Outlook 2005: Congress to Focus on Deficit,
as Budget Cutters Target Domestic Programs
by Mary A. Cooper
The second term of the George W. Bush presidency promises to include many
challenges in the legislative process. With larger Republican majorities in both
the House and the Senate, it might seem that the President would be able to push
his agenda through Congress more easily than in the past. History has shown,
however, that "lame duck" Presidents often have congressional control
problems. Legislators still have to answer to their constituents in the next
election, while a chief executive heading toward retirement is not in a position
to help them very much.
The rebellion is already under way, as even members of his own party are putting
pressure on Mr. Bush to propose ways to reduce the sky-rocketing federal deficit,
which is primarily the result of several rounds of tax cuts and rapidly escalating
expenditures for the wars in Iraq and Afghanistan. The President has pledged
to cut the deficit in half in five years, but with both military operations likely
to continue, even with the Pentagon's proposed spending cuts, it is unlikely
that defense will suffer substantial decreases. That leaves human services programs
as the targets for budget cutters. Advocates for low-income people are especially
concerned that programs such as child nutrition, Medicaid, housing and food stamps
may be cut. Since participation in nutrition programs has increased steadily
in recent months, funding reductions now would be especially detrimental to low-income
families.
TANF
One of the first tests may come with regard to reauthorization of TANF, for
which current funding ends on March 31. Authorization for this federal program
to provide cash aid to low-income families with children expired in August 2002.
Since then, Congress has passed seven short-term extensions at the current funding
level of $16.5 billion per year.
There will probably be pressure to reduce the appropriation for TANF. Child
advocates say increased funding is needed to provide more child care for poor
working families. The Administration contends that no additional money is needed
because the TANF rolls have been cut in half since the program started. This
argument may be used to justify an actual cut in funding.
The Administration has sought to increase the work requirement for all adult
recipients of program benefits to 40 hours a week, while advocates seek increased
opportunities for education and training. President Bush wants to institute marriage
promotion programs for TANF recipients, diverting funds to this purpose that
are now being used by states to provide other crucial services to welfare families.
The House passed a highly punitive TANF bill in 2003 that died when the Senate
failed to act. It is hard to see how Congress can pass new TANF legislation
by March 31 when the White House gives it no priority and the new Congress will
not be fully organized for work for several weeks into the new year.
Social Security
President Bush has made "reform" of Social Security a centerpiece
of his second term but has given no specifics beyond laying out three general
principles:
- The program will not be changed for those already retired or now
near retirement;
- Payroll taxes will not be raised;
- Younger workers may put some of their payroll taxes into private
investment accounts.
By barring any increase in taxes, Mr. Bush has taken off the table one possible
funding source that could have spread the burden more fairly of paying for Social
Security through the working population. Salaried people now pay 7.45 percent
of their salaries into Social Security and Medicare up to an annual wage cap
of $87,000. Raising or eliminating that cap would mean that those who have benefited
most from the tax cuts would be contributing more to the solvency of Social Security
and Medicare than their less affluent employees. In retirement, they would also
draw higher benefits, based on their contributions.
There is no agreement among experts on privatizing a part of Social Security.
In the short run, diverting a portion of new program income into private accounts
for younger workers could mean there would be too little money to pay full benefits
to current recipients without increasing the deficit. Unless Congress
creates one at the expense of the rest of the budget, there is also no guarantee
that private accounts would grow any faster than the current system.
Housing
In December a bipartisan group of prominent housing experts released a book
laying out a new strategy to deal with the nation's crisis in affordable housing.
Led by Clinton Administration Housing Secretary Henry Cisneros and George H.W.
Bush Administration Housing Secretary Jack Kemp, the group called for:
- A federal ban on predatory lending to people who have no possibility
of repaying;
- Tax and other incentives to employers who help workers gain affordable
housing by such means as providing down-payment aid;
- A National Housing Trust Fund to help with building, preserving and
rehabilitating 1.5 million affordable housing units in the next decade; and
- A tax credit to encourage community development efforts and low-income
home ownership.
Minimum Wage
One of the quickest ways to help low-income households would be to increase
the minimum wage. Stuck at $5.15 an hour since 1997, the minimum wage-even if
earned 40 hours a week, 52 weeks a year-is insufficient to raise the most dedicated
worker above the poverty line.
Sen. Kennedy (D-MA) has repeatedly introduced legislation to raise the minimum
wage by $1.50, but the Senate leadership has not allowed a vote. Kennedy is expected
to try again in 2005.
Tax Cuts
During the recent election campaign, President Bush pledged that, if reelected,
he would make the tax cuts of 2001, 2002, and 2003 permanent. Now he is pressing
Congress to make good on his promise.
These tax cuts were marketed to the public as middle class tax cuts, but a
recent study by the Center on Budget and Policy Priorities shows that they provide
far more advantage to upper income people. Another study by the Congressional
Budget Office reveals that the tax cuts raise after-tax income for the top one
percent of earners by a far higher percentage than for any other income group,
while actually cutting after-tax income for the bottom 80 percent.
The tax cuts have failed to result in the job creation promised by the Administration.
A total of 4.3 million new jobs were supposed to result from passage of the 2003
tax package, but only 38 percent of those jobs materialized.
Another result of the tax legislation since 2001 that was not predicted by
its advocates has been its role in raising the deficit. Even the Office of Management
and Budget, an arm of the Administration, has reported that the tax cuts account
for 57 percent of the cost of all legislation enacted since President Bush took
office.
These findings from a broad range of nonpartisan entities shed light on the
important issues Congress must consider in deciding whether to make these tax
cuts permanent or to let some or all of them expire as their provisions run out.
In terms of social justice, these tax breaks serve to expand the chasm between
the upper income group and all others. Their cost to the federal government is
huge. In a time of massive deficit, Congress may wish to rein in this continuing
budget hemorrhage. |
