Following the lead of the House-passed Budget Resolution, the Appropriations Committee divided up $967 billion in funding on May 21, making the assumption that a second year of cuts will take place.  While the deficit reduction legislation that mandated sequestration does call for this total, the House violates the law by ignoring the required subtotals for defense and non-defense spending.  The House committee approved $512.5 billion for defense, or about $15 billion more than the deficit reduction law allows in FY 2014.  The House committee also cuts $20.6 billion more than the law calls for in all the other programs subject to the sequester cuts.

The funding levels provided to each of the Appropriations subcommittees (called the “302(b) allocations”) make it possible for them to report out bills.  The first approved by the full House Appropriations Committee on May 21 was for Military Construction-Veterans’ Affairs.  This non-controversial bill is one of the few that receives more funding for FY 2014 than it got this year – a 3.4 percent increase, even assuming the lower sequestration total.

The House Appropriations Committee’s priorities are clearly with the military, veterans and homeland security – these are the only areas that get increases over current spending.  In marked contrast, the appropriations bill for the Departments of Labor, Health and Human Services and Education will be cut 18.6 percent below this year’s levels.  The Transportation-Housing and Urban Development spending bill will be cut 9 percent.  Interior-Environment spending will be cut 14 percent, and Energy-Water will be reduced by 11.2 percent.  Financial Services, which includes funding to implement the Dodd-Frank legislation for regulation and consumer protection related to the finance industry, is cut 14.6 percent.  (See the House allocations for each Appropriations subcommittee. See this table for more information on 302(b) subcommittee allocations, compiled by Democratic Staff of the House Committee on Appropriations.)

This year’s sequestration amounts to an approximately 5 percent cuts to domestic programs that are not exempt.  These reductions have resulted in early closings and cancelled summer programs in Head Start, followed by announcements around the country that classes will be shut down and enrollments reduced in the fall.  If a cut well over three times this size were inflicted in FY 2014, many more children would be denied Head Start.  Similarly, if cuts to meals for seniors were more than tripled, programs that are now reducing the number of days they deliver meals or closing dining rooms would have to make drastic additional reductions.  Rental housing voucher cutbacks so far have meant no new vouchers are available in many jurisdictions.  If these cuts were multiplied, housing authorities would be unable to avoid taking away vouchers that now keep people from becoming homeless.    (For more information about this year’s sequestration cuts, click here.)

Appropriations bills do not become law until final versions are negotiated between the House and Senate.  That will be harder than ever for FY 2014.  The House and Senate have not agreed on a total figure for appropriations – a key decision point in budget resolutions.  In contrast to the House budget’s $967 billion total, the Senate’s budget calls for $1.058 trillion, based on the assumption that the additional sequestration cuts will not occur.  (The Senate budget makes up well over $1 trillion in deficit reduction through FY 2021 by a combination of revenue increases and savings in areas mainly including Medicare, farm supports, the Pentagon, and some additional domestic appropriations cuts). The Senate budget resolution specifies that defense spending will total $552 billion in FY 2014, and domestic/international funding will add up to $506 billion.

The Senate Appropriations Committee has not yet divided up these totals into its own 302(b) allocations, but expects to do so during the week of June 17, when it also expects to take up the Military Construction-Veterans Affairs appropriations bill.  But its higher total means that there will be substantial differences between the House and Senate on most appropriations bills.  In the absence of an agreement between the two bodies, the deficit reduction law now in place will require the lower total of the House, but will also require the House to cut about $15 billion from its recommended funding for defense.

Neither House nor Senate appropriators are enthusiastic about this looming result.  Chairman Hal Rogers of the House Appropriations Committee called for “…a budget compromise that will undo the damaging sequestration law and give us a single, common top-line allocation with the Senate” when his committee passed its appropriations allocations on May 21.  Chairwoman Barbara Mikulski of the Senate Appropriations Committee is insisting on passing appropriations bills that are not subject to continuing sequestration cuts.  But, while appropriators are trying to pass separate spending bills according to “regular order,” it is easy to imagine that as the beginning of the new fiscal year approaches (October 1), threats of government shutdown will intensify in the face of seeming inability to bridge the wide differences.

Rearranging the Deck Chairs.  As reports of harmful sequestration cuts accumulate, some Senators are looking for a way out.  Some are seeking increased flexibility for federal agencies to determine how to make the required cuts, to get out from under the across-the-board equal percentage cuts the law calls for.  Senator Richard Shelby (R-AL), the ranking (senior) Republican on the Senate Appropriations Committee, has a proposal to allow agencies to move a limited amount of funding around among accounts.  Senators Susan Collins (R-ME) and Pat Toomey (R-PA) have similar proposals, with agency decisions to alter the automatic cuts subject to review by Congress.  Other bills, such as a plan being developed by Senators Inhofe (R-OK), Toomey and Manchin (D-WV), would require the President to submit an alternative set of cuts, which could be rejected by Congress.  All these plans would substitute different cuts in appropriations for the ones now in place.  Advocates for human needs programs are quite concerned that this might spare some programs, but could easily lead to even more damaging cuts to programs that are less popular or known, but that provide important services to vulnerable people.  Without revenues from fair sources and long-term savings from the Pentagon, key players such as Senate Budget Committee Chair Patty Murray (D-WA) believe that human needs program cuts cannot be successfully replaced.

The post CHN: House Appropriations Committee Sets Funding Levels for FY 2014: Domestic Programs Slashed While Pentagon is Protected appeared first on Coalition on Human Needs.

House Budget Committee Chair Paul Ryan (R-WI) got party line (22-17) approval of his Budget Resolution in Committee on March 13; the next day Senate Budget Committee Chair Patty Murray (D-WA) secured a similar party line vote (12-10).  Both the House and Senate will take up their budget proposals during the week of March 18 in hopes of approving them before recessing at the end of the week.  Recent legislation required the House and Senate each to pass its budget by April 15 or each legislator would forfeit his or her pay.  But there is nothing to force the House and Senate to agree on a final joint resolution, and a policy chasm separates the two.

Revenues.  The House plan is notable both for what it says it will do and for what it leaves out.  Its $5.7 trillion tax cut is pretty specific:  it proposes to drop the individual income tax down to just two brackets, 10 and 25 percent.  It reduces the corporate income tax rate to 25 percent, repeals taxes enacted as part of the Affordable Care Act, and repeals the Alternative Minimum Tax.  Together, according to the Brookings-Urban Institute Tax Policy Center, those massive reductions add up to $5.7 trillion.  Reducing the top rate from its current 39.6 percent down to 25 percent provides mammoth tax cuts to millionaires, who stand to gain an average of at least $200,000 each just in 2014, in an analysis by Citizens for Tax Justice.  The House budget proposal is also specific in saying that its tax changes will be revenue neutral.  But other than a general statement about closing tax loopholes, it says nothing about how tax cuts as large as $5.7 trillion would be made up.  It is clear, though, that there are not enough loopholes for rich individuals to offset the cost of the huge income tax rate reduction, especially if Chairman Ryan keeps to his stated intention not to increase taxes on capital gains or dividends.  Citizens for Tax Justice estimates that even if millionaires lose every single one of their tax expenditures, they would still gain over $200,000 from the proposed tax rate reduction.  That means the only way to pay for the rate reduction would be to raise taxes on low- or middle-income taxpayers.

The Senate’s budget plan includes $975 billion in tax increases over ten years.  It does not specify the precise nature of the tax increases, except to say that it is the intent of the Committee that the increases come from the wealthiest individuals and from large corporations.  The budget includes a fast track procedure called “reconciliation” for consideration of increased revenues.  In this case, the Senate Finance Committee will be given instructions to come up with a set of revenue-raising proposals totaling $975 billion, and must report its proposal to the full Senate by October 1.  The budget discusses at length the opportunities for increasing revenues by reducing tax expenditures that provide the greatest benefit to upper-income taxpayers, without specifying which should be reduced or eliminated.  It is specific in suggesting placing limits on the value of tax deductions or other preferences for the top two percent, and recommends reducing business tax loopholes.

Spending Reductions.  The House budget makes extreme cuts both in mandatory programs including Medicaid and SNAP/food stamps and in discretionary programs such as education, housing, social services, environmental and consumer protection, and some nutrition assistance.  Its aim is to shrink the federal role, and does so by turning Medicaid and SNAP into block grants, drastically cutting the funding of each.  The proposal cuts Medicaid and the Children’s Health Insurance Program by $756 billion over ten years.  It cuts other mandatory programs by nearly $1 trillion more, without specifying where those cuts would occur beyond SNAP.  Those cuts would necessarily hit low-income people hard, since these other mandatory programs prominently include Supplemental Security Income (SSI) for poor elderly and disabled, child nutrition programs, unemployment insurance, child care, Temporary Assistance for Needy Families (TANF), and child welfare services.   In addition, the budget would repeal the health care reform law, ending the subsidies for health insurance and the Medicaid expansion called for in that legislation.  The budget turns Medicare into a voucher program which starts to take effect in 2024.  Analyses of last year’s Medicare “premium support” voucher plan showed that the savings projected for the federal government would be achieved by passing higher costs on to Medicare beneficiaries.

The House budget retains the cuts imposed by sequestration for domestic programs, and then cuts the domestic discretionary programs another $700 billion.  In contrast, it stops the sequestration cuts for the Pentagon, spending about $500 billion more on defense than would have been allowed under the Budget Control Act.

In all, the Center on Budget and Policy Priorities estimates that about two-thirds of the House spending cuts will target programs for low- or moderate-income people.

The Senate Budget Committee plan replaces the cuts that begin with sequestration in FY 2013 and continue through FY 2021 with $240 billion in Pentagon savings, $275 billion in health care savings, $76 billion in other mandatory program savings, $142 billion in domestic discretionary program reductions, and $242 billion in reduced interest payments, for a total of $975 billion.  Advocates had hoped the Senate plan would have spared domestic discretionary programs entirely, since they have already been cut substantially in the first deficit reduction round.  The budget narrative says that the health care savings (expected to be primarily in the Medicare program) will not be achieved by reducing benefits or eligibility, but by systemic savings such as negotiating for lower prescription drug prices.

Further Action in the Senate.  Under Senate rules, budget resolutions are adopted with a simple majority; debate is limited to 50 hours and the budget cannot be filibustered.  However, unlimited amendments are possible.  When all time for debate has expired, the Senate takes up amendment after amendment with no debate – known in Senate speak as “vote-a-rama.”  Advocates will be wary about amendments that could undermine the constructive approach of the Senate Budget Committee’s budget in the ensuing fast action.

Alternative Budgets.  The proposals developed by the House and Senate Budget Committees are not the only budgets prepared by members of Congress.  The House Congressional Progressive Caucus and Congressional Black Caucus have each developed an alternative approach.  Both make substantial investments in job creation and increase revenues far more than the Senate Budget Committee plan.  The Progressive Caucus budget would create 7 million jobs in the first year (in marked contrast to the House Budget Committee version, which is estimated to lose 2 million jobs over the same time period).  The Progressive Caucus budget also cuts the Pentagon while increasing funding for domestic priorities.  In addition, the House Budget Committee Democrats are expected to develop an alternative, also likely to increase revenues from fair sources and to protect human needs programs.  At press time, it was not yet known whether Senate Republicans would be releasing their own alternative.

The post CHN: Starkly Different House and Senate Budget Plans Offered for FY 2014 appeared first on Coalition on Human Needs.

For weeks, it seemed a foregone conclusion that Congress would fail to agree on a way to replace these cuts by the March 1 deadline.  Negotiations among the Administration, House and Senate were non-existent.  But in the weeks approaching the deadline it was assumed that if cuts began to occur after March 1, pressure would intensify and a way to replace the cuts would be found in tandem with the next big deadline:  when the temporary spending bill covering all appropriations expires on March 27.  Instead, on March 1, the President met with House and Senate leaders and signaled that he was not interested in risking a government shut-down at the end of March.  Both the President and Senate Appropriations Chair Barbara Mikulski (D-MD) expressed the intention to handle the continued funding for FY 2013 appropriations separately, and few Republicans at this point would consider replacing the cuts if it means increasing revenues, no matter what the source.  While a loud outcry from the public once the cuts are felt could change the odds in Congress, right now the prospects for derailing the cuts before the end of the fiscal year are murky at best.

In a recent Senate Appropriations Committee hearing, witnesses from the Obama Administration were unified in their testimony that granting the Administration flexibility to move money around to reduce the indiscriminate nature of the across-the-board sequester cuts would not solve their problems.  But before the first full business day of living with sequestration had arrived, the Administration’s director of the Economic Policy Council, Gene Sperling, noted on weekend interview shows that the Senate would take up legislation to provide the Administration with more leeway to manage the cuts.  How that would affect the full range of human needs programs affected is not yet known.

The Sequester’s Beginnings.  Congress included sequestration – or across-the-board cuts in all but a number of exempted programs – in its deficit reduction legislation, the Budget Control Act of 2011.  The law set 10 years of appropriations caps, projected to save about $1.5 trillion through FY 2021.  Congress was supposed to agree on a plan to reduce the deficit another $1.2 trillion, which could be achieved by a combination of revenue increases and spending cuts.  To force itself to act, Congress included an enforcer – automatic cuts that would kick in if Congress could not agree on a plan.  Those cuts would be split 50-50 between Pentagon and domestic/international programs.

Congress had more than a year to come up with an alternative to cuts that would hit WIC nutrition, Head Start, public housing, unemployment benefits for the long-term unemployed, education, environmental and consumer protection, medical research, job training, air traffic and food safety, and a whole lot more.  The President and Congressional Democrats called for new revenues to play a part in replacing these cuts.  Congressional Republican leaders said no.

The House leadership pointed to legislation it had passed twice in 2012 to replace the sequester – which slashed SNAP/food stamps, Medicaid, the Affordable Care Act, federal employee benefits, the Child Tax Credit and other services.  House leaders said they would not do anything else, and would await action by the Senate.

The Senate was stymied by the fact that legislation can be held up by a minority, requiring 60 votes to pass most bills.  A sequester-replacement plan could not pass without bipartisan support, and it was not forthcoming.  Senate Democrats, led by Majority Leader Harry Reid (D-NV), Budget Chair Patty Murray (D-WA) and Appropriations Chair Barbara Mikulski (D-MD) developed the American Family Economic Protection Act (S. 388), which increased revenues by increasing taxes on millionaires and closing certain corporate loopholes, reduced farm supports, and made Pentagon cuts more gradual, while eliminating all the slated domestic cuts.  Senate Republicans introduced their version of sequester replacement (S. 16), which gave the President until March 15 to come up with other ways to cut $85 billion, without shifting cuts from domestic areas to the Pentagon or raising revenues, and giving Congress the opportunity to object to the President’s proposals.  Both bills were unable to overcome the hurdle of cutting off debate in order to get to an actual vote on the legislation when Congress took them up on February 28.  The vote to cut off debate on the Democrats’ bill was 51-49, 9 short of the 60 needed.  No Republicans supported moving forward with this bill; 3 Democrats also opposed it:  Hagan (D-NC), Landrieu (D-LA), and Pryor (D-AR).  In addition, Majority Leader Reid voted no in order to preserve the right to bring the bill up again.  The other three Democratic opponents objected to the reduced farm payments and/or some of the tax provisions.  The Republican alternative had far less support, with its own caucus divided about it.  It failed 38-62, with 9 Republicans voting “no” and 2 Democrats – Baucus (D-MT) and Warner (D-VA) – voting “yes”.  Republican opposition tended to center on seeing the bill as ceding legislative power to the President.

No Government Shutdown Now Expected Over FY 2013 Appropriations.  The House of Representatives plans to act on legislation during the week of March 4 to approve appropriations for the rest of the fiscal year (through the end of September).  It will start with the $1.043 trillion cap for total appropriations, as already established by Congress, and then subtract the domestic discretionary portion (some of the cuts are to mandatory programs) of the $85 billion in sequestration cuts, resulting in a $974 billion bill.  That is the level of funding the House had sought for FY 2013 appropriations last spring, but at that time was successfully opposed by the Senate and Administration.  The plan assembled by House Appropriations Chair Harold Rogers (R-KY) is expected to continue existing funding levels for most parts of government through an extended Continuing Resolution (C.R.), but to enact separate two full appropriations bills for Defense and Military Construction-Veterans Affairs.

The Senate Appropriations Committee is also at work on completing FY 2013 funding, but Chairwoman Mikulski (D-MD) is preparing an Omnibus bill.  Instead of extending mostly level funding in a Continuing Resolution, an Omnibus bill would incorporate 12 separate detailed appropriations bills.  These differences between the House and Senate approaches complicate the efforts to agree on final legislation.  Since Congress has a recess period scheduled for the week of March 25, the House and Senate must agree on the appropriations package by March 21 or 22.

While the President had previously stated he would veto any appropriations bill that was less than the $1.043 trillion cap, over the weekend he clarified that he would not veto a bill that encompassed the sequestration cuts.  Bipartisan comity is not easy to find, but it does extend to a reluctance to risk a government shutdown.

The post CHN: Senseless Cuts Begin: Wide Swath of Domestic Services and Pentagon Spending Will See $85 Billion Reduction This Year appeared first on Coalition on Human Needs.

The House Goes Home for Christmas: Its Top Priorities: Slash Health Care, Nutrition, and Federal Pay, Raise Taxes on Working Families, Preserve Pentagon Spending, and No Fingerprints on Tax Increases Even for the Very Rich

If you are reading this, the world did not come to an end on December 21.  Congressional action did, though, at least through Christmas.  Despite predictions by Speaker Boehner (R-OH) and Majority Leader Cantor (R-VA) that there would be enough Republican votes for Boehner’s plan to raise tax rates on income over $1 million, their caucus rebelled.  Without enough votes for passage, Speaker Boehner cancelled the vote, and the House went home.  They might come back before New Year’s, if a deal can be put together to avert the spending cuts, tax increases, and loss of unemployment benefits for 2 million long-term jobless people that will mark the start of 2013.

The House did cast votes on Thursday evening.  They re-adopted a bill they had passed last spring, which replaced the $110 billion in automatic spending cuts scheduled to start January 1 with a large number of domestic cuts.  That bill went nowhere last spring, and the President and Senate Majority Leader Reid (D-NV) confirmed its fate will be the same now.  The new-old bill, The Spending Reduction Act of 2012 (H.R. 6684), passed 215-209, with no Democrats voting for it and 21 Republicans joining all 188 Democrats to oppose.

The bill was not originally part of Speaker Boehner’s plan for Thursday.  He had hoped there would be enough support to pass an amendment he called “Plan B”, continuing the current tax rates for everybody except millionaires, whose income tax rates would rise to where they were before the Bush tax cuts were enacted.  Because other favorable treatment for millionaires and multi-million dollar estates would remain, those with incomes over $1 million would still get tax cuts averaging $50,000 each.  Treatment of 25 million low-income working families with children was not so favorable – they would see their taxes rise by an average of $1,000 each.  (For more detail, see below.)  Even Grover Norquist, originator of the anti-tax pledge that has a stranglehold on most Republicans, said that passing Boehner’s “Plan B” would be okay, because it would be preventing a tax increase on everybody else.  But that wasn’t enough to gather the near-unanimity among Republicans necessary to pass Boehner’s bill with little or no Democratic support.

Republican House members either objected to raising any taxes on anyone, balked at passing something that did nothing to stop the looming Pentagon and domestic spending cuts, or both.  To mollify enough of them, the Speaker agreed to let the House vote again on the bill to replace the “sequester,” or automatic spending cuts.  In voting for this, the majority made its priorities clear.  The bill would eliminate all the $55 billion in Pentagon sequestration cuts in 2013 and would replace about $38.5 billion in across-the-board cuts to domestic appropriations, in part by substituting $19.1 billion in spending reductions to be achieved by lowering the total cap on appropriations for FY 2013.  Medicare cuts of about $16 billion that were originally included in sequestration would stay in place.   The money lost by stopping the Pentagon cuts and some of the domestic reductions would be made up (and then some) by more than $217 billion in cuts over 10 years  to SNAP/food stamps, Medicaid, premium subsidies and other funding for the new health care law, the Child Tax Credit, and several consumer protection measures.  It also raised nearly $88 billion in revenues over 10 years by requiring federal employees to pay more of their retirement costs.  (More details about these provisions below.)

But although the House passed these spending cuts, it did not win over enough Republicans to get a majority for the Plan B increase in millionaire tax rates.

So what’s next?  Despite repeated assertions on the House floor by House Budget Committee Chair Ryan (R-WI) and others that President Obama has not come out with specific spending cut proposals in his deficit reduction plan, the President has put forth several offers in his negotiations with Speaker Boehner.  The President’s most recent proposal includes tax cuts for everyone, but reduces the tax breaks at the top, for a new revenue total of $1.2 trillion over ten years, and cuts spending by $930 billion, plus another $290 billion in debt interest savings.  Some of the savings are highly controversial among Democrats (see below).  If a solution is to be found, either before or soon after the beginning of the new year, it appears less likely to be achieved by legislation that can draw majority Republican support in the House.  Another option – passing a plan in the House with bipartisan support (lots of Democrats and some Republicans.  It remains to be seen whether Speaker Boehner will exercise leadership in pressing for that, or leave it to others to work around him.  In announcing the House’s departure, the Speaker did not seem to be signing up for a renewed battle to win over his caucus.  Instead, he said “Now it is up to the president to work with Sen. Reid on legislation to avert the fiscal cliff.”

Taxes

Taxes were a major issue during the Presidential campaign with a focus on the ’01 and ’03 Bush-era income tax rates set to expire at the end of this year.  On November 14, newly off an election victory where he campaigned for higher taxes on incomes over $250,000 and with opinion polls solidly favoring his position, the President at his first post-election news conference reiterated his position on income tax rates and pressed for $1.6 trillion in revenue as part of a comprehensive deficit reduction deal.  Democrats were buoyed by the President’s approach.  Republicans had strongly resisted any increase in personal income tax rates but some conceded that the election results would likely mean rates for high-income taxpayers would go up.  Others pressed for no rate increases and instead talked in vague terms about tax reform that included closing unspecified tax loopholes and ending some tax deductions.  In return they also wanted deep cuts in spending.

The President presented a more detailed deficit reduction plan on November 29, outlining nearly $1.6 trillion in addition tax revenue over 10 years.   Tax rates for income of less than $250,000 would remain the same while the two top rates of 33 and 35 percent would revert back to 36 and 39.6 percent; the rate on capital gains would increase from 15 percent to 20 percent and dividends from 15 percent to the ordinary income tax rate; the maximum value of tax deductions would be lowered to 28 percent (someone in the 35 percent tax bracket can currently deduct up to 35 cents for every dollar in deductions) and additional limits would be placed on itemized deductions for higher-income taxpayers; and the estate tax would revert back from its current $5 million exemption level and maximum rate of 35 percent to its 2009 exemption level of $3.5 million and 45 percent maximum rate .  The tax package would also continue the expansions made in the 2009 economic recovery act to the refundable Child Tax Credit and Earned Income Tax Credit (EITC) for low-income working families; extend for one year the 2 percent payroll tax cut for individuals; provide a one-year fix to the Alternative Minimum Tax (ATM), keeping new taxpayers from being hit with an average income tax increase of $2,250 according to the Tax Policy Center; and extend a number of business tax breaks.

In response to the President’s plan Speaker Boehner, the Republicans’ lead negotiator in deficit reduction talks with the President, offered $800 billion in revenue through limiting tax expenditures in tax reform that would occur next year.  His plan did not specify which tax expenditures would be limited.  Many of the most costly expenditures in terms of lost revenue are very popular and have powerful lobby shops supporting them, for example the home mortgage interest deduction, making them politically difficult to reduce significantly.

Under earlier House Republican tax proposals and plans proposed by Speaker Boehner, the 2009 improvements in the Child Tax Credit and EITC would be allowed to expire.  This means that 12 million families benefiting from the Child Tax Credit would see their taxes go up by $800, on average.  Six million families would pay an average $500 tax increase because of cuts to the EITC.

In early December deficit reduction talks between Speaker Boehner and the President continued.  On December 17, the President presented a new proposal containing both new savings on the spending side and a reduction in revenue.  The proposal reduced revenue by increasing from $250,000 to $400,000 the income threshold at which the lower tax rates would be extended.   The 33 percent income tax rate would be extended rather than reverting back to 36 percent.

Speaker Boehner seemed to be making a significant move toward the President on revenue when he indicated that he would let tax rates on income over $1 million expire.  However, coupled with extending the Bush-era tax rates on income up to $1 million, extending limits on certain tax deductions set to end on January 1, taxing dividends at 20 percent rather than at the rate of regular income, and continuing the current generous estate tax provisions, people with incomes of over $1 million would receive an average tax cut of $108,500 according to the Tax Policy Center.

In a high-risk strategy Speaker Boehner decided to take this so-called “Plan B” to floor of the House for a vote on December 20.  When conservative Republicans revolted, Speaker Boehner pulled the bill knowing that it would not pass.  It is not yet clear what the impact of his failure to pass the bill will have on future talks with the President.  Democrats and the White House are urging him to return to the negotiating table with the President.

See Citizens for Tax Justice report from December 20 comparing Speaker Boehner’s “Plan B” and the President’s original and December 17 proposals at: http://www.ctj.org/pdf/latestfiscalcliff.pdf.

The Real Cliff:  Unemployment Insurance About to Expire, Leaving 2 Million With No Help

The House spectacle before the abrupt departure was remarkable both in showing what the majority wanted to do and what it didn’t care to tackle.  Although 4 in 10 of the unemployed today have been out of work for more than six months (most for more than a year), and have run out of state unemployment benefits, the House took no action to continue the federal Emergency Unemployment Compensation program for the long-term jobless.  It will expire at the end of December.  Two million will be denied unemployment benefits right away, followed by another million by the end of the March in 2013.  The proportion of the long-term unemployed has risen dramatically over the years.  After the 1980’s recession, 26 percent of the unemployed were out of work six months or more.  The President’s plan includes the extension of unemployment benefits for a year, at a cost of $33 billion.

Shrinking the Adjustment for Inflation:  “The Chained CPI”

One of the most controversial provisions in President Obama’s deficit reduction package is a change in the way the Consumer Price Index (CPI) would be calculated for purposes of calculating benefits for Social Security, and also affecting many other low-income programs that rely on annual inflation adjustments for eligibility or benefit levels.  In what ultimately turned out to be abortive negotiations with Speaker Boehner, the President responded to the demand that benefits to entitlement programs be cut by agreeing to this change, which is called the “chained CPI.”  It reduces the inflation rate by assuming that when certain prices go up, consumers are likely to switch to other comparable but cheaper products.  Some research questions whether the elderly, or low-income people generally are able to make such substitutions as easily as the population as a whole.  According to the Center for Economic and Policy Research, after 10 years, the Chained CPI would result in a 3 percent cut in Social Security benefits, about 6 percent after 20 years, and nearly 9 percent after 30 years.  For an average worker retiring at 65, this reduced measure of inflation would result in benefits being cut $1,130 a year at age 85.  Women would be disproportionately affected, because they live longer and are more likely to be poor.  The Administration’s Chained CPI proposal, which is estimated to save $130 billion over 10 years, does provide exemptions for low-income elderly and disabled making use of Supplemental Security Income (SSI), but that alone does not offer adequate protection to low-income people.  If the revised calculation is applied to the federal poverty guidelines, it will lower the annual increases in the poverty line, which would be likely to reduce benefits or shrink eligibility for means-tested programs.  Many progressive groups, including labor, have strenuously opposed making use of the Chained CPI.

SNAP in Farm Bill and House Bill 

Prospects for a 5-year reauthorization of a farm bill including the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) before this Congress ends on January 2 has all but disappeared. There is not time for action on a separate bill and prospects for attaching it to the elusive larger deficit reduction package are fading.  The full Senate passed a 5- year farm bill extension in June with $23 billion in savings over 10 years, including $4.5 billion in cuts to SNAP.  In July the House Agriculture Committee approved bipartisan farm bill legislation with $35 billion in savings over 10 years, including $16 billion in cuts to SNAP.  The House Republican leadership has refused to allow a floor vote to happen because some Republicans want deeper cuts to SNAP while many Democrats do not support any cuts to the program.  The commodities provisions in the two bills that subsidize farmers also split members, more along geographic than party lines.  The Senate bill tends to favor northern commodities like corn and soybeans and the House bill rice, peanuts and wheat grown in the southern states.

Absent a full reauthorization, there is faint hope that a shorter-term extension of the current farm bill might pass.  The SNAP program will continue to operate uninterrupted without an extension of the full bill because the rules governing the program will not expire and funding was included in the continuing resolution through March 2013.  However, some programs would be affected.  Dairy subsidies would revert back to a 1949 law, likely doubling milk prices.  Dairy products are a large portion of the Women, Infants and Children (WIC) federally-funded nutrition program, and the price increase would lessen the buying power of WIC recipients.

The Spending Reduction Act passed by the House on Thursday night included $32.3 billion in cuts to SNAP/food stamps.  The House majority would return SNAP benefits to their old level of about $1.30 per meal, an amount judged by nutrition experts to be inadequate.  While current law would have started that reduction in November of 2013, this bill moves it up to February.  Recent analysis estimates that this cut will result in a loss of $8 – $10 per person per month.  The House will also deny SNAP to 2 million people who now get benefits because their low incomes qualify them for programs such as Temporary Assistance for Needy Families.  This change will also result in 280,000 low-income children losing free school meals.  In addition, the House agreed to make it harder to streamline eligibility for SNAP benefits, which now can be received without additional documentation if certain households already qualify for Temporary Assistance for Needy Families (expected to cut assistance to 1.8 million individuals).  This change will also result in 280,000 low-income children losing free school meals.  These restrictions were estimated last spring to save $11.7 billion over 10 years.  Further, this bill would reduce SNAP benefits to people who now receive a small benefit from the Low Income Home Energy Assistance Program, said last spring to reduce SNAP spending by over $14 billion.  Despite this time of high unemployment, the House would drop certain federal spending for SNAP employment and training programs (saving about $3.1 billion over 10 years) and would end federal bonus payments to states to encourage good performance in administering SNAP.

Health Care Spending Reductions

The President’s most recent offer calls for $400 billion in savings in health care programs over 10 years, said to come mainly from Medicare, with relatively little from Medicaid (although details were not available).  The House Spending Reduction Act keeps the $16 billion in Medicare cuts scheduled to take place as part of the automatic FY 2013 cuts imposed by the Budget Control Act ( 2011 legislation that set up the “sequestration” cuts to start in January 2013 if Congress could not agree on a deficit reduction plan).  In addition, the House bill slashes health care premium subsidies under the Affordable Care Act for 350,000 people, and cut Medicaid funding to Puerto Rico and other territories even though Puerto Rico, despite its disproportionate poverty, receives far lower federal Medicaid payments than any state (a high of 35 percent in 2010; states receive no less than 50 percent of Medicaid costs).  The amendment also allows states to make cuts in their Medicaid programs below the levels in place when the Affordable Care Act passed, which could reduce eligibility or benefits for millions of people.  Further, it includes a number of funding cuts aimed at undermining the Affordable Care Act (the major new health care legislation now being implemented).  These savings are estimated at $47.3 billion over ten years by the Congressional Budget Office.

The President’s plan is said to assume at least one-year funding for continued higher payment levels to physicians under Medicare.  Their payments were supposed to be cut by Sustainable Growth Rate (SGR) reductions passed by Congress some years ago, but Congress has not been willing to implement these cuts.

Debt Ceiling

President Obama has been emphatic in not wanting to undergo another crisis negotiation in which Republicans insist on spending reductions commensurate with increases in the debt ceiling.  The debt ceiling is expected to be reached within the next month or two.  If Congress does not authorize continued borrowing, the crisis would stall spending, spook federal bond-holders, with threats of catastrophe for our economy, according to people like Federal Reserve Chair Ben Bernanke.  Holding spending on domestic priorities hostage to deeper and deeper cuts to get the debt ceiling increased would be very dangerous to human needs programs.  Obama’s position initially would have reduced Congress’ role in debt ceiling increases permanently; more recent proposals have called for a two-year debt ceiling increase.

Appropriations

The President’s most recent offer called for cuts of $100 billion to defense and $100 billion to non-defense appropriations over 10 years, beyond the $1.5 trillion in cuts to these programs already set in motion over the next decade.  These cuts are much lower than the approximately $1 trillion in additional Pentagon, domestic, and international program cuts that are now scheduled to start in January and continue over 10 years.  Still, domestic appropriations are being cut deeply already, affecting education, housing, child care, WIC, Head Start, home energy assistance, and much more, and many groups oppose any further cuts.  On the other hand, many military spending experts believe that much more could be cut from military spending than the $100 billion called for in the President’s plan.

As noted above, the House spending reduction bill cuts appropriations by another $19.1 billion in FY 2013 by lowering the appropriations cap by that amount.  The bill also prohibits further military cuts.

The post CHN: The House Goes Home for Christmas appeared first on Coalition on Human Needs.

As the October 1 start of the new fiscal year draws near, Congress has set forth a path to avert what has become an annual question: “Will they (Congress) allow the government to shut down?”  Democrats and the Administration have endorsed the timetable originally proposed by conservative Republicans to fund the government for six months, through March of next year.  The plan will be based on the $1.047 trillion funding cap for annually appropriated programs for fiscal year (FY) 2013 established in the 2011 Budget Control Act (BCA) and used by Senate Democrats and the Obama Administration to set FY 2013 funding.  This amount is $4 billion above this year’s level of $1.043 trillion.  The continuing resolution (CR) will start from FY 2012 program levels, with the expectation that urgently needed funds beyond FY 2012 amounts will be added, with details to be worked out during the August recess.  A vote on the CR will occur in September before Congress leaves for election campaigning.  If passed as expected, this takes regular appropriations off the table during the post-election lame duck session when the biggest issues will be the impending across-the-board sequestration cuts set to take effect on January 1 and the expiration of the Bush-era tax cuts on December 31.  (See article on taxes in this Human Needs Report.)

Prior to the agreement on the CR both the House and Senate had passed 11 of the 12 appropriations bills in their Appropriations Committees and the full House had passed to 6 of them.  None of the bills has been signed into law.  The Interior-Environment bill in the Senate and Labor-HHS-Education in the House saw the least action.  The Senate Interior-Environment bill was pulled from consideration in committee to prevent Senate Republicans from offering policy rider amendments attacking Environmental Protection Agency regulations. The House had approved its Labor-HHS-Education bill in subcommittee, with funding $6.8 billion below the enacted level for FY 2012 and $8.8 billion less than the Senate Committee’s Labor-HHS-Ed bill (S. 3295).  The bill, which defunded the health care law, was anathema to Democrats and portended a contentious road ahead.  See details of the House Labor-HHS-Ed bill in the July 24 Human Needs Report.

All the bills the House passed were based on the much lower overall funding level of $1.028 trillion.  Betting on being in a stronger position after the election when they hope to reduce funding, Republicans have agreed for now to the higher spending level for the CR and to set aside controversial policy riders in the bills.  Some Democrats believe that their party would have had greater leverage to finalize a more favorable deal with a 3-month CR that expired at the end of December. Recalling how last summer Republicans held an increase in the debt ceiling hostage in exchange for tight spending caps but no new revenues, some Democrats are leery of a 6-month deal that would expire around the time Congress will also need to act on increasing the debt ceiling.

More Cuts:  Separate from the funding levels approved for regular FY 2013 spending, both defense and non-defense are set to be cut from current levels by $55 billion each in FY 2013 unless a deficit reduction deal is reached by January 1.  Each program that is not exempt will be subject to across-the-board cuts (aka “sequestration”).  (Last week the Administration said that military personnel would be exempt.)  The BCA’s drafters included sequestration to push Congress to enact a deficit reduction plan in order to avoid unpopular reductions to defense and non-defense programs.  No one thinks the automatic sequestration cuts are an appropriate way to achieve deficit reduction.  Defense contractors and their allies in Congress have been particularly aggressive in beating the drum about the dire consequences sequestration would have on military jobs and capabilities.  Some have called for reconfiguring sequestration so that more of the cuts would fall on non-defense programs.  Democrats and the Administration have stood firmly against such a strategy.  In fact, many military analysts believe there is room for more cuts in the Department of Defense budget if implemented rationally.  On July 19 during consideration of its FY 2013 Defense Appropriations bill, in a sign that resistance may be lessening to cutting military spending, the House adopted 247-167 a bipartisan amendment co-sponsored by Representatives Mick Mulvaney (R-SC) and Barney Frank (D-MA) that would reduce spending by $1.1 billion.  While the cut is small compared to the bill’s overall cost of nearly $606 billion, the vote was significant.

On August 1 Acting Director of the Office of Management and Budget Jeff Zients stated in testimony before the House Armed Services Committee, “A great deal has been written about the devastating effects the sequester will have on defense programs,…. But less attention has been paid to the equally destructive effects sequestration will have on non-defense programs.  An eight percent reduction in non-defense discretionary funding would cause severe harm to many of the investments most critical to our country’s long term economic growth. More than 16,000 teachers and aides responsible for educating thousands of children would lose their jobs. In addition, 700,000 women and children would lose the nutrition assistance they need to remain healthy. 100,000 kids would lose places in Head Start, which helps them begin school ready to learn. The National Institutes of Health would have to halt or curtail vital science, such as research on cancer and childhood diseases. Let me underscore this point — the across-the-board cut required by the BCA would jeopardize critical programs that improve children’s health and education, adversely impacting future generations.”  See full testimony here.

Similar concerns are at the heart of the report “Under Threat: Sequestrations Impact on Nondefense Jobs and Services” issued by Senate Labor-HHS-Ed Subcommittee Chairman Tom Harkin (D-IA) on July 25.  It provides a detailed state-level analysis of sequestration’s effects on education, health, social services, and labor programs.  The report goes beyond estimated funding cuts to show the numbers of people who would lose services and workers who would lose jobs.

The 10-year budget caps in the BCA reduce the deficit by $1 trillion, all from cutting spending.  Advocates believe that the deficit needs to be addressed in a responsible way through a balanced approach that unequivocally needs to include significant new revenues.

The post CHN: Congressional Leaders and Administration Agree on 6-Month Spending Outline; But Automatic Spending Cuts and Tax Increases Still Loom appeared first on Coalition on Human Needs.

Congress has not raised the federal minimum wage for 10 years, the longest period since the first federal minimum wage was passed in 1938.  The wage is not indexed for inflation so its buying power has eroded by one-fifth of its value since the last increase in 1997 and now stands at a 52-year low.  According to the Economic Policy Institute, about 4 percent of the workforce, about 5.6 million workers, who earn less than $7.25 an hour will be directly affected.  Another 7 million might benefit through so-called ‘spillover’ effects. Of the workers mostly directly affected, 71 percent are adults, 61 percent are women, 43 percent work full-time and another 36 percent work 20-34 hours per week.

Despite the hundreds of billions of dollars in tax cuts for businesses and upper income groups over the last 10 years and additional tens of billions targeted to small businesses, Republicans have tried to make the case that businesses who hire low-wage workers should receive another round of tax cuts to offset the negative impact of an increase in the minimum wage.  Breaks for business are not the norm; the only other time tax cuts were added to the minimum wage bill was the last time it passed in 1996.  The House rule governing consideration of H.R. 2 disallowed attempts by Republicans to offer any of these so-called ‘sweeteners’.

Next week the Senate will consider S. 2, a bill initially identical to H.R. 2.  Because the bill will likely be filibustered, it will require 60 votes for passage rather than a simple majority.  In order to assure passage Republican and Democratic leaders are negotiating to add tax breaks for business to the bill.  They are expected to add to S. 2 the 5-year $8.3 billion tax cut package agreed to by the Senate Finance Committee.  It includes extension of the Work Opportunity Tax Credit of employers who hire certain low-income workers, reduction in depreciation time for capital improvements businesses make, an increase in the amount of deductions for new business investments that can be made annually, and an increase in the size of businesses that can use a simplified cash method of accounting for tax purposes.  The Finance Committee has identified offsets to pay for the tax package, mostly by reducing existing tax breaks for business.

Also, in order to break the impasse on a stalled ethics bill this week, Senate Democratic leaders have agreed to allow Republicans a vote on a version of the line-item veto in an amendment to the minimum wage bill.  Advocates have long sought to extricate the minimum wage from other controversial proposals; they are concerned that if such an amendment were to become law, it would shift too much power from the legislative to the administrative branch of government.   (For more information on the line-item veto, see http://www.cbpp.org/1-10-07bud-fact.htm)  Other amendments could also be offered that would, for example, erode fair labor standards.  All of these amendments would require 60 votes to pass in the Senate.

Most agree that there will be an increase in the minimum wage signed into law but the process will likely not be smooth in the Senate.  Ultimately, a House and Senate Conference Committee will work out differences in the bills.

The post CHN: Overwhelming Minimum Wage Victory In The House appeared first on Coalition on Human Needs.