Week Ending July 1, 2011
President Calls for Eliminating Tax Break; McConnell to Force Senate Vote on Balanced Budget Amendment
This week, budget talks aimed at reaching a deal to lower the deficit and raise the debt ceiling advanced to the highest level as President Obama met with Republican and Democratic congressional leaders. No deal has yet been reached. In a press conference, the President noted that spending cuts have been identified, but any deficit reduction plan must include revenues through the elimination of tax breaks. He specified eliminating tax breaks for millionaires and billionaires, oil companies, hedge fund managers and corporate jet owners. He also chastised Congress for scheduling a recess in the midst of many unresolved policy and budget issues. Senate Majority Leader Harry Reid (D-NV) responded by cancelling next week’s scheduled recess. The House is currently on recess and returns next week.
Senate Republican Leader Mitch McConnell (R-KY) reintroduced the Senate equivalent of the House’s extreme balanced budget amendment with the support of all 47 Republicans and noted that he would seek to force a floor vote in mid-July. The House is expected to debate the balanced budget amendment the week of July 25.
We strongly urge AFSCME activists to contact your Representative and Senators to oppose any balanced budget amendments. A balanced budget amendment would damage the economy, not strengthen it. The current version, H.J. Res. 1 in the House of Representatives, and S.J. Res. 23 in the Senate, would require much deeper cuts than even the Ryan budget, slashing federal investments to the lowest levels since before 1965, prior to Medicare and Medicaid. And it would enshrine these cuts in the U.S. Constitution!
Please call Congress today at (202) 224-3121
Social Security Is An Issue In Deficit Reduction Negotiations
The Strengthen Social Security Coalition, whose members include AFSCME and a broad range of national organizations, held a series of Hill briefings in the last few weeks to educate congressional offices on several key issues that appear to be under consideration in the deficit reduction talks. One proposal would change the cost of living formula for federal tax policy and all federal spending programs as a way to reduce federal spending and increase tax revenues. If applied to Social Security, the new formula, called the chained CPI, would reduce the cost of living adjustment for benefits downward for both current and future retirees, resulting in a benefit cut over time. The other proposal would extend the current 2% reduction in the employee Social Security (FICA) tax for another year and perhaps extend the same 2% reduction to the employer FICA tax. It is being floated by several key Democratic lawmakers as a way to stimulate job creation, but there is a split among Democrats on this issue. A letter to President Obama is being circulated among House Democrats opposing the “payroll tax cut” because, if not reversed, it would substantially reduce revenue going into the Social Security Trust Fund, making it more dependent on general revenue and less financially secure. AFSCME opposes both payroll tax reduction proposals.
Federal Appeals Court Upholds Health Reform Law
On Wednesday, the U.S. Circuit Court of Appeals for the Sixth Circuit became the first appellate court to rule on the Affordable Care Act (ACA), ruling that the law was constitutional. Specifically, in a 2 to 1 decision, the Court ruled that the law’s requirement that most Americans obtain health care coverage was constitutionally valid. The decision marked the first time that a Republican-appointed judge voted to uphold the law.
Two other federal appellate courts have recently heard oral arguments in lawsuits challenging the ACA’s constitutionality, with decisions expected in the coming weeks or months. Ultimately, it is expected that the U.S. Supreme Court will take up one or more of the appellate court cases.
Medicaid Assistance to States Ends Amid Threats of New Federal Cuts
On June 30, the additional federal matching funds for states’ Medicaid programs contained in the 2009 Recovery Act and extended last year will end. AFSCME fought hard for these critically important federal funds to states. All told, states received an additional $104 billion, which helped enormously to stabilize state budgets and strengthen Medicaid during our country’s long and deep recession. States are not out of the woods, however, and continued budget cutting by state and local governments is delaying the nation’s economy recovery and undermining job creation efforts. Tax collections in most states remain well below pre-recession levels and lag far behind the growing cost of maintaining existing services.
Adding to the fiscal stress on states, Medicaid cuts are on the table as part of federal deficit reduction negotiations. We understand that the proposed cuts are being considered in the range of $100 to $150 billion over 10 years. Most of this would be a shift of costs to the states.
The House-passed Fiscal Year 2012 budget would dismantle the Medicaid program entirely, converting it into fixed block grants to states. Families USA released a report this week that quantified the harm this proposal would have on state economies. A 5% cut in Medicaid spending would mean that states and the District of Columbia would lose a total of $13.75 billion that is needed to support health care for vulnerable residents; a 15% cut would reduce federal support by $41.25 billion; and a 33% cut would cost states $90.75 billion. These cuts would dampen business activity and job creation in every state. The 10 states with the largest potential loss of business activity and jobs due to Medicaid cuts are: NY, CA, TX, PA, FL, OH, IL, MA, NC, and MI.
AFSCME will continue to advocate for full and reliable federal support for states’ Medicaid programs, and for fair and balanced deficit reduction initiatives, including revenue increases.
Bipartisan Agreement on TAA Announced, but Runs into Opposition from Key Republican Leaders
The White House this week announced a bipartisan agreement on the Trade Adjustment Act (TAA) this week which allows the current Department of Labor regulation to continue requiring that TAA funded staff be state personnel covered by merit systems. The agreement was worked out by the White House, Senate Finance Committee Chairman Max Baucus (D-MT), and Ways and Means Committee Chairman David Camp (R-MI).
The TAA agreement extends a modified version of the 2009 TAA program for two years and will be submitted as part of the Korea free trade agreement. The 2009 TAA program expired last February when the Senate Republican leadership blocked it. The White House will submit the TAA extension as part of the Korea trade agreement. Since trade agreements are not subject to amendment, the TAA extension also will be protected from amendment.
The Senate Finance Committee moved quickly to consider the agreement this week. However, in a reversal of the bipartisan support that TAA historically has enjoyed, Committee Republicans announced they will oppose the Korea free trade bill if it includes the TAA extension. In an unprecedented action, they stayed away from the scheduled Committee meeting on the bill depriving Chairman Baucus of the quorum he needed to conduct business.
Senate Subcommittee Holds Hearing on DREAM Act
On Tuesday, the Senate Judiciary Committee’s Subcommittee on Immigration held the first-ever Senate hearing on the DREAM Act (S. 952). This legislation, which has been introduced in every congressional session since 2001, would grant legal status to some young people who were brought to the United States illegally as children and go on to attend college for at least two years or serve in the military. Hundreds of “DREAMers” attended the hearing, many wearing their graduation caps and gowns. Department of Education Secretary Arne Duncan testified that those who would qualify for legal status under the DREAM Act would make needed contributions to our economy, filling jobs in the sciences, technology, math and other areas where labor shortages exist. Department of Homeland Security (DHS) Secretary Janet Napolitano noted in her testimony that DHS is focusing its enforcement efforts on criminal aliens rather than students who pose no threat to society and that passage of the DREAM Act is a priority of the Obama Administration. The DREAM Act faces a tough road ahead, especially in the House of Representatives.
Senators Lieberman and Coburn Propose Increasing Medicare Costs for Beneficiaries
Sens. Joseph Lieberman (I-CT) and Tom Coburn (R-OK) have proposed a 10-year plan to save $500 to $600 billion from Medicare as a way to reduce the deficit. The bulk of the savings ($241 billion) are the result of shifting more of the cost of doctor visits and other outpatient services from the federal government to beneficiaries. In addition, the proposal would add a new $550 deductible to Medigap policies and cap coverage at $7,500. The Lieberman-Coburn proposal would also raise the age of Medicare eligibility starting with individuals born in 1949. The age of eligibility would be increased by two months every year beginning in 2014 until the eligibility age reaches 67. The proposal would establish a $550 annual deductible for hospital stays, plus doctor visits and lab tests. In addition, the proposal would increase out-of-pocket costs for beneficiaries with incomes of $85,000 or more. The proposal would also speed up cuts in payments to hospitals and home care providers, and provide a three-year hold on any scheduled cuts to physician reimbursements.
A recent series of reports by the Kaiser Family Foundation show that even without the cost shifting in the Lieberman-Coburn proposal, Medicare beneficiaries are already shouldering a substantial portion of their own health spending. Medicare beneficiaries spend three times as much of their income on health expenses than people not on Medicare. With household incomes rising more slowly than health care costs, out-of-pocket expenses consume more and more of seniors’ incomes. Like the House Republican budget, the Lieberman-Coburn proposal would increase health care costs of seniors.
Half a Million Seniors Save $260 million on Rx Thanks to Affordable Care Act
Medicare provides access to prescription drugs for millions of beneficiaries. An important provision in the ACA requires drug companies to provide a 50% discount on covered name drugs for Medicare beneficiaries who are in the Medicare prescription drug gap, called the donut hole. Almost half a million individuals enrolled in Medicare’s prescription drug benefit have received the discount on their out-of-pocket costs in the first five months of 2011. Assistance for Medicare beneficiaries who have high prescription drug costs will expand and by the end of the decade the coverage gap in the Medicare prescription drug program will be gone. In addition, about 5.5 million Medicare beneficiaries have accessed one or more preventative screenings available free of charge, thanks to the new law. This lifesaving help for people with Medicare would disappear if the budget authored by House Budget Committee Chairman Paul Ryan (R-WI) became law. The House adopted Chairman Ryan’s budget along party lines in April.
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