Week Ending April 12, 2013
President’s Budget Includes Harmful Changes to Social Security and Medicare
President Obama released his Fiscal Year 2014 budget this week. Since the House and Senate have already passed their budget resolutions, this budget is intended to provide the basis for further budget deliberations. But, as President Saunders noted, “while there are many positive elements in President Obama’s budget, they are outweighed by the harm that would be done to seniors and working families if the Republican proposals for the chained CPI and means-testing Medicare premiums were adopted.” Both House Speaker John Boehner (R-OH) and Minority Leader Mitch McConnell (R-KY) immediately dismissed the President’s budget and oppose any attempts to raise additional revenues.
Social Security and Retirement
The Obama budget calls for a different calculation to determine cost-of-living increases, known as the “chained CPI,” which would result in a cut for Social Security beneficiaries. The President’s budget also proposes an additional $35 billion in federal retirement benefit cuts. Switching to the chained CPI saves the federal government $120 billion a year on the backs of children, seniors, people with disabilities and veterans. Included in the chained CPI proposal is a recommendation to protect vulnerable populations, but it falls short of doing so. The typical single elderly woman with an original annual benefit of $13,200 would have to live to age 104 to be made fully whole, and all recipients would see a decline in their benefits during the first 10 years of their retirement. In addition, 9.4 million veterans and 8.6 million who receive Social Security Disability Insurance (SSDI) are not included in the group of individuals who would be fully excluded from the chained CPI.
Obama’s budget would save the Medicare program $371 billion over 10 years. A significant amount of these savings is achieved by reducing prescription drug costs for the program and closing the Part D coverage gap (known as the donut-hole) sooner. Unfortunately, the budget proposal also increases income-related premiums for Medicare beneficiaries, which AFSCME opposes. Currently, seniors with incomes of $85,000 (single) or $170,000 (married) pay income-related premiums. Under the proposal, more beneficiaries would pay until over time one in four beneficiaries pay higher premiums. We are concerned that this proposal will hurt beneficiaries of modest means and undermine Medicare as an earned social insurance program. This proposal will cost beneficiaries $50 billion over 10 years.
The President proposes raising $600 billion in revenues over 10 years targeted to reducing the deficit and supporting his priorities by closing tax loopholes; reducing tax benefits for those who need them least; imposing a 28% cap on itemized deductions and exclusions; implementing the “Buffett rule” which requires that households with incomes over $1 million pay at least 30% of income (after charitable giving) in taxes; imposing a tax on financial firms with assets exceeding $50 billion; proposing tighter estate and gift taxes; heavily taxing tobacco; and implementing the Social Security chained CPI.
The budget includes “America Fast Forward Bonds,” which are conventional taxable bonds issued by states and localities in which the federal government makes direct payments at a 28% subsidy rate. Obama also proposes temporarily increasing the federal subsidy rate to 50% for school construction. He also proposes so-called “revenue-neutral” corporate tax reform which would use new corporate revenues to lower overall corporate rates, which AFSCME opposes.
Additional Budget Highlights
Overall, the budget would reduce the deficit by $1.8 trillion, with $600 billion raised in new revenues and $1.2 trillion from program and social insurance program cuts. These cuts include $200 billion in “sequester” program cuts split nearly equally between defense and non-defense. Some program cuts would be delayed until FY 2017 to protect the economy from the harmful impact of austerity measures. We remain concerned that additional cuts will eliminate more state and local government jobs, reduce services and further harm the economy.
- Job Creation – The budget does call for new investments in education, manufacturing, clean energy, infrastructure and small business, including funding increases for services provided by state employment service staff.
- Education – Early Childhood and K-12 – The budget proposes a major $75 billion investment in early childhood education, by providing states with funds to provide four year olds in low and moderate-income families with access to pre-K in public school and community-based settings. The budget would increase funding for Title I and special education for K-12 education, and proposes to keep interest rates affordable for college loans. Head Start funding is increased, and funding for child care is increased.
- Transportation and Infrastructure – The budget includes $50 billion for infrastructure investments, which would allow the government to make an immediate investment in reducing the backlog of deferred maintenance on highways, bridges, transit systems and airports. Additional information can be found at www.whitehouse.gov/omb/budget
Huge D.C. Rally at Capitol; Senators Poised to Introduce Comprehensive Immigration Reform Bill
Much of the activity on comprehensive immigration reform (CIR) this week was in the streets. AFSCME co-sponsored a rally on April 10 that drew tens of thousands of people to the Capitol where all the speakers and participants called on Congress to pass a CIR bill with a clear pathway to citizenship. Many speakers also stressed the need to give hard-working, law-abiding immigrants interim legal status so they will no longer have to live in constant fear of deportation and can escape the underground economy that harms all workers and causes the loss of billions of dollars in tax revenues. Dozens of CIR rallies were also held across the country.
In Congress, after months of meeting and drafting legislation, the Senate “Gang of Eight” is expected to release its CIR bill early next week. The gang members; Sens. Michael Bennett (D-CO), Richard Durbin (D-IL), Jeff Flake (R-AZ), Lindsey Graham (R-SC), John McCain (R-AZ), Robert Menendez (D-NJ), Marco Rubio (R-FL) and Charles Schumer (D-NY) have been under pressure from others in Congress and President Obama to introduce a CIR bill soon so momentum continues.
While no draft or summary has been made available before the bill is officially released, some core provisions are expected to be included: A road map to citizenship for the 11 million undocumented immigrants living in the U.S.; Increased enforcement and border control measures; A mandatory, employment-based immigration status verification system; Several temporary guest worker programs; and A new W-visa that would be available to low-skilled foreign workers if documented labor shortages exist.
We are continuing our D.C. lobbying and field activities to support legislation that brings immigrants out of the shadows. As immigration reform moves ahead in Congress, we will be reaching out to AFSCME Councils and Locals to magnify our message and our strength.
House Passes Bill to Limit NLRB Ruling
The House voted largely along party lines to pass the Preventing Greater Uncertainty in the Labor-Management Relations Act (H.R. 1120). The bill requires the National Labor Relations Board (NLRB) to cease all activity that requires a three-member quorum and prohibits it from enforcing any action taken after January 4, 2012. The bill would effectively shut down the NLRB indefinitely and deprive both labor and management of the ability to have their rights adjudicated when a violation of the National Labor Relations Act is alleged.
In a related development, President Obama this week announced his intention to nominate three individuals to serve on the NLRB. Mark Gaston Pearce has been re-nominated and will continue to serve as Chairman, a position he has held since August 2011. Harry I. Johnson, III, currently a partner with Arent Fox, LLP, was nominated to serve as a member of the Board. Previously, Mr. Johnson was a partner at Jones Day law firm. The third nominee is Philip A. Miscimarra who is a partner in the Labor and Employment Group of Morgan, Lewis & Bockius, LLP. Previously, he was a senior fellow at the University of Pennsylvania’s Wharton Business School.
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