Invest and Save: Protect Programs That Grow Our Economy

Posted April 18, 2011

Now that the President Obama’s National Commission on Fiscal Responsibility and Reform has delivered its recommendations, Spotlight on Poverty and Opportunity will present a diversity of voices to discuss how budgetary changes will (or should) affect low-income individuals. Contributions will cover the following topics—Economic Stability and Recovery, Social Security, Health Care, and Taxes and Tax Expenditures.


This commentary is the latest in the series, entitled “Opportunity and the Budget: Needs, Choices, and the Future.” It addresses the following question, “Taxes and Tax Expenditures: Tax Expenditures Represent Important Anti-Poverty Programs—What Role Do They Play in the Budget Conversation?”

About 240,000 low-income parents got jobs through the Temporary Assistance for Needy Families Emergency Fund before Congress let it expire at the end of September. While Congress was willing to sacrifice this effective program in the name of deficit reduction, a better approach would be to increase revenues to maintain investments in our children and workers.


The better choice becomes more clear when we consider the individual stories at stake in budgetary decisions.


Melania Vega, a single mom, worked for the Illinois Hunger Coalition as a site coordinator for summer food programs. She was one of the last to receive a temporary job through the TANF Emergency Fund.


In a conversation with Coalition on Human Needs, Melania talked about how her job allowed her to pay off debts from a seven-month period of unemployment, and how she is now able to pay for child care, car insurance, and dance classes for her daughter. Some weeks afterward, Melania got the bad news that there was no funding to extend her employment, and was forced to return to joblessness. 


As we think about the federal budget deficit, it is worth also thinking about Melania, her daughter, and the low-income families she served at work. Is it possible to reduce the long-term federal deficit without compromising Melania’s income and child nutrition?


It is, and an important part of the answer lies in increasing federal revenues.


We are a very wealthy nation and the top one percent holds a bigger share of that wealth than at any time since 1928. The tax cuts, extended in December for another two years, will give each household in the top one percent an average tax cut of $60,000 a year and households earning a million dollars or more $150,000 a year. 


This top one percent stands to gain more than $1 trillion over the next ten years. During this period, what is more important: investing in good nutrition for children, reducing the deficit, or giving still more to the wealthiest?


Some would address these budgetary problems by ending the Bush-era tax cuts for the top income households and use the revenue to pay down the deficit. They might also choose to cut programs supporting child nutrition or other similar investments.


That would be a penny-wise, pound-foolish kind of mistake. Young children whose families cannot always afford nutritious food are more likely to become ill and to be hospitalized. They are also more likely to need special education and have lower reading and math test scores by the third grade, according to the medical researchers at Children’s HealthWatch.


When we provide adequate nutrition, it pays off in better health and development, which means children do better in school and in life.


If important services land on the chopping block, children won’t get the benefit of nutritious food in their child care centers because hundreds of thousands of child care placements will be cut. Parents won’t get jobs weatherizing homes despite the energy and cost savings for millions of low-income families. Class sizes will rise and America’s children will continue to fall behind in education. 


Gradual deficit reduction is important, but some who talk about it really care more about something else—shrinking the federal government. The House, for example, voted to slash services and jobs this year while keeping the deficit high through tax cuts.


The Coalition on Human Needs is joining with many groups in a campaign to prevent such cuts. We call it Strengthening America’s Values and Economy (SAVE) For All.


Giving parents like Melania a chance is an American value. It’s also a practical way to spur economic growth. 


A balanced approach that collects more revenues and uses a considerable proportion for deficit reduction, while saving enough to invest in rebuilding our economy and improving our children’s life chances, will have the best and most sustained pay-off. Ultimately, the biggest deficit reduction measure is an expanding economy, with more people working and paying taxes.


If we want economic growth, we must make investments that give dedicated parents like Melania the chance to contribute. If we cut programs that create jobs and prepare today’s and tomorrow’s workers for the jobs of the future, we may be reducing the deficit modestly now, but we are ultimately setting our nation up for less tax-paying productivity in the years ahead. 


We can also look to other sources of revenue such as reducing tax breaks for the oil and gas industry or those sheltering income offshore and turning some tax deductions into credits so they are less skewed to benefit those at the top.


Increased revenue should not be the sole source of deficit reduction. We should cut wasteful expenditures, in the military and elsewhere, but we should not cut the services that help our people succeed. 

To view a PDF version of this document, click here.


Deborah Weinstein is the Executive Director of Coalition on Human Needs.