National NOW Times >> Spring 2006  >> Article

Online Edition: Reprehensible Budget Slashes Human Needs Programs to Pay for Tax Cuts for the Rich

A shorter version of this article appeared in the Spring 2006 edition of the NOW National Times

February 8, 2006

On Feb. 1, the House of Representatives narrowly approved the 2006 budget reconciliation bill (S. 1932) that cuts nearly $40 billion over five years from scores of critically important federal programs, including Medicaid, child support enforcement, disability assistance, child care for poor families, welfare funding and student loan programs. These drastic reductions in social spending are paired with a package of more tax cuts for the wealthy that may lead to as much as $90 billion in lost revenues.

"Republican budgeteers have targeted these disgraceful cuts at the most vulnerable members of society," said National Organization for Women President Kim Gandy. "Those most affected by this mean-spirited budget bill will be poor women and children—and hard working, struggling families will be hurt as well."

Republican leaders earlier suggested that these reductions in federal spending were needed to pay for the cost of Katrina recovery, but it is now clear that the cuts will instead offset revenues lost because of new and extended tax cuts, primarily benefiting the already-wealthy and the highest income earners.

Tell your Representative how you feel about their vote.

• Child Care Assistance Slashed - Only $1 billion is provided for child care programs for welfare beneficiaries even though modest estimates show that more than $7 billion would be needed to aid parents who, under this legislation, will also be forced to work longer hours. It is estimated that by 2010, some 255,000 additional children in low-income working families will have been denied child care aid.
• Tougher Welfare Work Requirements - Because states will have to meet higher work participation requirements under the reauthorized Temporary Assistance to Needy Families (TANF) welfare program, they will likely have to adopt stricter policies and deny aid to more poor families. The legislation does not provide additional funds to states to meet these new and expensive requirements, and actually provides incentives to states to exclude two-parent families from TANF.
• Child Support Collections Cut - Federal monies for child support enforcement will be deeply cut, translating to a projected loss of $24 billion in child support over the next ten years, according to the Congressional Budget Office. Better enforcement in recent years has led to higher collections for thousands of low- and moderate income families. In many instances, the receipt of child support payments is essential to sustaining a low-income family and helping them avoid public assistance.
• Foster Care Relatives Denied Help - Foster care funding assistance for grandparents and other relatives will no longer be available in certain states; many foster care programs are already seriously under-funded and there are insufficient numbers of families in most states willing to care for foster children.
• Disability Benefits Delayed - People with disabilities will have to wait as long as a year to receive benefits due to a new restriction imposed by this budget. Many individuals with disabilities are in desperate financial straits and already must wait for many months to receive become eligibileity under the Social Security Supplemental Security Income (SSI) program.
• Student Loans Will Cost More - Funding for student loans will be slashed by $12.7 billion over the next five years; the reductions are produced by increasing interest rates and hiking fees paid by students and parents. These changes will affect low- and moderate-income families struggling to meet ever-increasing costs of a college education (40 percent rise over last five years) and could amount to as much as $3,000 more in interest payments per student.
• Medicaid May Become Unaffordable - Increases in Medicaid co-payments and premiums plus reductions in benefits will total $29 billion over the next ten years, according to the Congressional Budget Office. Recipients, the majority of whom are poor and elderly women and children, will have to meet much higher premiums and co-payments for health care, and states will be allowed to cut back on Medicaid services. These and other changes will mean that many low-income persons will simply not be able to afford services. (More information about the worst provisions is available online.)
• Medicaid Changes are Draconian - It is important to note that the changes to Medicaid will mean that millions of low-income children could lose coverage for critical health care services, like payment for eyeglasses, hearing aids, speech therapy, crutches, and other medically necessary treatments that are often unaffordable to low-income parents. In addition, the legislation will make it more difficult to qualify for long-term care coverage under Medicaid—a roadblock to the only source of care for thousands of low-income elderly and disabled women. Millions of taxpayer dollars are being allocated for erectile dysfunction drugs, while vital services for the elderly, disabled and children are being dramatically reduced. In addition, a new mandate for proof of citizenship before receiving eligibility under Medicaid will mean that between three and five million U.S. citizens could see their Medicaid coverage jeopardized, according to a recent survey conducted by the Center on Budget and Policy Priorities. No exceptions will be made for persons having lost documentation due to homelessness (or hurricanes) or for persons with serious mental or physical disabilities. About 49 million U.S.-born citizens and two million naturalized citizens will now be required over the next year to produce proof of citizenship.
• For the first time in the history of Medicaid, states can deny contraception and family planning services to poor women - Required under all previous versions of Medicaid, provision of both family planning services and contraception are essential to the health of Medicaid recipients. States can now opt out of providing these services, undermining the health of millions of the nation’s poorest. Constraining access to contraception will undoubtedly increase unintended pregnancies, the public costs of which far outstrip the cost savings of limiting contraception.
• Fatherhood and Marriage Programs Funded – This legislation includes up to $50 million annually to fund questionable fatherhood programs.  These funds have been taken from other seriously under-funded TANF programs and NOW suspects that some of those monies will end up with extremist "fathers' rights" groups. The authorized total would be $150 million annually for both fatherhood and marriage promotion initiatives; all states will be mandated under this bill to establish marriage promotion programs and to meet numerical performance objectives.  NOW regards marriage promotion efforts targeting low-income women as potentially coercive, discriminatory and an invasion of privacy.

No Surprise: More Damaging Tax Reductions - A separate bill (H.R. 4297) that will reduce taxes by $56 billion—mostly for the super-rich through an extension of reduced taxes on capital gains and dividend income—was adopted by the House on Dec. 8 by a vote of 234–197. Three similar measures subsequently passed the House, including a $31 billion, one-year extension provision limiting the Alternative Minimum Tax; $7 billion in tax incentives for Gulf Coast hurricane-damaged states; and a package of five small tax provisions not included in the larger reconciliation package. The whopping total will be a loss of $90 billion over the next five years!

Furthermore, the two new tax breaks which went into effect January 1, 2006 will cost the Treasury almost $150 billion over the next ten years. These pertain to limitations on the value of the personal exemptions and itemized deductions that high income earners can take. Most of the monetary gains will go to households with incomes above $1 million annually, according to the Center on Budget and Policy Priorities.

Income Gap Widens Since 1980s – A new state-level study by the Center on Budget and Policy Priorities and by Economic Policy Institute finds that the gap between the highest-income families and poor and middle-income families grew significantly between the early 1980s and the early 2000s. Though income inequality declined briefly following the stock and high tech bubble burst of 2000, inequality began growing again in 2003.  By contrast—and a surprise to no one—the incomes of the nation's richest families have climbed substantially over the past two decades, while middle- and lower-income families have seen only moderate increases. The analysis is based on adjusted Census income data and more information is available online.

While Katrina-related tax reductions of $7.8 billion were adopted by both houses and signed into law on Dec. 22, most of the dispossessed and those harmed by the hurricane and flooding will be equally hurt by the cruel budget cuts to the very programs that will help the human recovery effort.

"Hurricane Katrina illuminated the stark differences between the rich and the poor in this country," Gandy said. "Rather than helping to eliminate the gaps, these tax reductions and program cuts will only widen them. The members of Congress who vote for these cuts are trading in their integrity and compassion to benefit the rich."

Give Congress A Piece of Your Mind by sending an instant e-letter of appreciation to those Members who voted against these cruel cuts.