Poor first to barrel over the ‘fiscal cliff’
President Obama took much heat a year ago when he floated a series of proposed budget cuts that would have slashed programs for the poor. The cuts would have reduced funding or eliminated outright community service block grants that fund an array of community education, health and social service programs in poor, under-served, largely inner-city neighborhoods. It would have also cut programs in science, technology, youth mentoring programs, and employment and training assistance.
The proposed cuts were just that — proposed — and there was little chance that any of them would go into effect. The proposals were mostly made to counter the forced concession that Obama had to make with the GOP on the Bush tax cuts, namely allowing them to stay in place for the wealthy, and to wring more spending concessions out of the GOP on unemployment benefits and health services.
Obama’s decisive election victory in November radically changed that. So far he has stood firm on his demand that the wealthy pay more, and has proposed an array of other tax hikes that would also squeeze more revenue out of the rich. The only major spending cut at this point that has raised eyebrows among Democratic supporters has been the $340 billion proposed cut from health care programs.
But the cuts would not directly hit the elderly and needy. The cuts are mostly to health providers, and do not impact benefits. In addition, much of the public bought into the GOP’s bogus line that Obama’s alleged reckless spending was drowning the government in a sea of red ink.
Nervous foreign investors as well as a slew of financial experts and economists endlessly claimed that the budget deficit — projected to soar to nearly $1.6 trillion in the last fiscal year, a post-World War II record — would saddle the nation with higher taxes; deeper cuts in education, health and social services; staggering permanent debt; and possibly even bankruptcy.
That doomsday scenario was part political hyperbole, part financial panic. Even then, many economists noted that the claim of financial Armageddon was overblown.
But Obama is not out of the woods on spending cuts, and neither are the poor. Though his proposals would protect programs that directly benefit the poor, Medicaid, unemployment insurance, and food stamps, the GOP’s counter proposals don’t. As the deadline for reaching a deal to avoid the fiscal cliff creeps closer, the pressure could build for the White House to eye programs that it has firmly and repeatedly taken off the table for potential cuts. The two proposals put forth by both sides outline deficit reduction efforts in broad budget categories and are not entirely clear about whether cuts will hurt poor people or not. A small army of the nation’s leading business leaders have screamed that a plunge over the fiscal cliff would be a disaster for business, wreck the nation’s credit rating and shove the nation back into deep recession. That must be avoided at all cost, they warn.
Obama’s answer to that is that a deal can be cut by approving the tax hikes and revenue raising measures he’s proposed, as well as the major check that he wants to put on the runaway military spending on the two wars that he inherited from Bush. This would bring the deficit under $1 trillion and would spare cutting programs that would devastate the poor and working class.
The political, social and economic consequences of the fiscal cliff debate on the poor are enormous. Surveys show that the ranks of the poor are still huge and that the wealth and income gap between the rich and poor is wider than in recent years. There’s also the greater public recognition that Social Security, Medicare and Medicaid, unemployment insurance and other government-funded programs play a huge part in bolstering the economy, and Americans’ living standards.
The GOP’s favorite whipping program — food stamps — is a perfect example of that. If that aid been counted as income, nearly four million — almost two million of them children — would have been lifted out of poverty.
Then there’s the Earned Income Tax Credit, which is a refundable federal credit for low- to moderate-income working Americans. The estimate is that this lifted nearly six million people, half of them children, out of poverty. These programs provide income for the poor that goes directly into spending on goods and services. This in turn creates jobs, spurs business expansion, and sharply boosts tax revenues for local, state and the federal governments.
The poor — far from being a drag on the economy — fuel it with their spending. Obama’s budget does not hammer the poor. The GOP’s counter to it would. Obama’s proposals as they now stand are the only ones that keep the poor from barreling over the fiscal cliff.
Earl Ofari Hutchinson is an author and political analyst.