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Children's Budget Watch

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Guide to the Federal Budget Process

Navigating the Road Ahead


President Obama and Congress have taken significant steps over the last few years to reduce the nation’s deficit and stabilize the nation’s debt. To date, policymakers have reduced deficits by $2.77 trillion over the next 10 years ($3.97 trillion if you count sequestration cuts) through a combination of spending cuts and raising revenues, although it has been heavily skewed toward spending cuts (almost 80 percent of the deficit reduction to date has come from cuts to programs).

The deficit reduction debate is far from over, and the threat to children and low-income families from repeated cuts on top of state and local cuts remains high. In the coming months, your Senators and Representatives will make critically important decisions about the federal budget that will impact our nation’s children and the long term economic health 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 to invest in children and to “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.

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Navigating the Road Ahead

In 2014, we expect to see another series of high stakes budget debates that will have important implications for low-income families with children. The voices of children must not be drowned out by louder, better-funded voices. Tell your elected Representatives to invest in children and to be careful what they cut!

Here’s a primer on some of the budget issues that will make news in 2014:

The December 2013 Budget Deal

At the end of last year, Senate and House Budget Chairs Murray and Ryan reached a modest deal that made some progress rolling back a portion of the required sequester cuts in 2014 and 2015, mitigating their disastrous effects on children and vulnerable families, while setting spending targets for fiscal years (FY) 2014 and 2015.  We were disappointed that budget negotiators left in place significant sequester cuts in 2014 and 2015 and did not begin to address the even larger sequester cuts that remain fully in place after 2015.  These cuts will result in funding levels far too low to meet national needs.  Additionally, the deal did not extend emergency unemployment insurance benefits for the 1.3 million long-term unemployed who subsequently lost benefits just after Christmas.  The wealthiest nation on earth can afford to do better:  budget negotiators failed to ask the richest Americans and corporations to pay their fair share, or close even the smallest and most egregious tax loopholes to fund desperately needed investments in children and poor families that would strengthen the American economy for years to come.

Funding for Fiscal Year 2014

The December deal paved the way for House and Senate appropriators to draft omnibus legislation that would fund the government for the remainder of FY 2014 by assigning specific dollar amounts to each authorized federal program.  This legislation passed on January 18, 2014.  Overall, the omnibus takes some small steps in the right direction for children, but nothing of the scope or magnitude that would constitute the level of investment we know is critical for the future of children and this nation.  It gave some programs significant boosts in funding relative to recent austerity levels, while others remained the same or were cut further.  However, in many cases, even the “winners” that received more money than they did post-sequester for FY 2013 received significantly less funding than they did in FY 2010 before austerity measures were applied.  Of particular interest to CDF, spending for FY 2014 in the Labor, Health, and Human Services account (that funds many critical services for children and low income families such as health coverage, education, early childhood services, and much more) is down 8.5 percent from FY 2010 (excluding inflation).   

Increasing the Debt Limit

The U.S. will hit its borrowing limit in early February, necessitating action to extend the federal debt limit or the federal government would default on its loans for the first time in history.  Until recently, raising the debt ceiling has been a fairly routine action.  Since 1980, the debt limit has been raised 42 times with strong bipartisan support until recently, when the nation has been brought to the brink of default by Republicans refusing to take action without exacting huge budget cuts that would disproportionately harm the poor.  We expect legislation to be introduced soon that would increase the debt limit.  CDF supports the quick passage of a “clean” debt limit increase, without any terms, conditions, or cuts that would adversely affect children and low-income families. 

Funding for Fiscal Year 2015

With FY 2014 funding now wrapped up, Congress will move on to set tax and spending targets for the federal government for FY 2015, which starts on October 1, 2014. Unfortunately, the budget agreements to date formalize the level of spending in years ahead: there will be a very small increase allowed in FY 2015,  and of course, there will be significant sequester cuts each year through 2023 unless Congress takes action to reduce or erase them.   

Step 1: The President's Budget.  On March 4, 2014 President Obama will delivered to Congress his administration’s recommendations for spending next year. Because the power of the purse ultimately lies with Congress, the president’s budget is simply a statement of the administration’s priorities and is non-binding. The president’s budget focuses on the federal fiscal year which runs from October 1 to September 30.

Step 2: The Congressional Budget.  Shortly after the president releases his budget, it’s Congress’ turn. Both the House and the Senate can use the president’s budget as an outline to build their own budgets, or they can ignore it completely. Ordinarily, the House and Senate would pass their own non-binding budget resolutions and then go through a conference process to reconcile their differences. The resulting conference report becomes binding once both bodies have approved it (because it is not a law, it does not require the president’s signature). However, for the last several years, the process has not worked this way. This year, the House is expected to release a budget relatively soon, but because budget caps for FY 2015 were already set in last December’s budget deal, Senate leaders have indicated they will not write a budget for this fiscal year.    

Step 3: The Appropriations Process.  The House and Senate Appropriations Committees are in charge of “appropriating” or setting aside specific dollar amounts to authorized federal programs. There are 12 separate appropriations subcommittees in both the House and the Senate. For instance, within the Labor, Health, and Human Services spending bill, the subcommittee is responsible for allocating funds for programs including job training programs, the Child Care and Development Block Grant, Head Start, Title I of the Elementary and Secondary Education Act, the Maternal and Child Health Block Grant, and many others. It also has jurisdiction over Race to the Top, a signature education program of the Obama Administration.

In the appropriations process, the House and Senate are each supposed to pass 12 spending bills — one for each of the subcommittees — to fund spending for the following fiscal year. In years when Congress fails to pass some or the president fails to sign all 12 spending bills, the government can remain in operation by passing an “omnibus” spending bill which rolls all remaining spending into one bill, or a “continuing resolution” (“CR”), to fund the government until a certain date. The appropriations process must be completed by before the new fiscal year begins on October 1, 2014, or the government must shut down until Congress and the Administration are able to come agreement on temporary or full fiscal year spending (as happened at the start of FY 2014, when the federal government and all its non-essential services were shuttered for 16 days).