Conference Agreement Cuts Services for Low-Income People, Increases the Deficit, and Gives Tax Breaks to the Rich
Last night Congress approved a $2.6 trillion federal budget for next year that lays the groundwork for $10 billion in cuts to Medicaid, as much as $3 billion in cuts to Food Stamps, and billions in other mandatory program cuts.

The budget would make room for $100 billion in tax cuts – while cutting $212 billion over the next five years to domestic discretionary programs. Education, veteran’s health care, community development, workforce training, child care, Head Start, nutrition assistance for pregnant women and children, home energy assistance and environmental programs, and many others fall under this category.

The House voted by a margin of 214 to 211 on H. Con. Res. 95 . The Senate agreed 52 to 47 . Republican Senators Lincoln Chafee (RI), George Voinovich (OH), and Mike DeWine (OH) joined all Democrats and Independent Jim Jeffords (VT) in voting against the budget resolution. Senator Joe Lieberman (D-CT) did not vote. Not a single Democrat in the House or Senate voted for the resolution. A budget resolution is not a law and thus does not go to the President for his signature.

Cutting Mandatory Programs That Help Low-Income People

The budget includes instructions to specific committees in the House and Senate to find $35 billion in “savings” (cuts) to mandatory programs over the next five years. (Mandatory programs are not appropriated annually.) The inclusion of these reconciliation instructions sets the stage for act two in the budget process – producing legislation making program changes that will result in cuts.

Under the budget resolution, Medicaid must be cut by $10 billion over the next five years. The Senate Finance Committee and the House Energy and Commerce Committee are directed to produce a bill by September that will make these cuts. The President’s own budget recommended cuts of $7.6 billion, according to calculations by the Congressional Budget Office.

Food Stamps are also at risk. The House and Senate Agriculture Committee have instructions to cut $3 billion from programs under their jurisdiction – which includes farm subsidies as well as Food Stamps and other nutrition programs. House Agriculture Committee Chairman Bob Goodlatte (R-VA) has said he would like to see those cuts come from the Food Stamps program, but Senate Chairman Saxby Chambliss (R-GA) has favored applying the cuts across farm supports, Food Stamps, and other agriculture programs.

The resolution also assumes cuts to other committees including $12.7 billion in cuts to the House Education and Workforce Committee and $13.7 billion to the Senate Health Education, Labor and Pensions (HELP) Committee. About $6.6 billion of that amount is assumed to come from changes to the Pension Benefit Guaranty Corporation, which could mean higher pension premium payments from companies with defined-benefit plans.

Student loan programs, also within the jurisdiction of Education and Workforce and HELP, could be tapped for cuts. The Center on Budget and Policy Priorities estimates that student loans could be cut as much as $7 billion over five years. On the other hand, the budget resolution increases the reserve fund for Pell Grants and increases the maximum amount of a grant by $100 to $4,150. Advocates for education point out that the increases in Pell Grants are laudable, but cuts elsewhere could make college less affordable for low-income students.

Smaller cuts must be produced by the House Resources and Senate Energy and Natural Resources Committees, the House Financial Services and Senate Banking Committees, the House and Senate Judiciary Committees, and others.

Committees with reconciliation instructions face a September deadline to come up with legislative changes that will achieve the required cuts. If a committee fails to produce legislation, the Budget Committee can write its own bill with cuts as determined by the Chair and send it to the floor for a vote. The bills will be wrapped into a single reconciliation bill, which will need only 51 votes for passage – not the typical 60 votes required for most legislation.

Discretionary Spending Slashed

Over the next five years domestic discretionary spending will be slashed by $212 billion. Those cuts could hit education, child care, workforce training, Head Start, veteran’s benefits, housing, home energy assistance, nutrition assistance for pregnant women and children and many other programs. Next year alone, spending on domestic discretionary programs would be reduced by $23 billion – a 5.9 percent cut from this year.

The conference agreement included $843 billion in total discretionary spending for 2006, the same level as the House. The Senate had earlier adopted an amendment offered by Senator Edward Kennedy (D-MA) that increased the total discretionary level to $848.8 billion, with the intention of directing that additional money towards education and training. The conferees rejected the amendment and the higher level of discretionary spending in the Senate resolution.

Appropriators have not been waiting for the completion of a budget resolution to start the work of divvying up the total amount to individual subcommittees. House Appropriations Chairman Jerry Lewis has said he is giving more of the total discretionary amount to domestic spending than the President requested.

Making Room for More Tax Cuts

Even while making deep cuts to services for low-income families, the resolution makes room for $100 billion in additional tax cuts, most of which will benefit upper-income individuals. The resolution does not specify how taxes will be cut; that work will be left to the House Ways and Means Committee and the Senate Finance Committee.

Reconciliation comes into play with tax cuts, too. $70 billion of those tax cuts will be part of a reconciliation bill passed by the tax-writing committees. Like the reconciliation bill that cuts low-income programs, the tax reconciliation bill is also due in September and needs just 51 votes for passage.

Various proposals have been floated that may be part of the tax package, including fixing for one year the alternative minimum tax (AMT),now hitting more middle-class families, and extending research and development and other tax credits for companies. But many speculate the bill will extend the capital gains and dividend tax breaks. Nearly half of the benefits of this tax break will flow to people earning more than one million dollars. This particular tax break will give an average of $38,000 a year to those millionaires.

Makes the Deficit Worse

Since the beginning of the year, conservatives on the Hill have insisted a budget resolution include deep cuts to low-income services in order to begin to control the large and growing deficit.

But the final budget makes the deficit worse. The new tax cuts coupled with an increase in defense spending actually deepen the deficit more than if there had been no budget at all. In fact, the budget pays for rich people’s tax cuts in two ways: by restricting services for the poor and sick and by borrowing – a crushing debt left to the rest of us to repay.

Seen in that light, the budget truly is both “mean and profligate” as described in a New York Times editorial this week.

Limiting Long-Term Spending

The conference agreement contains a new rule aimed at holding down future spending for mandatory programs. The new rule would not allow the Senate to pass policy changes that could increase the deficit by $5 billion or more in any of the four ten-year periods from 2016 through 2055. The Congressional Budget Office would have to estimate the very long-term cost of any proposed change to a mandatory program, and if the costs exceeded $5 billion or more in one or more ten-year periods, the bill would be subject to a point of order. 60 votes would be required to defeat the point of order. Even modest policy improvements could be affected by this rule, because long-term costs are likely to exceed $5 billion, which is not adjusted for inflation

Tax cuts of any size are exempt from the rule, no matter how much they increase the deficit.

Bad – Just Not as Bad as it Could Have Been

The budget resolution is a profound disappointment to those who believe Congress should not cut health care for the uninsured while handing more tax cuts to millionaires. However, it must be noted the final agreement is a vast improvement over the budget agreed to by the House just last month.

Thanks to the work of thousands of advocates for children, the elderly, and people with disabilities, Congress heard and responded. The House resolution included as much as $18 billion in cuts to mandatory programs in the Ways and Means Committee – cuts that could have hit the Earned Income Tax Credit, Supplemental Security Income for poor elderly and people with disabilities, TANF, services for abused and neglected children, child care, child support enforcement and others. The Senate resolution had none of these cuts and the final agreement does not contain them.

The House resolution included a total of $69 billion in mandatory program cuts, of which at least $15 billion would have come from Medicaid. The Senate cut a total of $17 billion from mandatory programs – but refused to cut Medicaid. So the final resolution – cutting $35 billion from mandatory programs – is closer to the Senate number than the House.

Republican Senators Chafee, DeWine, and Voinovich deserve much credit for standing up to their leadership and voting no on the final resolution as well. In the House, 15 Republican representatives also refused to support the resolution.

Fight is Not Over

As mentioned above, by September Congress must pass o ne reconciliation bill that cuts mandatory spending by $35 billion over five years and a second reconciliation bill that cuts taxes by $70 billion. (The resolution also requires a third reconciliation bill to increase the debt ceiling.) Advocates within the human needs community will continue to fight to ensure cuts will not hurt low-income people.

For More Information
CBPP: Assessing the Conference Agreement on the Budget Resolution  *** Page Not Found
CHN: Opposition to the Budget Deal is Widespread – Independent Organizations Speak Out   *** Page Not Found
House Roll Call Vote on Final Resolution
Senate Roll Call Vote on Final Resolution