higher taxes on the wealthy are necessary to pay for programs that benefit the most vulnerable Americans.

Our demographics are changing and communities of color are the fastest-growing group of Americans. It’s important that we invest now in these communities as they are our nation’s future workforce.

Below are the top 10 reasons why it’s important that communities of color pay attention to the fiscal showdown and the impact that it will have in these communities:

1. Deep cuts to the unemployment provision will disproportionately impact people of color. More than 2 million Americans could lose their unemployment benefits unless Congress reauthorizes federal emergency unemployment help before the end of the year. According to the Bureau of Labor Statistics, as of October 2012 the unemployment rate is steady at 7.9 percent. But people of color face higher levels of unemployment, with 10 percent of Latinos and a staggering 14.3 percent of blacks unemployed.

2. An average tax increase of $3,500 per household will adversely impact low-income and middle-class families of color. According to the Tax Policy Center, low-income families will be hit the hardest, with a couple making between $20,000 to $30,000 annually seeing a tax increase of $1,408. This tax hike will be particularly hard for the 16.7 percent of African Americans living in poverty and the 27.8 percent of Latinos who are near poor. Middle-class families of color will also experience a tax increase. The average tax increase for middle-class families is $2,000 each year. This is particularly devastating for the middle-income blacks and Latinos who are still recovering from the housing crisis.

3. Workforce-development programs that are vital to communities of color, like YouthBuild, face significant cuts. YouthBuild, a program connecting low-income youth to education and training, could be cut by about 8 percent. Coupled with previous cuts, the program could see about one-third of federal funding cut between fiscal year 2010 and fiscal year 2013. In 2010, 54 percent of YouthBuild participants were African American and 20 percent were Hispanic.

4. Federal budget cuts under sequestration would quickly mean cuts to federal, state, and local public-sector jobs, which disproportionately employ women and African Americans. In 2011 employed African Americans were 20 percent of the federal, state, and local public-sector workforce, and women were nearly 50 percent more likely to work in the public sector.

5. Early child care funding could be cut by more than $900 million, impacting the thousands of children of color who benefit from these programs. Such cuts will mean 96,000 fewer children in Head Start, a federal program that promotes the school readiness of children from low-income families from birth through 5 years old, and where 60 percent of program participants are children of color.

6. Programs that directly help the most vulnerable families and children are on the chopping block in the fiscal showdown negotiations. Child nutrition programs such as the Women, Infants, and Children Supplemental Nutrition Program, commonly known as WIC, serves as a supplemental food and nutrition program for low-income pregnant, breastfeeding, and postpartum women and for children under age 5. The program could be cut by $543 million—a devastating loss to the more than 450,000 people of color who utilize its services.

7. Education funding cuts will hurt the 66 percent of students who borrow to pay for college. Students of color, who have higher rates of borrowing, would be particularly impacted. Pell Grants, which provide need-based grants to low-income students to offset the cost of college, face severe cuts. In 2011 the Pell Grant program provided financial aid to more than 9 million students, many of whom are students of color. The lack of access to financial aid for people of color will further exacerbate the student debt rates in these communities. From 2007 through 2008, 81 percent of African Americans and 67 percent of Latinos with a bachelor’s degree graduated with student debt, compared to 64 percent of their white peers. Cutting access to these vital financial aid programs will curtail the higher education aspirations of tens of thousands of students of color.

8. Cuts to vital health services such as Medicaid will hurt the 60 million people who depend on it for health insurance coverage. People of color will be hit particularly hard by cuts to Medicaid, with Latinos accounting for approximately 29 percent of program enrollees and African Americans accounting for 20 percent. In 2010, 57 percent of people on Medicaid were people of color.

9. Since 2010, funding for housing has been cut by $2.5 billion, meaning any additional cuts would significantly hurt low-income families and communities. Many housing programs, such as Section 8 Housing Assistance, provide vouchers to low-income families for affordable housing in the private market. In 2011 the program aided more than 2 million low-income families across the country. Data from 2008 indicated that 44 percent and 23 percent of public housing recipients are African American and Hispanic, respectively.

10. As we move into the season of colder weather, programs such as the Low-Income Home Energy Assistance Program, or LIHEAP, which helps bring down the cost of heating for low-income households, are crucial. The Low-Income Home Energy Assistance Program, which helped about 23 million low-income people pay for winter heating bills, is in jeopardy of being cut in FY 2011. Low-income communities, who disproportionately tend to be people of color, depend on such programs to make ends meet during these tough economic times.

In order to avoid significant damage to the U.S. economy and particularly to communities of color across the country, President Obama and Congress must come to a budget agreement and protect the interests of all Americans.

Sophia Kerby is the Special Assistant for Progress 2050 at the Center for American Progress. 

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Sophia Kerby

Research Assistant