With concern about rising deficits
taking center stage in Washington, President Obama formed the bipartisan National Commission on Fiscal
Responsibility and Reform to make recommendations on how to ensure a sound
fiscal future for our country. As the Commission deliberated, Spotlight on Poverty and
Opportunity believed their efforts to rein in
deficits and manage the budget should include a focus on the potential impact
on low-income people.
This commentary is the latest in our series, entitled “Poverty, Opportunity,
and the Deficit.”
pundits, and politicians are wondering what recommendations President Obama’s National
Commission on Fiscal Responsibility and Reform will deliver this December, and
how those proposals will affect national priorities and economic well-being.
Commission is charged with proposing recommendations that will balance the
budget – excluding interest payments – by 2015 and improve the long-run fiscal
outlook. While the outcome of the Commission remains a source of speculation,
we believe any recommendations must adhere to three principals.
the recommendations of the Commission must take into account the severity of
the Great Recession and its adverse impact on both low- and moderate-income
Americans and the unemployed. Premature budget cuts would jeopardize the weak
economic recovery, possibly throwing the country back into recession and
unnecessarily inflicting pain on millions of Americans.
economy is growing again and jobs are being added, albeit slowly, but the recovery
is very uneven. Though corporate profits and Wall Street bonuses have bounced
back, the labor market remains in shambles, with five unemployed workers for
every current job opening. In this context, the first priority for fiscal
sustainability must be putting the economy on a path for a strong recovery that
lifts the boats of all Americans.
when the time comes for spending cuts and tax increases, the budget should not
be balanced on the backs of poor and working-class Americans. Cutting supports
to those in need is both morally and fiscally misguided. Lower-income Americans
neither caused the financial crisis nor benefited from the Bush tax cuts for
the rich—two major sources of our present budgetary challenges. Income supports
are not the drivers of our long-term budgetary challenge; indeed, they make for
excellent fiscal stimulus, providing some of the highest bang-per-buck initiatives
to help the economy get moving again.
we have already seen attempts to balance the budget on the backs of the poor. The
recently enacted state fiscal relief and teacher jobs bill was largely financed
by making cuts to the Supplemental Nutrition Assistance Program (formerly food
stamps). While this stimulus was desperately needed – and the funding could one
day be restored – Congress should not have looked to food stamps to create
offsets, especially given that food insecurity has been severely worsened by
the recession. If we can afford to fund foreign wars without finding offsets –
as Congress recently did once again – we can afford to keep teachers in
classrooms without cutting food stamps.
budget deficits should not be curbed through regressive benefit cuts to Social
Security, which the Commission may be considering. One option, particularly
popular with Washington deficit hawks but not popular among mainstream
Americans, is increasing the retirement age, potentially to age 70. This would disproportionately
affect low- and moderate-income Americans, many of whom rely on Social Security
for the bulk of their retirement income and security. Low-income workers have
seen a smaller increase in life expectancy after the age of 65 when compared with
higher-income earners, making an increase in the retirement age particularly
Commission has been issued an important task: the gap between spending and
revenue policies must be narrowed to sustainability, but only after the economy
should bear in mind that cutting deficits too early could derail the economic
recovery, seriously worsening poverty and unemployment at a time of crisis. Our
fiscal challenges should be resolved largely by progressively raising taxes – reversing
the Bush tax giveaways to the rich – and curbing excess cost growth in the
health care sector. Cutting food stamps and other income support programs will
not fix our long-term budget outlook. Balancing the budget on the backs of the
poor is both fiscally and socially wrong.
Thiess and Andrew Fieldhouse are Federal Budget Policy Analysts for the
Economic Policy Institute.