Key Findings

• Congress reconvenes in mid-November to complete work on the annual appropriations bills, including the bill that (among other things) provides funding for “Section 8” housing vouchers. A key issue will be how to distribute the voucher funds that the bill provides.  
• The formula for distributing funds included in legislation that the House Financial Services Committee recently approved would make the most efficient use of these funds. Under the funding level Congress seems likely to provide for housing vouchers in 2007, this formula would avoid any cuts in the number of vouchers in use and allow agencies to restore many of the vouchers lost in recent years. 
• In contrast, maintaining the existing distribution formula, as a bill approved by the House Appropriations Committee would do, would result in the loss of 26,000 vouchers, despite spending the same amount of money. 
• The Senate Appropriations Committee has approved a bill that contains some, but not all, of the changes contained in the Financial Services Committee bill; under it, new voucher cuts would not occur, but most of the earlier voucher cuts would not be restored.

Note: This report is accompanied by state-by-state fact sheets which show the impact of the competing formulas on each public housing agency in the state.

Key Findings

• An extensive body of research shows that covering low-income parents increases enrollment by eligible children in health insurance programs, thereby reducing the number of children who are uninsured.
• Parental coverage also appears to improve children’s use of health care, such as preventive care.
• Policies that cut back coverage for low-income parents are likely to result in reduced coverage for children as well, and hence in more children becoming uninsured.
• Covering low-income parents also increases their own insurance coverage and access to care.

Key Findings:

• In September, Congress shifted $5.3 billion that Senate appropriators planned to devote to domestic programs to the defense and homeland security appropriations bills. As a result, $5.3 billion will have to be cut from other appropriations bills the Senate Appropriations Committee has approved — bills that largely fund domestic programs — when Congress reconvenes after the election.
• If the $5.3 billion reduction is achieved through an across-the-board cut, funding levels for all of the programs funded by those other bills will need to be cut 1.1 percent below the levels that Senate appropriators had approved. Since many of these programs already are slated for cuts, the cuts would now be deeper.
• For example, if the funding levels approved by the Senate Appropriations Committee were reduced by an additional 1.1 percent, Head Start would be cut a total of $221 million below the level needed to maintain current services (i.e., below the 2006 funding level adjusted for inflation). Education for the Disadvantaged Children (which includes Title I) would be cut a total of $479 million, while Pell Grants would be cut a total of $864 million and the National Institute of Health would be cut a total of $666 million.
• These new cuts would be on top of the $12 billion that has been cut from domestic appropriated programs over the past two years. The President has proposed to continue cutting these programs in each of the next five years.
• The action by Congress to shift $5 billion to the defense bill in September means that the efforts made by some moderate Republican lawmakers to mitigate cuts the White House proposed in domestic programs seem likely largely to fail.

Key Findings

• A House-passed 2007 funding bill would result in the deepest shortfall in public housing operating subsidies — the funds that enable local housing agencies to maintain developments, pay utility bills, and keep rents affordable to needy families — in more than 25 years. The Senate Appropriations Committee passed a version that provides some added funds but still falls far short of what is needed.
• Much of the underfunding stems from HUD’s failure to request funds to cover sharp utility cost growth in recent years.
• Faced with deep shortfalls in 2007, many local housing agencies will have to balance their budgets through steps that harm the vulnerable people they serve, about half of whom are elderly or have disabilities.
• Funding shortfalls in 2005 and 2006 have already forced some agencies to raise rents on the neediest households, defer safety-related improvements, and make other painful cuts.

Key Findings

• States that cut taxes significantly in 2006 typically did so in ways that hide the true cost and will make it harder to balance budgets in the future.
• Of the 10 states enacting tax cuts in 2006, nine “backloaded” the tax cuts, meaning that the bulk of the cost will occur in future years for which budgets have not yet been written.
• Those future revenue losses will exceed $5.1 billion per year, more than five times what states have budgeted for. This level of revenue loss could reduce states’ ability to meet existing or emerging needs in areas like education, health care, and transportation.

Key Findings

• TABOR would put a severe squeeze on the state budget, potentially requiring 1/6 of the budget to be eliminated over time.
• State aid to localities, which is 36 percent of the state budget, would face substantial cuts, particularly in education funding.
• TABOR also tightly limits local expenditures, causing further cuts in education, as well as cuts in public safety, road maintenance and other services.
• Residents faced with deteriorating services would likely respond by voting to override the TABOR limit — thereby maintaining or even increasing local property taxes. This is what happened in Colorado, where limits were overridden in most localities.
• Several other states have enacted property tax relief in recent years, but the methods they used would be precluded under TABOR.

Misunderstanding of the Treasury Study Mars Some News Accounts

Some of the reporting on the Treasury analysis has made a basic mistake.  The Treasury study found that making the tax cuts permanent would increase the size of the economy over the long run — i.e., after many years — by 0.7 percent, if the tax cuts are paid for by unspecified cuts in government programs.  This is a very small effect.  If it took 20 years for the 0.7 percent increase to fully manifest itself (Treasury officials have indicated it would take significantly more than ten years but have not been more specific than that), this would mean an increase in the average annual growth rate for 20 years of four-one-hundredths of one percent — such as 3.04 percent instead of 3.0 percent — an effect so small as to be barely noticeable.  Moreover, after the 20 years or whatever length of time it would take for the 0.7 percent increase to show up, annual growth rates would return to their normal level — that is, they would be no higher than if the tax cuts were allowed to expire.

Several news reports, however, mistakenly said that the Treasury found that making the tax cuts permanent would lead to a 0.7 percentage point increase in the annual growth rate.  If true, that would be an enormous economic benefit; it would increase the size of the economy by 40 percent after fifty years.  It would be more than fifty times larger than the 0.7 percent increase in the size of the economy over several decades that the Treasury study actually found.

Key Findings:

By adopting the following practices, states and school districts can help directly certify as many eligible children as possible:

• Keep it simple: use data matching to automatically enroll eligible children for free school meals.
• Help kids when they need it most: automatically enroll eligible children throughout the year when their families fall on hard times.
• Make the most of data matches: school districts can directly certify all children in the household based on a data match of any child in the household.
• Track your progress: regularly assess how the process is going by measuring the share of children in households receiving food stamp benefits who are being directly certified for free school meals.

Key Findings:

• Senate Republican leaders continue to push proposals to permanently eliminate most of the estate tax. They also have endorsed a measure the Senate Budget Committee passed June 20 to make far-reaching changes in the budget rules. That bill requires deficits to be reduced to 0.5 percent of GDP in 2012 and succeeding years, and triggers automatic across-the-board cuts in all entitlement programs except Social Security if the targets would be missed.
• CBO estimates show that if the Bush income tax cuts are extended, deficits will exceed the targets the Budget Committee bill sets by almost $200 billion a year in 2012 (and more in succeeding years), even after the large cuts the Budget Committee bill calls for in discretionary programs are made. This gap would have to be closed by entitlement cuts (unless tax cuts are scaled back or revenues raised in some other manner, or discretionary programs are cut even more deeply).
• The costly estate-tax measure would trigger deep entitlement cuts under this approach. Every dollar in lost estate-tax revenue would trigger an additional dollar in entitlement program cuts.
• Under the automatic budget cuts in the Budget Committee bill, the legislation to eliminate most of the estate tax would trigger cuts over the 2007-2016 period of: $115 billion in Medicare, $61 billion in Medicaid and SCHIP, $9 billion in SSI benefits for the elderly and disabled poor; $8 billion in veterans benefits, and $3 billion in school lunch and child nutrition programs. The entitlement-program cuts would dwarf those contained in the budget reconciliation bill enacted earlier this year.

Key Findings

• A new Treasury analysis acknowledges that the recent tax cuts, if made permanent, eventually must be paid for. Legislation approved by the Senate Budget Committee would effectively do that. While the legislation will not be enacted this year, it offers what Investor’s Business Daily has called a “vision statement” for how to extend the tax cuts and address deficits.
• The Senate bill would impose austere discretionary funding caps that would lead to deep cuts in domestic discretionary programs (unless Congress refused to honor the President’s defense requests). It also would impose annual deficit targets and require cuts in entitlement programs if those targets were not met. It would impose no fiscal restraints on new or existing tax cuts.
• If the tax cuts are extended, entitlement programs would have to be cut $206 billion a year by 2012. If these savings were achieved through the bill’s automatic entitlement cuts, there would be deep cuts in everything from Medicare and veterans disability compensation to school lunches and assistance for the elderly and disabled poor.
• Yet the bill’s deficit target in 2012 would be met without such budget cuts if the tax cuts were not extended or were financed through revenue-raising measures. Essentially, the bill charts a course under which the bill’s severe domestic program cuts would be used to pay for the tax cuts, rather than to reduce deficits.
• The tax cuts are tilted toward the most well-off. The budget cuts would hit low- and middle-income households hardest. As a result, most Americans would end up net losers under the “vision” that the Senate bill represents.

Key Findings:

• Resolving the nation's long-term fiscal imbalance will require painful spending cuts and revenue increases. Such changes likely cannot be achieved in a partisan fashion, so measures to encourage bipartisan Congressional action on these issues are potentially valuable.
• Unfortunately, the Wolf proposal undercuts the potential for bipartisanship by slanting the commission's membership toward Republicans and providing a fast-track procedure for Congressional consideration of the commission’s proposals, with only Republican amendments to the commission's plan being allowed.
• The language of the Wolf proposal heavily favors cuts in programs over revenue-raising measures. It is ideologically slanted in this regard instead of being ideologically neutral, further reducing the commission’s chances of achieving bipartisan success.
• The 1983 Greenspan commission, which was created and run on a strongly bipartisan and ideologically neutral basis, is the type of commission model to emulate.