Through the State of the Union message and its budget proposal for Fiscal Year 2004, the Bush Administration has laid out a plan that -- if enacted -- would radically alter the composition and function of the federal government by vastly expanding military spending, ending or substantially altering many social programs, shifting major responsibilities for the well-being of individuals and families to the states and the private sector, and significantly downsizing the federal income base.

Key to the State of the Union message was a $674 billion, 10-year, “economic stimulus package” which would, among other things, eliminate taxes on corporate dividends and accelerate the implementation timetable on a number of tax breaks for the nation’s most affluent people, thereby undermining the income base of the federal government. President Bush maintains that his tax proposal would jumpstart the economy by making more money available to the private sector. Opponents of the plan contend that it would create a budget shortfall of $900 billion, thus undermining funding available for social programs such as Medicare and Social Security.

The case against the tax proposal was strengthened in late January when the nonpartisan Congressional Budget Office (CBO) estimated that the federal deficit would reach $199 billion this year, with a deficit of $145 billion in 2004. Deficits over the next decade are projected to reach $629 billion. Until recently, the deficit had been plummeting, leading CBO in 2001 to project a surplus of $5 trillion over the next 10 years, if the then-current economic trends continued, a prospect that has now vanished because of the weakened economy and the first Bush tax cut.

The stimulus effects of the President’s plan have been questioned by a number of legislators and economists. Economists generally agree that funds placed in the hands of middle- and low-income people are more likely to be spent quickly and circulate in the economy, thus creating stimulation. Since only 10 percent of the tax proposal would benefit households with income below $73,000 per year, there is little likelihood that much of the money in the Bush package would quickly return to the active economy.

House and Senate Democrats, led by Congressmember Nancy Pelosi (D-CA) and Senator Tom Daschle (D-SD), respectively, have offered alternative plans (ranging from $136 billion to $141 billion) calling for short-term stimulus by extending benefits for unemployed workers, giving fiscal relief to the states for health, education and social service programs, providing incentives for businesses to make immediate investments, and providing cash rebates to workers.

The President’s budget proposal was released a few days after the State of the Union address. His budget provides $15 billion over five years for global HIV/AIDS relief. However, it also provides for an overall freeze in funding for domestic social programs while massively increasing spending for a defense buildup that makes no provision for the cost of the projected war in Iraq or its possible outcomes.

The President’s budget would slash funds for education, eliminating 45 programs in the Department of Education, including vocational education and after-school programs for vulnerable children. Housing for low-income families is another victim, through the proposed elimination of the program that rehabilitates and replaces dilapidated housing. President Clinton’s initiative to put another 100,000 police personnel on the streets would also be forfeit, a proposal that seems inconsistent with the current emphasis on homeland security, an area in the budget that the President seeks to expand by seven percent.

The Administration is expected to ask Congress for a supplemental appropriation to cover the cost of the anticipated war against Iraq. This is estimated to have a price tag of $100 billion, which will have to be added to the projected deficit. In addition, defense supporters in Congress are expected to add billions more to the Pentagon budget for favorite weapons systems they feel the President did not fund sufficiently.

On the domestic side of the budget, the President’s proposals generally involve saving money by privatizing functions or turning them over to the states, eliminating or reducing benefits, and making it more difficult for needy people to qualify. For example, the Administration proposes to require that families of low-income children who received subsidized school lunches do more paperwork to prove they are truly eligible for the meals. Such a requirement will save money by forcing some people out of the program and intimidating others, especially immigrants, so that they do not apply at all, even if eligible.

Rudy Penner, who was appointed by the Republican leadership of Congress to serve a recent term as head of the Congressional Budget Office, summarized the President’s budget by saying, “There are a lot of pretty radical ideas in here. I guess overall I would have preferred a few less bold initiatives to avoid the bold increases in the deficit.”

The House and Senate Budget Committees will hold hearings on the budget proposals and make recommendations for change. These are subject to approval by the full House and Senate and a compromise should be reached between the two versions by early summer. Congress never concluded its work on the current year’s budget, opting instead to fund the government through a series of continuing resolutions.

Temporary Assistance to Needy Families (TANF)

On February 13, the House is expected to vote on reauthorization of TANF, the nation’s cash assistance program for extremely low-income families. The leaders of the Ways and Means Committee held no hearings and conducted no mark-up before arbitrarily sending to the floor for passage the same bill the House passed last year, which is essentially President Bush’s proposal.

The Democratic leadership will propose an alternative that would extend the current program while providing significantly increased childcare funding and giving states more options with regard to treatment of immigrants and the provision of education and training opportunities for recipients. The Senate is moving more slowly and may eventually simply reauthorize the existing program with a small increase in childcare funding. The House- and Senate-passed versions would then have to be reconciled before being sent to the President for approval.

GENERAL ASSEMBLY

Taxation and the Federal Budget

Presbyterian General Assemblies have often expressed opinions as
to how the Federal Government should function in relation to the
nation's economy. When the Assemblies have spoken, they have
without exception spoken on behalf of a federal economic policy
which is humane and sensitive to the needs of persons; taxes on the
basis of equity; and, while supporting private initiative, does not
allow private interests to trample the poor, disenfranchised or unemployed.

Federal Deficit

General Assemblies have not been blind to the problem of limited economic resources and the problem of a growing federal deficit. In addressing that issue directly, the 1990 Assembly urged both the President and Congress "to place the highest priority on developing a legislative program (a) to more adequately meet social and economic needs, and (b) to reduce the federal deficit. To the extent this cannot be done by reducing military or other spending, (the Assembly requests) them to approve legislation (a) to increase taxes and (b) to make the tax structure more equitable and
progressive" (Minutes, 1990, p. 776).

Taxes

In a 1977 study and statement, the UPCUSA General Assembly,
following the Apostle Paul, affirmed that it is right for Christians to
pay taxes because civil authorities are appointed by God for the good
purposes of public order and well-being. But an appropriate tax
structure is to be measured by four criteria:
Equity - Every practicable effort should be made to treat all persons
in the same economic situation in the same way. And there should be
fair distinctions made for those who are in different economic circumstances.
They should be progressive so that tax rates increase as
incomes increase. The practical implication is that those who receive
more should not only pay more taxes in an absolute dollar amount
but also pay at a higher rate than those who receive less income.
Moral Integrity - In structure, administration, and enforcement, the
tax system should foster honest and conscientious self-assessment...
Under this criterion, emphasis is placed on the taxpayer being treated
fairly and with dignity in the administration of the tax rules.
Simplicity - The tax system should be made as simple as practicable
so that taxpayers, tax administrators, and legislators can all understand
the rules and confidently apply them or comply with them.
That will more likely result in uniform application that will not be
affected by individual judgment, interpretation or circumstances.
Efficiency - The Assembly agreed with the understanding that an
efficient economy is one that obtains the highest output, not only of
goods and services but also of intangible values affecting the quality
of life. "A good tax system is one that furthers that goal wherever it
can and otherwise hinders it as little as possible..." (UPCUSA,
Minutes, pp. 243, 244). In applying those criteria, various General Assemblies have
called for a shift away from military expenditures and a greater
investment in "imaginative initiatives for peace, health, and welfare."
That means "the subordination of narrow, shortsighted, self-serving
considerations to an insistence upon society's responsibility for
conditions whereby such basic needs of all citizens as jobs, housing,
education, and health care can be satisfactorily met" (UPCUSA,
Minutes, 1979, p. 292).

By Mary A. Cooper