Revised December 5, 2005

By Robert Greenstein, Sharon Parrott, and Isaac Shapiro

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Last night, the House of Representatives narrowly approved a budget reconciliation bill that makes cuts in a number of programs.  Information from the Congressional Budget Office shows that many of the cuts would hit low-income people directly and hard, and that these cuts were changed only marginally in the tweaking of the bill that occurred before it was brought to a vote.

The House bill’s provisions are especially troubling in light of recent economic trends.  Official government data show that poverty, income inequality, food insecurity, and health coverage all have worsened in the past few years.  The House approach would exacerbate these trends.

A More Balanced Approach is Available

The House could readily produce the same amount of savings without sharp cuts in assistance for low-income families, if it wished to do so.  For instance, the Medicare Payment Advisory Commission (MedPAC), Congress’ official advisory body on Medicare payments, has identified tens of billions of dollars in excessive payments by Medicare to managed care plans.  The Senate achieved substantial savings in this area in its reconciliation bill.  The House achieved none.  Similarly, the House did far less than the Senate to lower the prices that Medicaid pays for prescription drugs, because the House essentially shielded the pharmaceutical companies.

To save $50 billion over the next five years — the approximate effect of the House bill — the House could have curbed the excessive payments to managed care plans (as recommended by MedPAC), lowered the cost of prescription drugs under the Medicaid program (as the Senate did), and cancelled two tax cuts exclusively for high-income people that are scheduled to start taking effect on January 1.  These two new tax cuts will be on top of existing tax cuts that, the Urban Institute-Brookings Tax Policy Center reports, already are providing average tax cuts of $103,000 apiece to people who make over $1 million a year.  Washington Post and Newsweek columnist Robert J. Samuelson, among others, has called for repealing the two new tax cuts before they take effect.

Indeed, the savings just from canceling the two new cuts, which will provide no benefit to middle-class households but confer an average tax cut (when the new tax cuts are phased in fully) of an additional $19,000 a year to people making over $1 million a year, would be more than enough to replace all of the House bill’s cuts in assistance programs for low-income families and individuals.