Guide to the Federal Budget Process Navigating the Road Ahead Sequestration

The 113^th Congress has been sworn in and your Senators and Representatives are once again poised to make critically important decisions about the federal budget impacting our nation’s children and the long term economy of the United States. Please share CDF’s budget principles with family, friends and colleagues and hold your Representative and Senators accountable in these coming months. Make sure you tell them “Be Careful What You Cut”.

Children's Defense Fund: Budget Principles

The Children’s Defense Fund (CDF) supports a federal budget that protects children and low-income families from budget cuts, invests in children to promote long-term economic growth for the nation, and ensures that the most advantaged Americans and corporations pay their fair share.

Any budget deal must improve and not worsen the state of America’s children by:

1. Protecting investments in children and low-income families from cuts.
• Since the bipartisan Balanced Budget Act of 1985, the fundamental principle of protecting children and other vulnerable populations has been a cornerstone of deficit reduction in America. Every automatic budget cut mechanism of the past quarter-century has exempted core low-income assistance programs from all cuts.
• Children are the poorest age group in America, with more than 1 in 5 children—1 in 3 children in communities of color—living in poverty. Recent polling conducted by the Pew Research Center found almost 60 percent of Americans oppose cutting investments in anti-poverty programs, while a Public Opinion Strategies poll showed even larger numbers of likely voters oppose cuts to Medicaid (73 percent) or education programs (75 percent).
• Cutting children from the budget now will cost us more later. Eliminating the Earned Income Tax Credit now would increase child poverty 23 percent. Since poor children are more likely to drop out of high school, they are less likely to find steady work as adults. Paying for each year of high school dropouts costs us more than $125 billion over the course of their lifetimes. Be careful what you cut!
2. Investing in children to create jobs and promote economic growth for the nation.
• Economists agree that investing in children promotes economic growth. For example:
• Early childhood programs have an estimated inflation-adjusted annual rate of return of 10 percent or higher, and studies show that while children and their families benefit, society as a whole enjoys the majority of the economic return through the contributions that skills and productive workers make to the economy.
• Investments in education that raise high school graduation rates have been shown to yield a public benefit of $209,000 per student in higher government revenues and lower government spending, and an economic benefit to the public purse that is 2.5 times greater than the costs.
• Investments in early childhood and health coverage for children, supplemental nutrition assistance, work supports like child care and job training, and the Earned Income and Child Tax Credits help create jobs now while preparing children for the jobs of the future.
3. Ensuring the most advantaged Americans and corporations pay their fair share.
• Any action to reduce the nation’s deficit must adopt a balanced approach, relying more on revenue increases than on spending cuts.
• Allowing the Bush tax cuts for the wealthiest two percent of Americans to expire on schedule is critical to achieving a more just society while maintaining a strong safety net that all Americans can count on.
• In 2010, the lowest 60 percent of taxpayers took in about the same share of income as the highest one percent.
• Corporate tax expenditures (deductions, exemptions and credits) cost the nation about $103 billion in lower tax receipts in 2011. At the same time, American corporations reaped profits at an annual rate over 10 times this amount in late 2010 –$1.678 trillion. Clearly corporate tax loopholes could be closed without much dent in profits. Each hour about $11.8 million is lost to these loopholes – money that could instead pay for:
• Annual salaries for 420 Head Start teachers; or
• Pell Grants for 3,100 low-income students to attend college; or
• Medicaid benefits for 4,800 low-income children for a year; or
• WIC benefits for 23,600 women and children for a year; or
• SNAP benefits (food stamps) for 9,700 children and adults for a year

Download CDF's Budget Principles.

Navigating the Road Ahead

With the 113th Congress now well underway, action continues on a number of critical budget issues that will have important implications for low-income families with children. We must make sure that the voices of children are not drowned out by louder, better funded voices. Tell our nation’s leaders to be careful what they cut!

Here’s a primer on some of the budget issues facing our lawmakers in 2013:

Sequestration—Last year, Congress and the White House struggled to come to agreement over how to try to balance the budget.  Democrats wanted to make some combination of cuts and tax increases for the wealthiest while Republicans were looking to balance the budget by making huge cuts without generating any new revenue through tax increases. Ultimately, a bipartisan deal was reached whereby Congress would try to find $1.5 trillion in savings or revenue over 10 years, and if they were unable to do so, automatic, across-the-board cuts known as “sequestration” would go into effect in January 2013. Designed to be unpalatable to both parties, sequestration would result in equal cuts to defense and non-defense discretionary funding, starting with nearly $110 billion in 2013—almost $55 billion in cuts to each.

However, in the early hours of the New Year, Congress reached a deal to avert the “fiscal cliff” that postponed the sequester until March 1 and gave Congress the opportunity to come to agree upon a combination of spending cuts and new revenues to replace the automatic cuts. Unfortunately, Congress was unable to reach a deal and on March 1, 2013 $85 billion in cuts began to go into effect. Rather than making a real effort to address the debt, these blunt cuts went into effect and are now affect critical life-altering services for many low income children and families: up to 775,000 pregnant and breastfeeding women, and infants and children will lose nutrition assistance, Head Start classrooms will shut their doors to up to 70,000 at-risk young children, treatment will end for 373,000 children and adults with mental illness. 750,000 Americans across the country will lose their jobs. Some, however, continue to hope for a “grand bargain” that would include a replacement for the sequester.

Learn more about what sequestration means for children and tell your members of Congress to make children a priority in their budget decisions.

Funding for the remainder of fiscal Year 2013—The deal reached to avert the fiscal cliff also did not address funding for the remainder of fiscal year 2013, from March 28 to September 30. If continuing funds are not appropriated, the federal government will shut down when the current funding bill expires on March 27th, 2013.

Funding for fiscal year 2014—Even with funding for FY 2013 still uncertain, Congress has moved on to set tax and spending targets for the federal government for fiscal year 2014, beginning October 1, 2013. Earlier this year Congress passed the “No Budget, No Pay Act” which requires each house to pass their own budget resolution by April 15th, 2013. If either chamber does not pass a budget, that body will have their pay will be withheld until they pass a budget. While these budget resolutions and proceedings may appear to be dry inside-the-beltway politics, they illuminate the values and priorities of the authors, and particularly in recent years, provide starkly contrasting visions of the future direction of the nation.

Increasing the Debt Limit—Until recently, raising the debt ceiling has been a fairly routine action, requiring authorization by both chambers of Congress. Since 1980, the debt limit has been raised 39 times, each with strong bipartisan support. However, last summer, our nation was brought to the brink of default when Republicans refused to raise the debt limit without exacting huge budget cuts that would have disproportionately harmed the poor, while Democrats insisted on a balanced approach that included new revenues. In order to avoid such a crisis this year, in late January, Congress passed a bill that temporarily suspended the statutory debt limit through May 18, granting the Treasury Department the additional borrowing authority to meet obligations that require payment over the next three months. Without this congressional action, the Treasury Department would have reached its borrowing limit in mid-February.