Week Ending July 8, 2011
Budget Deal May Target Deep Cuts to Medicaid, as Well as Cuts to Social Security and Medicare
This week, budget discussions continued as the President met with congressional leadership in the hopes of reaching an agreement very soon to reduce the deficit and raise the debt ceiling by the August 2 deadline. While no official details have been released, there are reports of approximately $2.5 trillion in spending cuts, including $100 billion from Medicaid and potential cuts to Medicare and Social Security, and roughly $400 billion in increased revenues. The level of spending cuts, the fact that they include cuts to Medicaid and possibly to Medicare and Social Security and the insignificant amount of tax increases is deeply troubling. President McEntee noted in a statement released on Friday that the “middle class and the poor did not create our fiscal situation, and should not bear the brunt of resolving it... The central focus of negotiators must be the need to create jobs and improve the economy. A healthy economy is the best deficit reduction strategy.”
Sen. Kent Conrad (D-ND), Chairman of the Senate Budget Committee, has prepared a separate deficit-cutting budget. Based on press reports, it would cut $4 trillion in spending over 10 years and raise revenues by an equal amount. It does not touch Social Security, but cuts Medicare by $29 billion and Medicaid by an unknown amount. An open question is whether the Conrad budget would allow workers to be taxed on their health care benefits. While the details have not been released and we have many questions about it, the Conrad budget does take a more balanced approach to spending cuts and revenue raising than what is emerging in the negotiations between the White House and GOP congressional leaders.
The White House budget talks are expected to continue through the weekend.
Balanced Budget Amendment Scheduled for Vote in House
The House is expected to consider H.J. Res. 1, the balanced budget amendment (BBA) to the U.S. Constitution, the week of July 18. In addition to requiring that the federal budget be balanced every year, the measure includes a spending cap that limits total federal spending to 18% of gross domestic product (GDP) annually. It also would require that any measure to raise revenues be approved by a two-thirds majority in both the House and Senate. Votes to suspend the balanced budget requirement or to increase the national debt limit would also require super-majority votes of three-fifths of both the House and Senate.
The resolution was approved by the House Judiciary Committee on a party-line vote earlier in June and would force extreme cuts in federal spending and harm to state and local governments. The BBA would have dire consequences for Medicare, Medicaid, Social Security, education, the environment, national security, veterans benefits, medical research, and other critical government programs and services. In addition, it would cause significant harm to the economy, making recessions deeper and longer. If adopted by a three-fifths vote in the House and Senate, it would go directly to the states for ratification, requiring 37 states to ratify the amendment.
A similar BBA (S.J. Res. 23) has been introduced in the Senate by Minority Leader Mitch McConnell (R-KY) and co-sponsored by all 47 Republican Senators. The bill was introduced and held at the Senate desk where it can be called up for a vote at any time. AFSCME is strongly opposed to the BBA and is working in a broad-based coalition to secure its defeat.
House Committee Approves Legislation to Preempt State and Local Taxes: Business Activity Tax Simplification Act
The House Judiciary Committee approved the Business Activity Tax Simplification Act (BATSA) (H.R. 1439) which would preempt and restrict state and local government authority to impose business taxes on some businesses. BATSA would reduce state and local business tax revenue by up to $10 billion annually. BATSA is strongly supported by the business community, which claims that states and localities impose too many different and confusing taxes. Specifically, BATSA would restrict state net income and other business activity taxes by establishing a new one-size-fits-all national standard narrowly focused on the physical presence of a business in the taxing jurisdiction, which would be more restrictive than existing standards related to economic activity in some states. Simply put, BATSA is designed to help businesses pay less taxes, and over time, provide large businesses with tax avoidance and planning opportunities, which would prevent a state from taxing business revenues earned in that state. Rep. Judy Chu (D-CA) offered two amendments, which were rejected, to weaken BATSA. One would delay the effective date from 2012 to 2022 and the other would delete a safe harbor provision allowing business to have a physical presence in a jurisdiction for up to 15 days without being subject to these taxes.
It is not clear if or when this legislation will move to the House floor or be taken up in the Senate. The House Judiciary Committee is expected to vote soon on additional legislation that would preempt other state and local taxing authority, including taxes on wireless services, rental vehicles, digital goods, and other commonly purchased goods and services. AFSCME continues to fight BATSA and related legislation and is leading a coalition of labor unions and working closely with state and local governments and progressive organizations to ensure businesses pay their fair share of taxes to help maintain public schools, public safety, infrastructure, and other vital public services.
Chairman Mica Introduces Outline of Six-Year Transportation Bill
An outline of the long-awaited surface transportation reauthorization bill was presented by Rep. John Mica (R-FL), Chairman of the House Transportation and Infrastructure Committee (T&I), on July 7. The surface transportation bill funds the nation’s highways, transit, rail, and highway safety programs. The proposal is a $230 billion, six-year surface transportation bill which does not as of yet contain any legislative language. The funding level represents a significant cut in transportation spending. The last reauthorization in 2005 was $286 billion and, at that time, was considered drastically inadequate to meet the nation’s transportation needs. In addition to funding transportation programs, the proposal seeks to reform, consolidate or eliminate 70 programs.
Democratic members of the committee held a news conference in response to the proposal during which they expressed their disappointment in a missed opportunity to create jobs, improve the economy and repair the nation’s failing infrastructure. Rep. Nick Rahall (D-WV), Ranking Member on the Committee, said “The dramatic, mindless cuts proposed to surface transportation programs will destroy nearly 500,000 American jobs next year alone, undermine our nation’s long-term economic competitiveness, and jeopardize our economic recovery.” Department of Transportation statistics show that 44,000 jobs are created for every $1 billion invested in transportation infrastructure.
House Appropriations Subcommittee Proposes Ending COPS Program, Slashes Law Enforcement Assistance
On Thursday, leaders of the House Appropriations Subcommittee on Commerce, Justice, Science and Related Agencies revealed they are planning massive cuts to state and local law enforcement assistance programs and grants for FY 2012. Overall, the Justice Department would provide $1.75 billion in grants to cities and states, which is $1.3 billion below President Obama’s request and a 38% cut from the FY 2011 levels that were finalized in the April budget negotiations.
In a short-sighted quest for savings, the subcommittee eliminated one of the most cost-effective methods for fighting crime, the Community Oriented Policing Services (COPS) program, which provides grants directly to state and local law enforcement agencies for hiring additional officers and assisting in safety programs. The subcommittee denied President Obama’s request of $600 million devoted for COPS hiring grants to aid state and local agencies, many of which are being forced to make historical layoffs and furloughs of officers and employees. Additionally, Edward Byrne Memorial-Justice Assistance Grants (JAG), which assist state and local law enforcement agencies in carrying out and updating their justice programs, were cut by 16% compared to last year’s levels.
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