Think Tank: Deficit Reduction Should Not Increase Poverty and Hardship

As President Obama and lawmakers of both parties continue to joust over continued federal deficit reduction, they must adhere to a principle that such reductions should not increase poverty or further erode the nation’s safety net, according to a group of analysts at a prominent Washington think tank.

“If policymakers heavily target programs that serve vulnerable Americans, they will run the risk of increasing poverty and hardship and reducing opportunity for those on the lower rungs of the economic ladder, limiting their future educational and employment prospects,” say analysts from the Center for Budget and Policy Priorities. “If, however, policymakers take a more balanced approach to deficit reduction, one that includes adequate new revenues to complement additional spending cuts, they can further reduce deficits while maintaining the resources to invest in key building blocks of future prosperity, including effective services and supports for poor families and children.”

In their plan of late 2010, the co-chairs of the President’s fiscal commission, Erskine Bowles and Alan Simpson, established that deficit reduction efforts should not increase poverty or inequality, a principle that they have reiterated in recent weeks, the analysts note in a new report published Monday.

“The Senate’s bipartisan ‘Gang of Six’ members adopted the principle for the plan that they issued in July 2011 based on the Simpson-Bowles proposal.  In the months ahead, policymakers should adhere to this principle in their own deficit reduction efforts.  In fact, previous major deficit reduction efforts — including the bipartisan packages of 1990 and 1997 and the Democrat-only package of 1993 — took steps to reduce poverty or increase access to health care even as they reduced deficits,” they add.

Whether policymakers will adhere to this principle in the coming months is an open question.  Last year, House Republicans proposed deficit-reduction plans that targeted low-income programs for substantial cuts.  House Budget Committee Chairman Paul Ryan’s 2013 budget resolution, which the House passed in April of 2012, secured more than 60 percent of its more than $5 trillion in spending cuts from low-income programs, including deep cuts in Medicaid and the Supplemental Nutrition Assistance Program (SNAP, formerly called food stamps), the analysts say.  This past December, the House passed legislation to replace the across-the-board spending cuts (“sequestration”) scheduled for 2013 with $315 billion in cuts over 10 years — and 40 percent of those cuts would have come from low-income programs, they add.

“To be sure, policymakers can make some money-saving changes in programs for low- and moderate-income individuals or families without unduly burdening those populations,” the analysts say. “Proposals, for instance, that reduce the cost of prescription drugs to Medicaid can achieve savings without reducing access to care for low-income beneficiaries.  (Policymakers also can achieve savings in Medicare without forcing low-income seniors to pay higher premiums, deductibles, or co-pays.)  But the achievable savings through greater efficiencies in means-tested programs are modest.  In particular, the largest means-tested program — Medicaid — already provides health care coverage at a substantially lower cost per beneficiary than private coverage.  Deficit-reduction efforts that target particular low-income programs or categories of programs for substantial cuts will likely increase the numbers of poor and uninsured Americans and reduce opportunities for low-income children.”


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