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Week Ending March 20, 2015

GOP Budget Double Header Strikes Out

This week, House and Senate budget committees passed their budget blueprints under the leadership of House Budget Chair Tom Price (R-GA) and Senate Budget Chair Michael Enzi (R-WY). The radical Republican budget first introduced five years ago by Rep. Paul Ryan (R-WI) is essentially back again with slight changes. Once again, these GOP budgets include the same wrong-headed policies and priorities that we have come to expect.  The spending cuts are very deep and would lower spending on vital domestic programs to unprecedented, inadequate levels in order to pay for big new tax cuts for corporations and the wealthy and to drastically boost Pentagon spending. Unlike the President’s budget that would rebuild and expand the middle class, these congressional budgets harm working families.

The House Budget Committee passed its plan along party lines, 22-13, but without a GOP leadership-backed amendment to increase funds for a defense spending slush fund. The committee rejected all Democratic amendments, including those to end spending caps, protect Medicare and Medicaid, and adjust taxes so that the wealthy and corporations pay their fair share. Speaker John Boehner (R-OH) has promised that the defense funds will be added back to the budget when it comes to the House floor for a vote next week, which could endanger its chances of passing. The Senate Budget Committee passed its plan this week, also along party lines, 12-10, after increasing defense spending to match the House plan and rejecting amendments to eliminate deep across-the-board “sequestration” cuts and to support progressive taxes.

Overall Cuts

The House budget reduces spending by a total $5.5 trillion and the Senate budget by $5.1 trillion over the next decade.  These cuts in federal investments would incapacitate state and local governments, leading to massive cuts in vital public services and enormous job losses that would threaten our fragile economic recovery. The Economic Policy Institute projects that the House proposal would result in the loss of 1.3 million jobs next year and 2.9 million jobs the following year. The majority of these cuts come from programs supporting low-income and working families – such as job training, public education, child care, student loans, and health care – while defense spending is increased by $613 billion in both the Senate and House budgets. 

  • Taxes

    The House GOP budget proposes comprehensive tax reform that reduces tax rates for individuals and corporations.  For individuals, it repeals the Alternative Minimum Tax (AMT), which requires the wealthiest to pay a minimum tax.  For corporations, it moves from the current worldwide tax system to a so-called “territorial” system, which tends to reduce taxes for corporations.  These tax breaks are expected to disproportionately benefit the wealthiest 2% and large profitable corporations. On the other hand, the House GOP budget neither strengthens nor extends vital tax credits for low-income or middle-class families, like the Earned Income Tax Credit, Child Tax Credit, or and other pro-work and pro-family benefits.

  • Health Care Coverage, Medicare and Medicaid

    The House majority budget would create substantial upheaval in health care coverage for children, working families, seniors and individual with disabilities. By repealing the Affordable Care Act (ACA) without offering a coherent alternative, the House majority plan would cause 15 million people to lose tax credits that make insurance affordable. Insurance companies could once again deny coverage for pre-existing conditions and end coverage when individuals become sick and need it most. Employer-sponsored plans could drop coverage for adults under age 26 from their parents’ plans.

    Current Medicare beneficiaries would be saddled with $198 billion gross increases in out-of-pocket costs, and could be forced to cover the full cost of medications when they hit the “donut hole” in coverage.  They would be forced to pay out-of-pocket costs for preventative screening.  In 2024, the budget plan would turn Medicare’s guarantee of medical care for seniors into a fixed amount voucher for all beneficiaries shifting costs on to beneficiaries.  It would also raise the age for Medicare eligibility to 67. This change would increase costs for seniors, states and employer retiree health plans, which will be forced to bear the costs of private health insurance for an additional two years. The voucher and the change in Medicare’s age of eligibility will cost seniors, states and retiree plans some $6.1 billion.

    The House budget changes federal funding for state Medicaid programs and the Children’s Health Insurance Program (CHIP) by converting them into a block grant called a “state flexibility fund.” States budgets will receive $1.8 trillion less in federal support for Medicaid and CHIP over 10 years. This cut includes repealing federal support to states for expanding Medicaid.  The ranks of the uninsured would increase, further stressing low-income individuals, hospitals and communities. States will be forced to eliminate vital public services and reduce coverage.  Because two-thirds of Medicaid expenditures are for low-income seniors and people with disabilities, states will be forced to make deep cuts in home and community-based services and other long-term care services for these vulnerable populations. 

    The Senate budget also calls for the repeal of the ACA, and all its protections for consumers.  It also calls for converting Medicaid into a block grant.

  • Jobs Programs and Employment Services

    The Workforce Innovation and Opportunity Act (WIOA) of 2014 strengthened and revamped our country’s education, training and workforce system.  The House budget would weaken the effectiveness of job training programs by consolidating programs that are designed for and targeted to populations with unique training needs, including dislocated workers, youth, workers who are unemployed due to trade agreements, veterans and others.  The budget indicates this is a cost-saving measure, not good policy aimed at providing high-quality training that leads to middle-class jobs.  It is estimated that over two million fewer workers would receive job training and employment services if the unallocated cuts in the House budget are spread proportionately across programs.

  • Unemployment and Disability Insurance

    The House budget would eliminate under all circumstances, the ability of workers simultaneously to receive unemployment insurance and Social Security Disability Insurance (SSDI).  While receipt of these social insurance benefits are usually mutually exclusive, it is not always so.  For example, some individuals receive, and should be able to continue to receive, reduced SSDI payments because they are able to work in a limited capacity but are unable to find appropriate work. And, they should remain eligible to receive unemployment insurance benefits.

  • Education

    Student loans would become much more expensive under the House budget because students would be charged interest while still in college, and the maximum Pell grant at best would be frozen but likely cut because the plan eliminates $89 billion for Pell grants.  Head Start would serve 35,000 fewer children, and Title I would serve 1.9 million fewer disadvantaged K-12 students, likely resulting in the loss of 17,000 jobs for teachers and aides. 

  • SNAP

    The House budget proposes to cut the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) by $125 billion over 10 years by converting it into a state flexibility fund, which is a block grant to states.  This would end SNAP as an open-ended entitlement for any individual who is financially eligible to receive this anti-hunger, basic food assistance.  In an economic downturn, states would no longer receive increased federal funds to meet increased needs.  Instead, they would be faced with allowing these vulnerable populations to go hungry or to make cuts elsewhere in their budgets, likely in education and/or health care, states’ two largest budget items.  Converting SNAP into a block grant would also eliminate the requirement that the program be administered by merit-based, public employees, thus opening the door to privatization. The House budget additionally proposes to limit SNAP enrollment by reducing funding for advertising the availability of this assistance.

    The House budget proposes to rescind the ability of the Department of Health and Human Services to allow states to test new welfare-to-work strategies through its waiver authority.

  • Social Security

    The Social Security Disability Insurance (SSDI) Trust Fund is expected to face a shortfall in late 2016, but the House budget would prevent reallocations between the SSDI and the Old Age Survivors Insurance Trust Funds unless accompanied by what it deems to be a long-term solution for the program’s solvency.  Further, the budget calls for the President’s Fiscal Commission to resume exploring bipartisan options to strengthen Social Security, including a revised benefit structure and changes to sustain long-term solvency.  In the event that the 75-year actuarial balance of the trust funds is in deficit, the budget also directs the President to recommend reforms necessary to achieve a positive actuarial and annual balance.

  • Immigration

    Neither the House nor Senate budget includes comprehensive reform of our broken immigration system.  This omission misses the opportunity to reduce deficits by an estimated $900 billion over the next 20 years, boost the economy by 5.4%, and extend the solvency of Social Security.

  • Transportation/Infrastructure

    The House budget cuts $187 billion, or more than 19%, from transportation funding over the coming decade, notwithstanding the latest report card on the country’s roads and bridges from the American Society of Civil Engineers which gave America a D+ grade. The budget also fails to provide a long-term solution to the solvency problems of the Highway Trust Fund, which will run dry later this year when funding for surface transportation programs expires. Further, the budget proposes limitations on when money can be added to the Highway Trust Fund in times of need.  The Senate budget also fails to address long-term transportation issues. It provides even less direction than the House, and simply sets up two deficit-neutral trust funds for highway and aviation programs.

  • Regulatory Reform

    The House budget calls for “streamlining” the federal regulatory process including putting a higher burden on agencies already crippled by recent budget cuts and dismantling the government’s process for issuing and enforcing safeguards. It also places burdensome mandates on federal agencies such as elevating cost above all other considerations when issuing regulations.

  • Congressional Progressive Caucus (CPC) Budget

    AFSCME supports the House CPC budget alternative.  It is estimated that it would create 8 million good paying jobs by 2018, provide needed infrastructure investments, a new public works program, restore the manufacturing sector and create new state hiring. It also increases support for worker protections, provides a pay raise for federal employees, creates new paid leave initiatives, and invests substantially in child care, pre-K, K-12, and college affordability. Notably, it repeals the across-the-board “sequester” cuts and reinvests $2 trillion in domestic needs.  And, it importantly repeals the ACA’s health benefits tax that levies a 40% marginal excise tax on high-cost, employer-sponsored health insurance plans starting in 2018.  This 40% tax is already forcing insurers and employers to weaken workers’ current health benefits, which harms workers by shifting health costs to them.   

    The CPC’s budget proposes many progressive tax policies that ensure the wealthiest 2% and large profitable corporations pay their fair share of taxes while simultaneously providing tax credits for low-income and middle-class working families. It raises rates on annual incomes above $250,000 by returning rates to their levels before President George W. Bush’s tax cuts, and raises rates for incomes above $1 million.  It taxes unearned income, such as capital gains and dividends, equally as earned income or wages. It raises rates for the estate tax to 55%-65% and reduces the exemption from the current $5.25 million to $2.5 million per person.  For those struggling to make ends meet, it expands and extends the Earned Income Tax Credit and Child Tax Credit.  And, it proposes a new refundable “Hard Work Tax Credit” for two years for up to $800 per worker earning below $95,000.

    The progressive budget ends tax “deferral” and thus no longer permits corporations to avoid paying American taxes on their overseas profits.  It also ends corporate tax “inversion” to close the loophole allowing U.S. companies to buy foreign firms and relocate to foreign jurisdictions to escape U.S. taxes.  And, it imposes a “Financial Transaction Tax,” which reduces risky speculation and would raise revenues of $921 billion over 10 years. 

    Finally, the CPC budget proposes a 4% pay increase for federal employees, and provides them with six weeks of paid parental leave.   

Congress Holds Several Sessions on Immigration

This week, Senate committees held three hearings related to federal immigration policy while House committees held two hearings and passed a mass deportation border bill. AFL-CIO President Rich Trumka testified at a Senate Judiciary Committee hearing that focused on the H-1B high-skilled visa program.  He urged the committee to reject any expansion of this deeply-flawed program that allows employers – most of whom are in the business of outsourcing work – to pass over qualified U.S. workers and instead petition for guest workers who they are allowed to pay just a fraction of prevailing wages and whose very presence in this country is dependent upon their employers.  The H-1B program does not allow guest workers to leave an exploitative employer and move to another job, and it does not allow them to petition for legal permanent resident status – only their employers can do that.  A few years ago, hundreds of AFSCME District Council 37 members in New York City lost their information technology jobs to H-1B guest workers after their jobs were privatized.  AFSCME submitted a Statement for the Record in support of reform, not expansion, of the H-1B program.

Other Senate hearings this week focused on border security in the Southwest and the pending lawsuit against President Obama’s immigration executive actions that expand the Deferred Action for Childhood Arrivals (DACA) program and establish the Deferred Action for Parental Accountability (DAPA) program.  Together, these actions would allow up to five million undocumented immigrants to get temporary legal status, including work authorization. 

House subcommittees held a hearing on the fiscal costs of the President’s executive actions.  While a witness from The Heritage Foundation testified that legalization would be a net negative for the economy, Rep. Matt Cartwright (D-PA) noted that the White House Council of Economic Advisors found that the President’s executive actions would raise the GDP by an additional $100 billion and would cut deficits by $30 billion over 10 years, as well as expand our labor force and raise average wages for U.S. citizen workers.  A House committee held a hearing on the Department of Homeland Security’s apprehension and deportation policies.  And, the House Judiciary Committee passed on party-line votes two flawed immigration bills: H.R. 1153, a mass deportation bill that requires state and local law enforcement to enforce immigration laws or risk losing all Department of Homeland Security grant funding; and H.R. 1148, which removes important protections for individuals who are seeking asylum. 

Congress Developing Package to Repeal Medicare Physician Cuts

Significant cuts in Medicare payments to physicians are scheduled to begin in April.  The evolving package to permanently repeal and replace the existing scheduled cuts in Medicare may include a needed extension of federal funding to support state’s Children’s Health Insurance programs (CHIP).  How Congress chooses to pay for Medicare physician payment reform and other components in the package (roughly $200 billion price tag) will have significant impact on the pocketbooks of current and future Medicare beneficiaries and employer-sponsored health plans. Increasing Medicare premiums for select beneficiaries and changes to Medigap plans are being seriously considered as ways to partially pay for blocking these cuts. AFSCME supports addressing the flawed Medicare physician pay system but strongly opposes paying for the increases in physician reimbursements by raising out-of-pocket costs for Medicare beneficiaries and their retiree plans, either through higher premiums or larger deductibles or changing the age of eligibility.

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