Top 10 Reasons Why Cutting Poverty Programs to Resolve the Fiscal Showdown Is a Bad Idea
As the fiscal showdown continues—with a little more than a month before a series of onerous automatic federal spending cuts and tax hikes go into effect—our national values and priorities are once again being tested.
If you listen to congressional Republicans as they talk about the budget crisis, the problem is out-of-control spending on the poor and middle class. They argue that investments in poor and middle-class people and in our nation’s future are unaffordable. These same congressional Republicans, as part of a deal to raise the ceiling on our national debt in the summer of 2011, held the nation’s creditworthiness and economic recovery hostage to force painful and immediate spending cuts on the country, totaling more than $1 trillion over the 10-year period from 2012 through 2021. The big idea from conservatives to reduce the deficit still remains slashing and burning vital federal programs and services.
There are at least 10 significant reasons why they are wrong.
1. Providing vital services and balancing the federal budget is not an either/or proposition
In 2011 CAP developed a comprehensive plan that fully balances the federal budget by 2030 while hitting important benchmarks and reductions in the interim. It accomplishes this goal while also making new investments in America’s people (education and job training and creation, for example)—$70 billion per year in new money starting in 2017. With some policies and funds benefiting low-income people, we project that our plan will reduce poverty by at least 8 million households in 10 years.
2. Federal investments are under control
Most programs targeting poor and middle-class families are discretionary, which means that Congress annually decides how much to spend on them. Over the last 40 years, nondefense discretionary spending has generally been limited to 3 percent to 5 percent of GDP and is currently on the decline. (see Figure 1) This was even true in recent years when the federal government increased investments in order to aid in the recovery.
A small number of programs (“entitlements”) fall outside of this grouping because they seek to automatically serve all people who are eligible. The Supplemental Nutrition Assistance Program, also known as food stamps, is an important example—sharp spikes in need caused its expenditures to dramatically increase. According to Congressional Budget Office projections, increased employment and economic recovery will automatically decrease spending on the program.
3. Spending on many individual programs is stagnating or declining
Hidden behind the general budget numbers is the fact that some investments have severely decreased in value over the years. In an era marked by a shifting economy that places higher and higher premiums on skilled workers and the continued process of economic recovery, one important example of declining investment is spending on workforce and job training programs. Forty years ago the nation invested $16 billion (in 2012 dollars) in these services but by 2007, the start of the recession, that figure had decreased by half to $7.9 billion (in 2012 dollars). (see Figure 2) Recovery investments have increased that number, but those were temporary measures. Thus, in some key areas, spending is not exploding but is deflated compared to previous eras and largely stagnating in recent decades.
4. Those in need are too often turned away
Discretionary programs have limitations. If they don’t have enough money to serve everyone, they don’t serve everyone. This has been a significant issue for the nation’s federally subsidized housing programs, with some areas of the country having waiting lists that are years long or simply closed—historically, communities like Los Angeles have experienced waiting lists that have 17 times as many families as available slots. Another example of this problem is child care, with 23 states either having waiting lists or turning away applicants.
5. Investments successfully lift and keep some Americans out of poverty
The Census Bureau’s supplemental poverty measure demonstrates the impact of government investments on poverty. In 2011, for instance, refundable tax credits kept 8.7 million people out of poverty, and the Supplemental Nutrition Assistance Program lifted 4.7 million people above the poverty line.
6. The most vulnerable will experience the greatest harm
Although budget and appropriations debate sometimes focuses on able-bodied working-age adults, that doesn’t reflect the realty of the nation’s government benefits programs, which largely serve the most vulnerable Americans—senior citizens, people with disabilities, and children. Social Security and Medicare, programs that largely reach seniors, account for 55 percent of funds going to individuals. The elderly, people with disabilities, and children are the primary participants in many other government services. Within the Supplemental Nutrition Assistance Program, for example, 49 percent of households have children, 16 percent have senior citizens, and 20 percent have disabled nonelderly individuals.
7. Poverty reduction is cost effective
Lifting and keeping people out of poverty are cost-effective activities. Studies have shown that factors associated with poverty, such as educational, health, and criminal justice outcomes, impose a cost on all Americans. In 2007, for example, the period prior to the worst of the Great Recession, CAP researchers conservatively estimated that the societal costs for adults who grow up in poverty are significant, reducing U.S. economic output by as much as 4 percent of GDP per year, or roughly $500 billion. Certainly the recession affected this number, and it won’t be until the nation has fully recovered that we will have a better understanding of the future costs of this national setback.
8. Slashing budgets threatens jobs
Federal spending cuts mean there is less funding available for public service jobs such as educators, police officers, social workers, and other professionals. Government workers have already lost a significant number of jobs in the aftermath of the recession—386,000 between 2010 and 2011, according to Department of Labor annual counts. Federal relief from the American Recovery and Reinvestment Act played a significant role in preventing even more job losses. With the expiration of those dollars, the potential for deeper budget cuts further endangers public-sector jobs.
Also at risk is the private sector, since government programs generate job-creating economic activity. Each $1 billion spent by the Supplemental Nutrition Assistance Program participants, for example, allows nearly 14,000 Americans to find and keep jobs such as stocking grocery store shelves, transporting food, and farming. Jobs continue to be an important concern for a nation still trying to emerge from the recession.
9. The poor and middle class have already made big sacrifices
The Budget Control Act of 2011 made significant cuts, including $840 billion over 10 years in discretionary program dollars. With no corresponding increase in revenue, that means that poor and middle-class Americans are already making sacrifices that haven’t been matched by the nation’s wealthiest taxpayers. Fairness and equity suggest a need for shared sacrifice.
10. The problem is too big to ignore
Far too many Americans are struggling to make ends meet. Fifteen percent of Americans, or 46.2 million people, are living in poverty, which is $18,123 a year for a single parent with two children. The nation’s growing income inequality is increasing the number of people who are above the poverty line but living on the brink at 200 percent of poverty or less. Factoring in these individuals means that one in three Americans—106 million people—are experiencing dire income insecurity.
Joy Moses is a Senior Policy Analyst with the Poverty and Prosperity program at the Center for American Progress.
The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.
Senior Policy Analyst