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November 18, 2005 |
HOUSE BUDGET BILL, WITH ALMOST ALL OF ITS
LOW-INCOME CUTS INTACT,
MOVES ON TO CONFERENCE WITH VERY DIFFERENT SENATE BILL
Download these Policy Points in PDF
On
November 17, House leaders made several changes to the House budget
reconciliation bill, some of them designed to garner the support of
Members who were concerned that low-income families would bear a large
share of the bill’s cuts. CBO analyses show, however, that these
changes reduce the total level of cuts that most directly affect
low-income Americans by only about two percent. The other 98
percent of the low-income cuts remain. The bill passed by the House
would impose significant cuts in:
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Food
stamps: more than 220,000 people would be cut off the program.
This includes at least 150,000 people, most of them in working
families with children who have substantial work and housing expenses
that drop their net incomes below the poverty line. In addition,
70,000 legal immigrants who have been in the United States
between five and seven years, primarily working-poor parents and poor
elderly individuals, would be cut off food stamps by 2008. The food
stamp cuts would total $700 million over five years, according to CBO.
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Medicaid:
low-income beneficiaries would have to pay more for health care and
would receive reduced services; many would end up doing without needed
care. A last-minute change by the House reduced the co-payments
that the poorest Medicaid beneficiaries must pay. But the House left
unchanged the two most serious most serious problems in this part of
the bill — the very high co-payments and premiums that beneficiaries
just above the poverty line could be charged, and the health
care services that states would be allowed to eliminate, including
comprehensive preventive care and treatment for near-poor children.
These changes
would reduce Medicaid by nearly $30 billion over ten years,
according to CBO. These savings partly reflect the fact that because
of the increases in co-payments and premiums, many low-income people
either would not receive health care services or would not obtain
Medicaid coverage at all, CBO notes. This, in turn, would result in
more emergency room visits and higher emergency care costs, according
to CBO, as people’s health worsens due to lack of timely care.
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Child support:
$24 billion in child support payments would go uncollected over the
next ten years because of deep cuts in child support enforcement
efforts. By sharply weakening funding for child support
enforcement, the bill would undercut one of the government’s principal
tools for enforcing personal responsibility on those who father a
child. Child support payments would drop sharply — according to CBO,
$24 billion that would be collected under current law would go
uncollected under the House bill — and as a result, many children
would likely be pushed deeper into poverty.
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Child care:
330,000 children in low-income working families would lose child care
assistance by 2010. The bill requires states to place many more
parents receiving TANF cash assistance into work programs. States
will have to provide child care for these parents. Yet the House bill
fails to provide enough child care money even to maintain the
current number of subsidized child care slots for low-income
families.
As a result, states would have to shift child care slots from
low-income working families that are not on TANF cash assistance to
families that receive cash aid and are participating in work
programs. By 2010, some 330,000 children in low-income working
families would lose their child care subsidies. (This figure is a
CBPP estimate; no CBO estimate is available.)
Budget Cuts Will Be Used
to Finance Tax Cuts, Not Deficit Reduction or Hurricane Relief
Despite claims by supporters of the House bill, these cuts would not
reduce the deficit or help offset the costs of hurricane relief.
This is because the House is planning to consider a tax-cut
reconciliation bill that would reduce revenues by $60 billion over five
years, more than offsetting the total savings in the budget-cut bill.
Moreover, while the House budget cuts would heavily affect low-income
families, the centerpiece of the House’s forthcoming tax-cut bill — an
extension of the capital gains and dividend tax cuts — would
overwhelmingly benefit upper-income households. Fifty-three percent of
the benefits of extending those two tax cuts would go to the 0.2 percent
of households that make more than $1 million a year, according to the
Urban Institute-Brookings Institution Tax Policy Center.
Unlike House, Senate
Achieved Savings Without Sharp Low-Income Cuts
The House’s approach to reconciliation budget cuts contrasts
sharply with that of the Senate, which did not include any cuts to food
stamps, child support enforcement, SSI, or foster care.
The Senate bill did
include Medicaid reductions, but unlike the House, the Senate avoided
changes that harm low-income beneficiaries. Instead, the Senate took on
powerful lobbying interests such as managed care providers and
pharmaceutical companies: the Senate bill reduced overpayments to
Medicare managed care plans (as recommended by the non-partisan Medicare
Payment Advisory Commission) and reduced the prices Medicaid pays
pharmaceutical companies for prescription drugs. The House, in
contrast, shielded managed care providers and pharmaceutical companies.
The House could have
achieved the $50 billion in savings in its final bill while protecting
low-income families by:
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reducing overpayments to Medicare managed care plans;
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lowering Medicaid prescription drug prices (by addressing the
high charges imposed by pharmaceutical companies, as the Senate did);
and
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canceling two tax cuts exclusively for high-income people
that are scheduled to start taking effect on January 1. The savings
just from canceling these two new tax cuts would be more than enough
to replace all of the House’s low-income cuts.
It
remains to be seen whether the House’s approach of imposing large cuts
on low-income Americans or the Senate’s approach of protecting these
people from the most severe cuts will prevail in conference
negotiations.
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