Spending Cuts vs. Tax Cuts: Who’s Getting What from the Deficit Reduction Plans

By Juliana Stebbins*

On June 22, 2011 Joan Entmacher, Judy Waxman, Helen Blank, and Melanie Ross Levin of the National Women’s Law Center presented Demand for Change, Not Spare Change: What's at Stake for Women & Families in Today's Budget Debates. With time narrowing down in D.C to increase the debt ceiling by August 2nd, the NWLC has mapped out what some of the different deficit reduction strategies would mean for women. The consensus is clear that deficit reduction is a must but the means of achievement has locked Washington into a stand still. With one side of the House pushing slash-economics, a strategy of slashing federally funded programs that protect and assist the poor and middles class while holding on to tax breaks for the wealthiest percentile, the other is relentless on protecting the programs that a growing portion of the American population is dependent on.

The Republican supported Ryan budget is adamant that federal spending must be reduced drastically. The proposed plan would cut $4.5 trillion in spending with 2/3s coming from low-income programs such as Medicaid, food stamps, and low-income housing. Although the wealthiest would be targeted with cuts as well, theirs would be in the form of tax breaks. The potential $6.7 trillion in tax revenue would be sacrificed to protect those earning $250,000 or more per year while low and moderate income individuals would receive little of the benefits. 30% of single mothers and their children would receive zero from the proposed tax cuts in 2013 while those making over $1 million would receive $192,500 in tax breaks. As illustrated in a diagram created by the Tax Policy Center of the U.S Department of Health and Human Services, each millionaire’s $104,000 tax cut in the 2012FY would put 13 children through Head Start or provide 18 children with child care. With the objective of reducing the deficit, will these cuts (both on spending and taxes) included in the Ryan budget do the trick? While those behind the plan anticipate a -1.6 trillion dollar impact on the deficit, the Congressional Budget Office predicts only a -0.38 trillion dollar impact. Although this plan would make a dent, it is largely at the expense of the most economically vulnerable.

Since the Senate defeated the Ryan budget it would seem unnecessary to assess the realities of its implantation but there are several loopholes that would impose similar effects on low and moderate income individuals. Back doors to the Ryan budget include a global spending cap, the balanced budget amendment, and a spending-enforcement. While these strategies vary the objectives consistently attempt to limit federal spending without compromising tax breaks for revenue. Spending caps literally impose a cap on spending without enforcing any restraints on tax cuts. Spending-enforcement takes a similar approach if a deficit reduction is not met as anticipated. Meaning, if a multifaceted approach to reduce debt through increased revenue and spending reduction does not achieve the designated target, only increased spending cuts are automatically put in motion and tax cuts are not required to be modified. In a different advance, certain efforts to reduce federal spending rely on a 1990’s constitutional amendment that prohibits the government from spending more than it receives in revenue each year. On surface value a balanced budget seems rational and safe but in an economic atmosphere where people and states are more financially dependent on the federal government, many believe that such approaches would aggravate the recession.

Although the Ryan budget may have been blocked, there is still a determined effort to cut funding for federally sponsored programs. Consequently, reductions in federal spending would be at the expense of the individuals and families that depend on low-income programs. One major risk of cut backs would be the establishment of block grants for Medicaid and discretionary programs such as family planning services. As the system works now, each state program is funded based on the amount of eligible people but if block grants were applied states would receive a predetermined amount regardless of the amount of eligible candidates. The implementation would potentially limit the number who benefit from the program and the amount of services available. While a portion of the House believes these sacrifices are more expendible then increasing revenue through limiting tax breaks, recent polls provided by NBC/WSJ polling suggests that of the civilians questioned on the tolerability of spending and tax cuts, the majority responded that cutting funding for Medicaid and Medicare is mostly unacceptable and totally unacceptable and placing a surtax on federal income taxes for people earning over one million dollars a year is mostly acceptable and totally acceptable.

If concerned about certain approaches to reducing the deficit the National Women’s Law Center proposes certain actions that can help make a difference:

  1. Educate your community and organization on the issue, keep others informed
  2. Be visible, participate in town hall meetings and rallies and vocalize your opinion
  3. Use personal stories when discussing, blogging, writing about this issue, it helps bring the big picture to a tangible level
  4. Contact your representatives and let them know how you feel-call, write, even invite them to your organization or agency.

Juliana Stebbins is an Intern in the Research and Programs Department at the National Council for Research on Women. She is a recent graduate from Barnard College with a Bachelor of Arts in Anthropology and Human Rights.

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