VA-HUD Appropriations Bill Would Cut Low-Income Housing And Other Programs To Help Pave The Way For An Unaffordable Tax Cut -- 8/3/99

August 3, 1999

VA-HUD Appropriations Bill Would Cut Low-Income Housing And Other Programs To Help Pave The Way For An Unaffordable Tax Cut
by Jeff Lubell

The VA-HUD appropriations bill expected to come to the House floor this week has a number of serious problems:

The bill underfunds key discretionary programs, including low-income housing and community development programs that help families move from welfare to work. The bill provides at least $900 million less for HUD programs than last year's appropriations act did and provides nearly $2 billion less for HUD programs than the Administration requested.⁽¹⁾

Despite the last-minute removal of provisions that would have designated billions in routine expenditures as 'emergencies' not subject to the budget caps, the bill still employs mechanisms designed to permit spending above the budget caps, without acknowledging the caps are being broken. For example, the bill spends more than $3 billion in budget authority originally allotted to the Labor-HHS bill, a shell game that simply postpones the obvious conclusion that the spending bills cannot be passed within the caps.

The bill is loaded with earmarks for specific projects designed to attract the votes of specific lawmakers. While the VA-HUD bill traditionally contains a number of earmarks, this year's bill contains nearly twice the number of special projects as last year's bill. This is being done to persuade lawmakers to look the other way when considering the serious deficiencies in the bill and to vote for it anyway.

These problematic elements of the VA-HUD appropriations bill are designed to serve a common purpose: to pass a bill that is supposed to help demonstrate there is room in the budget for the House tax bill, which is projected to cost $792 billion over the first ten years, and nearly $3 trillion in the second ten years.⁽²⁾

The House tax bill is premised on CBO projections showing that the government will experience a surplus in the non-Social Security part of the budget of nearly $1 trillion over the next decade. These projections, in turn, result from highly unrealistic assumptions that discretionary spending will be cut enough to fit within the discretionary spending caps set as part of the 1997 budget deal. Take away the assumed discretionary spending cuts and the bulk of the projected on-budget surplus — and hence the basis for a big tax cut — disappears.

CBO's projection projects a cumulative non-Social Security surplus of $996 billion over the next 10 years. This forecast assumes that the current discretionary caps for FY 2000, FY 2001, and FY 2002 will be complied with and that discretionary spending in years after 2002 will equal the FY 2002 cap, adjusted only for inflation. It also assumes there will be no emergency spending outside the caps for the next 10 years.

CBO has shown that its surplus projection assumes cuts in discretionary spending of $595 billion over the next 10 years compared to the FY 1999 level of non-emergency spending, adjusted for inflation. Furthermore, to make room for an even bigger tax cut, the Congressional budget resolution assumes cuts in discretionary spending of an additional $180 billion over the next 10 years on top of the cuts assumed in the CBO surplus projection. CBO reports that the budget resolution assumes cuts in discretionary spending of $775 billion over the next 10 years below the FY 1999 level adjusted for inflation.

Suppose the caps are lifted so that overall discretionary spending remains at FY 1999 levels, adjusted only for inflation. Suppose also that emergency spending remains at its historical average level (i.e. its average level in fiscal years 1991 through 1998, excluding both expenditures for Desert Storm and the bulge in emergency spending in fiscal year 1999). Under this more plausible scenario, on-budget surpluses would equal only about $112 billion over the next 10 years, rather than $1 trillion. Some 89 percent of the projected on-budget surplus would disappear.

This means that most of the on-budget surpluses projected for the next 10 years are an artifact of assumptions of large and unrealistic cuts in discretionary programs. Stated another way, for these substantial non-Social Security surpluses to exist, discretionary programs must be cut deeply.

This is where the VA-HUD appropriations bill comes in. To support their claim that there will be large surpluses in the non-Social Security part of the budget over the next ten years and thus room for a rather massive tax cut, proponents of the House tax bill need to show they can cut discretionary programs and stay within the budget caps. They do this in the VA-HUD appropriations bill through a combination of substantial cuts in low-income housing and community development programs and other key programs and procedural devices that permit billions in spending not counted against the caps. Then, to increase the likelihood that the bill will be supported by a majority of the House, the bill substantially increases the usual number of earmarks for projects favored by specific lawmakers, in an attempt to win their votes.

All of this leads to a bottom line — the cuts in low-income housing and community development programs and other discretionary programs included in the VA-HUD appropriations bill are being used to help fund an oversized tax cut that would overwhelmingly benefit the nation's wealthiest individuals.

The Treasury Department's analysis of the House tax bill finds that the richest one percent of individuals would get 33 percent of the tax cuts in the House bill, the most affluent 10 percent of the population would get two-thirds — 66 percent — of the tax cuts, and the top 20 percent of households would garner 80 percent of the tax cuts. But the 20 percent of Americans in the middle of the income spectrum would get just five percent of the tax cuts, and the bottom 60 percent of the population combined would share just seven percent of the tax cut benefits, less than one-fourth what the top one percent would get.

Under the House bill, the average tax cut for the richest one percent of Americans would be $37,000 a year when the tax cuts are fully in effect, the Treasury estimates. The average tax cut for the bottom 60 percent of the population would be $134.

To support this huge tax cut for the wealthiest households, as well as a series of multi-billion dollar tax cuts designed to benefit specific corporations or industries, the VA-HUD appropriations bill makes significant cuts in low-income housing and community development programs and fails to provide any new housing vouchers to help meet the substantial housing needs of low- and moderate- income families.

Relative to this year's levels, the bill cuts the Community Development Block Grant (CDBG) by $250 million. The CDBG program enables states and large cities and counties to carry out community development projects of their choice.

The bill cuts public housing funds by $515 million relative to last year, an eight percent cut. The bill also provides $185 million less in public housing operating funds than the Administration requested, choosing instead to fund this account at the FY 1999 level that is widely acknowledged to have been inadequate. Public housing funds are necessary to ensure that the elderly, the disabled and poor families with children can continue to live in decent affordable public housing units. The funds also help to pay for programs to increase the safety of public housing and to replace severely distressed public housing developments with smaller mixed-income developments. HUD has noted that the reduced operating funding levels would lead public housing authorities to reduce their maintenance expenditures, resulting in tens of thousands of public housing units becoming substandard.

The bill fails to fund any of the 100,000 new Section 8 housing vouchers that Congress authorized as part of last year's public housing reform act. Housing vouchers help low- and moderate-income families, including elderly, disabled and working families, afford apartments that they locate in the private market.

The Administration has proposed providing 25,000 new vouchers to families seeking to move from welfare to work, 18,000 new vouchers to homeless households, 15,000 new vouchers to elderly households, and 42,000 new vouchers to help meet other local housing needs. These housing vouchers are needed. HUD's most recent report to Congress on housing needs found that, in 1995, some 5.3 million very low-income renter households spent more than half their income on housing or lived in severely substandard housing. On average, families newly admitted to the Section 8 housing voucher program wait around two years to receive assistance. Waiting times in large cities are even longer. The wait for a voucher in Chicago is about five years; in Miami, the average wait is eight years, and in Los Angeles, the wait can be as long as ten years.⁽³⁾

In addition to the cuts in low-income housing and community development programs, the bill eliminates funding for the Corporation for National and Community Service, which funds community service work through the Americorps program, and cuts NASA space and science programs by about $1 billion (eight percent) relative to this year's levels. The bill also makes significant cuts in a number of environmental programs.

Endnotes:

1. While the Committee Report for the VA-HUD Appropriations bill acknowledges providing $1.95 billion less for HUD programs than the Administration requested, it reports (somewhat misleadingly) that the bill provides $2 billion more in HUD funding ($26 billion) than Congress provided in the FY 1999 bill ($24 billion). The latter statement is misleading because it refers only to new budget authority and not the total budget authority provided for HUD programs in FY 1999. In fact, Congress provided around $27 billion in total budget authority for HUD programs in FY 1999; this was comprised of $24 billion in new budget authority, $2 billion in recaptured and reprogrammed budget authority from prior years and approximately a billion dollars in offsets that were used to reduce the amount of new budget authority required for HUD programs. For FY 2000, the bill provides at least $900 million less in total budget authority for HUD programs than the FY 1999 bill provided.

2. The $792 billion estimate of the cost of the House tax cut in the first ten years comes from the Joint Tax Committee. The $3 billion estimate of the cost of the tax cut plan in the second ten years comes from the Treasury Department. The Center on Budget and Policy Priorities has generated a similar estimate of the costs of the plan in the second ten years.

3. Office of Policy Development and Research. U.S. Department of Housing and Urban Development. A Picture of Subsidized Households in 1998: United States Summaries (1998) and Waiting in Vain: an Update on America's Rental Housing Crisis (1999).