Week Ending June 10, 2011
Budget Talks Continue as Economy Struggles; Radical Budget Cutting Plans Proposed
This week, the bipartisan group chaired by Vice President Biden resumed its work on attempting to reach a plan on increasing the federal debt limit and deficit reduction. Republicans continue to insist that tax cuts are off the table and that spending cuts be equal to the increase in the debt ceiling, which needs to expand by over $2.4 trillion. The group hopes to reach agreement on a plan before the July 4 recess although this appears to be an overly optimistic timetable. But, as the economic recovery has slowed with less than expected job creation, new concern has been expressed about large budget cuts and the impact they would have on the economy. Federal Reserve Chairman Ben Bernanke noted this week that spending cuts and layoffs by cash-strapped state and local governments already are holding back the recovery, and the boost supplied by federal Recovery Act investments is waning as those funds are nearly exhausted. State and local governments have served as engines of growth following previous recessions. But, since the recession officially ended two years ago, state and local governments have lost nearly half a million jobs, and Wells Fargo Securities projects that state and local governments will continue to cut 20,000 to 30,000 jobs a month for another year.
Not to be deterred, most House and Senate Republicans continue to press for immediate and deep spending cuts. One-hundred and three House Republicans sent a letter to their leadership calling for deep cuts to reduce the deficit in half by next year. That would require over $500 billion in new budget cuts, a 15% across-the-board cut impacting a wide range of federal programs and services, including Medicare, Medicaid, and Social Security. A 15% cut in Social Security would reduce monthly payments on average by $180. The same group also called for adoption of a balanced budget amendment to the U.S. Constitution, which would cap federal spending at 18% of Gross Domestic Product (GDP). This could cut important domestic programs including health, education, transportation and other programs by 70%, and Medicaid and food stamps by 50%. The House Judiciary Committee is expected to approve a balanced budget amendment (H.J.Res.1) next week, and it could come to the House floor for a vote shortly thereafter. A recent public opinion survey from the Pew Research Center indicates that the public does not support congressional proposals to protect corporate tax loopholes and to cut programs that help low-income Americans. Raising taxes on the wealthy and limiting tax deductions for corporations have support of supermajorities of 60% or more, and majorities oppose cutting funding for low-income Americans, reducing Social Security benefits, and taxing employer-provided health insurance.
41 Senate Democrats Send Letters to President Obama Opposing Drastic Cuts to Medicaid
On Thursday, Sen. John D. Rockefeller (D-WV) announced that 41 Senate Democrats have sent letters to President Obama stating their opposition to block granting, capping, or otherwise eliminating or slashing Medicaid coverage for seniors, children, persons with disabilities and other vulnerable populations who rely on Medicaid for their health care. Sen. Rockefeller stated: “We’re counting on the White House to stand firm on our shared values here. Medicare and Social Security have been declared off the table in deficit negotiations but Medicaid suddenly looks like the sacrificial lamb. I say absolutely no.”
The House-passed budget calls for $1 trillion in cuts to Medicaid and turns it into a block grant program – forcing state and local governments to pick up the rest of the tab, or cut services to beneficiaries as the cost of health care increases. Medicaid has been an essential safety net for families, especially during economic downturns when workers lose their jobs and their health insurance. During the height of the recession, between 2008 and 2009, Medicaid enrollment among families rose 9.3%. AFSCME will continue to fight against any proposal that would cut or dismantle the Medicaid program.
Bill Introduced to Slash Federal Workforce
House lawmakers have introduced legislation (H.R. 2114) that would reduce the federal workforce by 10% by 2015 through attrition, and expect the proposal to save $127.5 billion during the next decade. A trio of Republicans unveiled the bill, which would allow hiring one federal employee to replace every three workers who retire or leave the job. The legislation is based on a policy proposal in the House-passed FY 2012 budget resolution which also recommended a freeze on federal pay through 2015. “This bill will help us reverse the growth curve,” said the House Oversight and Government Reform Committee Chairman Darrell Issa (R-CA), who sponsored the bill along with fellow Republicans Dennis Ross (FL) and Jason Chaffetz (UT). H.R. 2114 would make exceptions for certain national security concerns or any event threatening public health or safety. The policy would be in effect through September 30, 2014.
Large Employers Support Expansion of Federal Tax Exclusion for Health Insurance
The Business Coalition for Benefits Tax Equity, a group representing 77 of the largest employers in the United States including Aetna, IBM, and Microsoft, went on record in support of legislation which would extend the exclusion from federal taxation of the value of employer-provided health care to domestic partners and nonspouse dependents. The bipartisan House bill (H.R. 2088) was reintroduced last week by Reps. Jim McDermott (D-WA) and Richard Hanna (R-NY). A companion bipartisan Senate bill was reintroduced June 9 by Sens. Chuck Schumer (D-NY) and Susan Collins (R-ME). The business community’s support for expansion of the tax exclusion is important both for its recognition of domestic partner equity and for its implicit support for the tax exclusion more generally. Support from the business community strengthens AFSCME’s and our allies’ efforts to protect health insurance coverage for all workers and their families. This legislation is unlikely to move on its own, but could be included in a broader tax reform effort this year.
Affordable Care Act Implementation to Assist States in Preventing Chronic Diseases
The U.S. Department of Health and Human Services (HHS) announced the availability of nearly $40 million to help states and territories prevent the five leading chronic disease-related causes of death and to promote health. Created by the Affordable Care Act, the new Prevention and Public Health Fund is designed to sustain and expand the necessary infrastructure to prevent disease, detect it early, and manage conditions before they become severe. The new initiative will help reduce the chronic diseases which are responsible for seven out of ten deaths and account for about three-fourths of the more than $2.3 trillion our nation spends on medical care annually. HHS expects to award the funds to all 58 U.S. states and territories; the application deadline is July 22, 2011. In April, the House voted along party lines to repeal the Prevention and Public Health Fund created in the Affordable Care Act. The Senate has not taken up this legislation.
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