Human Needs Report Article

The Human Needs Report is the Coalition on Human Needs' newsletter on national policy issues affecting low-income and vulnerable populations. It is published every other week while Congress is in session.

House and Senate Budget Committees Pass Budget Resolution for FY 2006 (3/11/05)

The House and Senate Budget Committees approved budget resolutions this week for fiscal year 2006 that spell out deep cuts for programs and services for moderate- and low-income families. The resolutions include deep cuts to programs aimed at helping the most vulnerable Americans, children, the elderly and people with disabilities. Medicaid, Food Stamps, child care, housing, education, Head Start, workforce training, community development, veterans' benefits and many other programs are on the chopping block. Even the Earned Income Tax Credit and child nutrition programs may be at risk of reductions.

The full Senate is expected to begin debating its resolution on March 14 and intend to vote on final passage before leaving for a two-week recess beginning March 18. The House resolution will also go to the floor for a vote next week. Advocates expect to see a small number of helpful amendments debated on the Senate floor, including an amendment that will strip out the cuts to Medicaid and two amendments related to tax cuts.

Advocates are urged to alert their networks and to contact their senators and representative to tell them to reject a budget resolution that includes such deep cuts. Multiple organizations and coalitions are planning mass call-in days to the Capitol on Tuesday and Wednesday, March 15 and 16. The Coalition on Human Needs has a simple e-mail letter that can be sent to elected officials urging them to reject a budget resolution that will hurt vulnerable people.

Deep cuts to Medicaid, Food Stamps and other low-income programs. Under the House resolution, mandatory programs, which include Medicaid, the Earned Income Tax Credit, TANF and Food Stamps, would be slashed by $68.6 billion over the next five years. The Medicaid cut could be as much as $20 billion. The Senate resolution would cut mandatory programs by $32 billion over five years. The Medicaid cut could be as much as $15 billion. (The President recommended mandatory cuts of $26 billion over the same period.)

The budget resolutions do not specify exactly which programs would suffer cuts – instead they give instructions (called reconciliation instructions) to the authorizing committees to find the savings in programs under their jurisdiction. By a target date set by the budget committee, authorizing committees must approve legislation changing a program or programs under their jurisdiction to generate the “savings.” This special bill, called a reconciliation bill, is debated under special rules in the Senate – with limited time for debate and only 51 votes required for passage. Most Senate legislation requires 60 votes to pass. (See below for more detail about reconciliation instructions to each committee.)

Senator Smith (R-OR) has said he will offer an amendment to strip the Medicaid cuts from the resolution and replace it with a bipartisan commission to study the finances of Medicaid.

Deep cuts to low-income discretionary programs. Domestic discretionary programs (those appropriated each year) would be cut by $216 billion over five years under the House resolution and by $207 billion over five years in the Senate resolution. The cuts would hit community development, education, housing, Head Start, child care, veterans' benefits, community services and many other programs. In 2010 alone, those cuts amount to 14 percent below the level of current services, adjusted for inflation under the House resolution (13 percent under the Senate resolution.)

The Senate resolution would put limits on all discretionary programs for the next three years. If homeland security and defense spending rise, as they are expected to, domestic program would suffer deep cuts in the next three years.

More tax cuts! Even while slashing programs that help the neediest Americans, both the House and Senate resolutions make room for still more tax cuts . The House resolution assumes $106 billion in tax cuts over the next five years; the Senate resolution makes room for $70 billion in tax cuts in the same period.

Included in both resolutions is an extension of tax breaks for capital gains and dividends – which would otherwise expire in 2008. The tax break on capital gains and dividends primarily benefits the well off. Nearly half of the benefits of these tax cuts in 2005 will go to households with incomes greater than $1 million, according to the Tax Policy Center. The Congressional Budget Office estimates the cost of extending the tax cuts for dividends and capital gains to be $23 billion between 2006 and 2010. In stark contrast, the House budget resolution calls for the Energy and Commerce Committee to trim $20 billion from Medicaid over the same period.

Some Republican senators are becoming wary of additional tax cuts that are not paid for. To ensure the smooth passage of a tax cut bill on the Senate floor, the budget resolution gives special procedural protection – reconciliation - for the $70 billion in tax cuts. Once the Senate Finance Committee writes a bill cutting taxes by $70 billion, the bill needs only 51 votes to pass on the Senate floor, rather than the typical 60. This is the same fast-track procedure used to make steep cuts in Medicaid, Food Stamps and other mandatory programs.

It is possible an amendment may be offered on the Senate floor that removes the $70 billion in tax cuts from the reconciliation process. If this amendment were adopted, the resolution would continue to assume $70 billion in tax cuts, but the cuts would not have the special protection of a reconciliation bill and a tax cut bill would need 60 votes to pass.

Senators Feingold (D-WI) and Chafee (R-RI) plan to offer an amendment similar to one that passed last year requiring any spending that increases the deficit – including tax cuts and new spending on mandatory programs – to be paid for, either by raising revenue or reducing spending. Last year, four Republican senators (Snowe (ME), McCain (AZ), Collins (ME) and Chafee (RI)) broke with their party leadership to vote for the “pay-as-you-go” amendment, giving it 51 votes for passage. All four of those Republicans, along with Senator Voinovich (R-OH), are expected to vote for the pay-as-you-go amendment again this year. Because the make-up of the Senate has changed, at least one more Republican – plus all Democrats - must vote for the amendment to ensure its passage.

Does Not Reduce the Deficit! According to the budget committee chairmen, such deep cuts are necessary to put the budget on a path to shrinking deficits. But the Center on Budget and Policy Priorities finds the House and Senate budget resolutions actually increase the deficit because of the tax cuts included. Thursday's Washington Post carried a quote from Senator Domenici (R-NM): “People will feel some real pain, but I don't know how you get a deficit down without people taking some medicine,” Unfortunately, the only people feeling real pain are low-income people.

For more information
CBPP: House Budget Resolution Cuts Key Low-Income Programs
CBPP: Assessing the Budget Proposal Put Forward by the Senate Budget Committee
CBPP: Assessing the Budget Proposal Put Forward by the House Budget Committee

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More Detail on Reconciliation Instructions

Here are the breakouts of the reconciliation instructions , by committee:

The Senate resolution as proposed by Chairman Gregg directs the Finance Committee to cut $15 billion over the next five years. The Finance committee has jurisdiction over Medicaid, TANF, EITC, and SSI, but it is expected the cuts will primarily hit Medicaid. The House resolution directs the Energy and Commerce Committee to cut $20 billion. These cuts are expected to come from Medicaid.

The House would cut $18.7 billion over five years from the Ways and Means Committee . This committee has jurisdiction over Medicare, the Earned Income Tax Credit, Temporary Assistance for Needy Families (TANF), child welfare programs, child support, and SSI. It is not clear what would be cut. The President has rejected cuts to Medicare, and it appears likely the committee will cut the EITC, but any program in their jurisdiction is at risk.

The House would cut $5.3 billion over five years from the Agriculture Committee . The Senate would cut $2.8 billion from its Agriculture Committee . These cuts could come from Food Stamps and/or from farm subsidies.

The Senate would cut $8.6 billion from the Health Education, Labor, and Pensions Committee over the next five years. The House directs the Education and Workforce Committee to cut $21 billion over five years. Those cuts could come from reduced subsidies to student loan lenders and changes to pension programs. Employers may object to the pension changes, perhaps putting other programs – such as child nutrition – at risk.