No More Fiscal Mischief: Untangling the Deficit Reduction Debates


Congress may have averted the “fiscal cliff”, but now the “fiscal rift” in Washington over how to achieve further deficit reduction could mean far more harmful consequences for low-income individuals and those who are chronically unemployed.

On January 2, the President signed the American Taxpayer Relief Act of 2012 (ATRA), thereby avoiding the so-called “fiscal cliff.” Although the fiscal cliff deal did not broker a comprehensive deficit reduction package, the deal has some notable bright spots.

For example, the deal gives a five-year extension on the Recovery Act’s earned income and child tax credits, which kept about 8.7 million Americans out of poverty last year. The deal also continues unemployment insurance (UI) benefits for long-term unemployed workers; without this one-year extension, 2 million unemployed job seekers would have lost all UI assistance immediately even as they continue to look for work.

Finally, the deal made no cuts to programs that help millions of families and individuals avoid poverty, including nutrition assistance, Social Security, and Medicaid.

With the “cliff” averted, policymakers are setting their sights on further deficit reduction measures. This has ushered back in a familiar debate, but this time on a very different playing field and with potentially far more harmful consequences for low-income and chronically unemployed individuals.

For starters, although ATRA delayed January’s scheduled sequestration (or, automatic, across-the-board spending cuts to federal discretionary programs), this automatic-red-pen-reprieve is short-lived. Sequestration is now set to kick in on March 1, and any cuts to non-defense discretionary programs – which include programs that support education and job training and help low-income families afford housing – will be especially painful for chronically unemployed Americans.

Sequestration isn’t the only issue, however – there’s also the looming debt ceiling and debates over the federal budget and further deficit reduction. Despite numerous attempts by some policymakers and experts to untangle discussions about the debt limit from discussions about deficit reduction (the Center on Budget and Policy Priorities does an excellent job clarifying why these are two separate discussions), many policymakers continue to weave the two together.

As the Center on Budget and Policy Priorities says, this provides “opportunities for political mischief while putting the nation’s financial standing at risk.” Political mischief – or at least political maneuvering – is evident in the House bill that was passed on Wednesday, January 23. This bill suspends the debt ceiling until May 18, but also stipulates that each chamber pass a budget by April 15. As a result, this bill links any further increase of the debt ceiling (which the U.S. needs to pay the bills it has already incurred) to the shorter-term federal budget and longer-term deficit reduction discussions.

The bill hasn’t transformed the terms of these discussions, however, which remain focused on spending cuts. As House Speaker John Boehner told the Republican conference last week, “Before there is any long-term debt limit increase, a budget should be passed that cuts spending.”

We’ve seen similar maneuvers before. Last year’s debt ceiling negotiations, though not explicitly tied to the passage of a budget, resulted in a deal that capped discretionary spending bills and disproportionately impacted programs and services that benefit low-income individuals, families, and people of color in exchange for raising the debt limit. Repeating last year’s fiscal and political choices to pass a budget deal would be devastating for vulnerable Americans – and doesn’t have to happen.

Achieving deficit reduction that will bring about long-term economic stability is about making smart choices, not simply slashing spending. Further, it is appalling that policymakers continue to hold the debt limit hostage to deficit reduction measures of their choosing and, in turn, increase uncertainty and heighten the risk of default by raising the debt limit for only a few months at a time. Policymakers should not let the government default or create any doubt or uncertainty. In a recent call to action, the Half in Ten Campaign stated, “Deficit reduction [must] take place in a balanced way that [protects low-income Americans and] also promotes job growth that expands the middle class.” At the National Transitional Jobs Network, we couldn’t agree more.

It’s inexcusable that over 48.5 million people in the United States lived in poverty in 2011. It’s also inexcusable that nearly 23 million Americans are currently unemployed or underemployed – with the long-term unemployed accounting for nearly 40 percent of those who are jobless. According to Census data, one in every 10 nonelderly household heads experienced unemployment in 2011. As staggering as these numbers are, they only represent a slice of the unemployment picture because millions of people have stopped looking for work and millions more are chronically unemployed and are rarely counted in official measures.

What’s more, we know that rising unemployment only increases poverty – according to the Social IMPACT Research Center’s recent Report on Illinois Poverty, national data shows that every one percentage point rise in the unemployment rate causes a 0.5 percentage point increase in the poverty rate. Reducing the deficit by cutting funding to public service programs that provide support, education, job training, and advancement opportunities to these at-risk Americans is indefensible.

Instead – and as hundreds of organizations have urged – Congress and the White House must protect safety net programs that kept millions of children, seniors, and women from falling into poverty in 2011 while also blazing a trail toward future economic prosperity by supporting investments in job creation and paid, on-the-job training programs such as those found in the Pathways Back to Work Act. As the Center on Budget and Policy Priorities notes, deficit reduction simply does not have to harm low-income and vulnerable Americans – we can reach deficit reduction goals without increasing poverty.

As the 113th Congress takes their places on the Capitol Hill stage, we again ask our leaders to make deficit-reduction decisions that keep the most vulnerable among us in mind – and that reflect American values including security, opportunity, and mobility.

The National Transitional Jobs Network is a national coalition dedicated to getting chronically unemployed Americans back to work. In addition to providing employment programs nationwide with direct technical assistance and best practices research to help them improve outcomes, we give the chronically unemployed a voice in Washington – fighting hard for programs and policies that help them succeed in the workforce.

Last year, we stood with states to encourage federal flexibility to achieve more effective TANF employment programs. We urged policymakers to make our public workforce system one that works for all – including the chronically unemployed. We continued to shine a spotlight on the need for job creation measures that include subsidized employment. And, we joined forces with allied groups to urge a balanced approach to deficit reduction.

With your help we can ensure that every person who wants to work has access to a transitional job in their community. Decisions made in Washington in 2013 may have widespread and negative repercussions for low-income individuals and families for decades and necessitate the continued advocacy efforts of the National Transitional Jobs Network. Please consider donating $10 today to support our advocacy work. Your contribution to the National Transitional Jobs Network gives us the resources to fight for, protect, and advance transitional jobs in order to get #AmericaBack2Work. Click here to contribute via Crowdrise.

Melissa Young, Associate Director, National Transitional Jobs Network
Caitlin Schnur, Policy and Research Assistant, National Transitional Jobs Network 

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About National Initiatives on Poverty & Economic Opportunity

Heartland Alliance’s National Initiatives on Poverty & Economic Opportunity is dedicated to ending chronic unemployment and poverty. We believe that every person deserves the opportunity to succeed in work and support themselves and their families. Through our field building, we provide support and guidance that fosters more effective and sustainable employment efforts. Our policy and advocacy work advances solutions to the systemic issues that drive chronic unemployment.

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