Policy Priorities

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Budget Watch: This Week...

May 5, 2011

Congress Returns to Work After Recess as Debt Limit Deadline Is Now Within Sight

Congress returned to Washington this week after a two week recess, and activity around the FY 2012 Budget Resolution and broader deficit reduction plans continue. Before the Easter recess, the House passed its FY 2012 budget, with huge cuts to programs that serve children and vulnerable families, on a party line vote. As early as next week, Senate Budget Committee Chairman Kent Conrad (D-ND) will introduce his alternative and it will be marked up in the Senate Budget Committee. While reports from Capitol Hill suggest that Democrats and Republicans aren’t all that far apart on the total amount of deficit reduction needed in the coming years – roughly $4 trillion – they continue to remain at considerable odds regarding what combination of cuts, revenue raisers, and program changes are needed to achieve that spending target.

In addition to the annual budget process, we are rapidly approaching the date by which the country will reach the $14.3 trillion debt limit, meaning that Congress must act to “raise the debt ceiling”, in order for the government to continue to borrow. Republicans and some Democrats are refusing to approve additional borrowing without an strategy to reduce the debt attached to the vote.  Because there is widespread bipartisan agreement that the debt ceiling must be raised, this vote is being seen by many as an opportunity to extract concessions that would ordinarily be impossible to pass.  For instance, one proposal being discussed is to attach a total cap on government spending to the debt limit vote, which would force the federal government to make massive cuts to programs serving children and other vulnerable populations without requiring legislators to vote on such a measure – a proposal that would clearly be unable to pass as a stand-alone bill. This week, Treasury Secretary Geitner announced action must be taken before August 2nd in order to prevent America from defaulting on its loans. If Congress fails to act by that date, confidence in the US economy would plummet worldwide, resulting on major hits to US investment and trade. This prospect is already causing widespread concern on Wall Street. While “raising the debt limit” may sound like an abstract concern to most people, the result would hit virtually everyone in America squarely in the pocketbook: mortgage rates would likely soar while millions of jobs would be lost. Secretary Geitner has warned that a failure to raise the debt limit could plunge the nation into an economic crisis more severe than the last.

First Focus released polling last week that shows strong public support for protecting federal investments that benefit children. The survey found that voters are more likely to hold harmless programs affecting kids than any other programs on the chopping block when asked about potential cuts Congress is considering in the budget debate.  Key findings included:

  • Voters believe children in America fare poorly. By almost a 3:1 margin, a majority of voters believe that the lives of children in America have gotten worse rather than better in the last ten years.
  • Children’s programs are most important to voters relative to other potential program cuts. The least popular cuts all directly affect children, including cuts to federal child nutrition programs, Head Start, k-12 education, CHIP, among others.
  • Voters strongly oppose the more than $750 billion in proposed cuts to Medicaid and funding shortfall created in the Children’s Health Insurance Program (CHIP) included in the House Budget Committee proposal.
  • Cutting programs is not the only option. Voters support other options for reducing the deficit. A 72 percent majority describe eliminating loopholes and federal subsidies to corporations as acceptable, 63 percent accept eliminating the Bush tax cuts for families earning over $250,000 a year, and 64 percent oppose the Ryan plan to lower the top tax bracket by a third.  Furthermore, voters support raising taxes on those earning over $1 million a year rather than cutting important programs.

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