Off the Charts Blog | Center on Budget and Policy Priorities

Congress’ vote to allow the Federal Aviation Administration (FAA) to shift funds away from other areas to pay air traffic controllers has revived questions about whether this approach can solve the many other problems associated with the sequestration budget cuts.

It can’t.

Shifting funds from airport infrastructure upgrades to day-to-day operations is not a “free lunch” — it reduces funding for construction and renovation projects, though the impact likely won’t be felt this year.

Moreover, most departments don’t have large resources to redirect without causing significant near-term harm.

Take, for example, the Department of Health and Human Services (HHS).  Many have decried cuts in the National Institutes of Health, Head Start, and seniors programs (such as meals on wheels and other supports that help frail seniors live in the community), all of which are within HHS.

These three areas together comprise half of all discretionary funding within HHS.  Suppose Congress gave HHS the flexibility to shift funds to undo sequestration in these areas.  If HHS used that authority to shield these areas from reductions, the cuts in all other HHS programs would have to roughly double, on average.

That means doubling the cuts in areas such as food and drug safety, disease prevention, child care and energy assistance for low-income families, mental health and substance abuse treatment, the Indian Health Service, community health centers, and HIV/AIDS treatment.

The cuts would have real-life, short-run consequences — less health care for Native Americans, longer waiting lists for life-saving HIV drugs and for child care assistance, and less help for low-income families and seniors to pay their energy bills.

Or take the Education Department.  The vast majority of its discretionary funding that faces sequestration goes to states and localities to fund public schools.  Giving the department more flexibility without additional resources wouldn’t protect school districts from cuts.

Simply put, there aren’t secret pots of gold within federal departments that can painlessly replace sequestration.  Policymakers should replace sequestration with a balanced mix of spending cuts and tax increases that protect important public services and the still struggling economy.

Responding to highly publicized flight delays from the “sequestration” budget cuts, the House and Senate have voted overwhelmingly to allow the Transportation Department to shift some airport infrastructure funding to pay air traffic controllers.  To be sure, delays in air travel inconvenience travelers and harm the economy.  But many other sequestration-related cuts that receive much less attention are far more damaging.

That’s why policymakers need to address sequestration as a whole, replacing it with a balanced mix of responsible spending cuts and new revenues, rather than adopt a piecemeal approach that only gets the issue off the front pages.

The many other people facing hardships because of sequestration include:

• Jobless workers losing unemployment benefits. Sequestration requires every state to cut benefits for the long-term unemployed.  So far, roughly 800,000 workers in 19 states have seen their benefits cut by a little more than 10 percent — or about $120 a month, on average.  When all states implement these cuts, they will affect as many as 3.8 million jobless workers.

• Children losing Head Start. Head Start serves about 1 million disadvantaged children across the country.  Already, some Head Start programs are cutting their programs for the current school year — dropping children from the program, ending the school year several weeks early, or cutting services such as bus transportation.  These cuts can leave families scrambling to find alternatives for their children.  The Associated Press reports, for example:

  At least two Indiana Head Start programs have resorted to a random drawing to determine which three-dozen preschool students will be removed from the education program for low-income families, a move officials said was necessary to limit the impact of mandatory across-the-board federal spending cuts.

  Other programs will reduce enrollment or make other cuts in their programs in the coming school year that starts in September.  For example, a Head Start program in Missouri just announced that nearly 200 fewer children would be enrolled next fall.

• Seniors losing Meals on Wheels. Some seniors programs in various states are cutting the number of home-delivered meals provided or seniors served.  In central Maine, for example, the agency on aging has started a waiting list for seniors and cut the number of weekly visits to seniors receiving meals from two to one.

• Low-income families, seniors, and people with disabilities losing housing assistance. CBPP estimates that 140,000 fewer households will receive vouchers to help them afford decent housing. 

What’s fundamentally wrong with sequestration is that the resulting funding levels are too low to meet government’s everyday operating expenses and invest in key areas — like infrastructure and education — that are important for economic growth.  In addition to the above cuts, local law enforcement, medical research, K-12 education, environmental protection, and many other areas also face cuts that will affect communities across the country.

The impacts of these cuts may be less obvious than cancelled or delayed flights, and many of the cuts will affect people with relatively little political clout, like low-income families.  But they, too, deserve policymakers’ attention.

House Budget Committee Chairman Paul Ryan says the safety net doesn’t do enough to promote work, but his budget — which gets nearly two-thirds of its $5 trillion in non-defense cuts from low- and moderate-income programs — proposes deep cuts in the very programs that help low-income working families make ends meet, raise their families, and provide better opportunities for their children.

As our new paper explains, the Ryan budget would:

• Allow important improvements in refundable tax credits to expire and potentially layer further cuts on top. Numerous studies have shown that the Earned Income Tax Credit (EITC), by “making work pay,” has raised employment rates, particularly among single mothers, and reduced welfare receipt.  January’s American Taxpayer Relief Act extended important improvements to the EITC and the Child Tax Credit (another tax credit available only to low- and moderate-income working families) through 2017. 

  The Ryan budget lets these improvements expire in 2018.The Ryan budget also requires hundreds of billions of dollars of unspecified cuts in the part of the budget that includes these refundable tax credits.  To meet this target, Congress likely would cut the refundable credits substantially.

• Add millions to the ranks of the uninsured. The Ryan budget repeals health reform’s coverage expansions and adds large cuts in Medicaid (and the Children’s Health Insurance Program) on top, greatly increasing the number of uninsured low- and moderate-income Americans.  Most of those affected would be in working households.

  These proposals would also increase work disincentives for some poor workers.  For example, working-poor parents in the typical state lose Medicaid eligibility when their earnings reach just 61 percent of the poverty line, or $11,900 for a family of three.  Under health reform, a parent who raises her earnings above this level could receive either continued Medicaid coverage (assuming the state takes up health reform’s Medicaid expansion) or subsidies to buy private coverage through an insurance exchange.  Under the Ryan budget, if she raises her income even to just $12,000, she would lose access to coverage in many states.

• Cut SNAP (food stamps) by nearly one-fifth. The Ryan budget converts SNAP to a block grant starting in 2019 and cuts funding dramatically.  If states absorbed the cut solely by restricting eligibility, they would need to drop 12 million to 13 million people from the program.  If they absorbed the cut solely by shrinking benefits, the reduction would be more than $50 per person per month in 2019.  That benefit cut — $1,800 for a family of three over the course of a year — would lower the maximum SNAP benefit to just 73 percent of the Agriculture Department’s estimate of the minimum amount a family needs to afford a bare-bones, nutritionally adequate diet.

  SNAP helps some 6.4 million working households afford food.  Given the depth of the cuts that states would have to make, it is a safe bet that millions of people in low-income working households would lose some or all SNAP benefits.

• Cut grants that help low- and moderate-income students afford college. The Ryan budget freezes the maximum Pell Grant award for ten years, proposes eligibility cuts that would make it harder for low-income students to qualify for the maximum grant, and makes deep cuts in Pell funding (see our paper for details).  These changes would result in many fewer students having access to grants and in smaller grants for those who do — limiting access to college, a key gateway into the middle class, for many low- and moderate-income students.  Once again, most of the students affected would be in working families.

Some skeptics have downplayed the impact of impending across-the-board budget cuts known as sequestration, arguing that federal spending will remain high and growing even if the cuts take effect Friday as scheduled.

In fact, sequestration will have a real impact on Americans across the country.  There is no way to cut $85 billion in a single year, mainly from discretionary programs — which include most defense spending as well as medical research, education, help for low-income families, food and water safety, law enforcement, and so on — and not see real impacts.  That’s especially true because sequestration would come on top of the large cuts in discretionary funding that are already in place under the 2011 Budget Control Act (BCA).  Taken together, the BCA cuts and sequestration would cut discretionary spending 14 percent below the 2010 level in inflation-adjusted terms, as explained below.

Here are just a few examples of what would happen under sequestration:

• The roughly 3.8 million long-term unemployed workers receiving federally funded unemployment benefits will face nearly 11 percent cut in their weekly benefits, according to the Administration. This will translate into a cut of roughly $130 per month for jobless workers.
• As we explain in a new paper, the WIC nutrition program for low-income pregnant women, infants, and young children will have to turn away an estimated 600,000 to 775,000 women and children, including very young children, by the end of this fiscal year.

• We estimate that more than 100,000 low-income families will likely lose housing vouchers.

Sequestration’s impact in 2013 will be especially large in some program areas because it will happen so far into the fiscal year, which began last October 1.  Some agencies will have to cut their programs more deeply in the remaining months of the year to hit the required savings target.

Cuts could affect basic public services and investments in research that affect a broad swath of the public.  For example, cuts in the Social Security Administration would lead to staff reductions (or furloughs) that would create delays in helping people apply for benefits or resolving problems that arise with their benefits.  Cuts in the Transportation Security Agency, meanwhile, would mean staff cuts or furloughs of airport security workers, leading to longer lines at airports and slower travel.

Economy-wide, Congressional Budget Office director Douglas Elmendorf told Congress this week that sequestration would cut GDP growth this year by 0.6 percentage points (from 2.0 percent to 1.4 percent) and cost about 750,000 jobs by the fourth quarter of 2013.

Under the BCA cuts and sequestration combined, overall discretionary funding in 2013 would be 9 percent below the 2010 funding level without adjusting for inflation — and 14 percent below the 2010 level when inflation is taken into account. (see graph). (We use 2010 as the comparison because it’s the last year before policymakers began enacting significant deficit reduction.  If, however, sequestration takes effect, 2013 funding will be 6.8 percent below 2012 funding levels without taking inflation into account and somewhat more if the effects of inflation were included.)

If sequestration continues beyond 2013 as scheduled, by 2021 overall discretionary funding will be nearly 19 percent below the 2010 funding level, adjusted for inflation.

Rather than let sequestration take effect, policymakers should replace it with a balanced package of tax and spending measures that do not increase poverty or inequality or exert such a sharp, immediate drag on the recovery.

“Under the current administration, we have . . . seen an explosion in the spending for welfare programs,” House Majority Leader Eric Cantor claimed in support of a new, House-passed rule requiring the annual budget resolution to detail past and projected growth of entitlement programs and propose reforms to them.  The rule will “allow us to begin to responsibly control the growth of these welfare programs and ensure they can help those who need them most,” he argued.

But, Rep. Cantor’s statement ignores two key facts:

• First, safety net programs are not a primary cause of the nation’s long-term budget problems. Almost all of the recent growth in low-income entitlement programs is due either to the recent recession — and is therefore temporary — or to rising costs throughout the U.S. health care system, which affect costs for both private insurance and public health programs like Medicaid.

• Second, federal spending on low-income entitlement programs other than health care will shrink significantly as a share of the economy after 2013 (see graph), according to the Congressional Budget Office (CBO).

To be sure, Medicaid is projected to continue growing as a share of the economy, as costs continue to rise across the public and private health care sectors.  But Medicaid isn’t the cause of this system-wide cost growth.  In fact, per-beneficiary costs have risen more slowly in Medicaid than in private insurance and are expected to continue doing so.

Ultimately, we will need to find ways to reduce health care cost growth in both the public and private sectors.  Cost growth has slowed in the past few years, though it is unclear whether the change is temporary or here to stay.  Thanks to health reform, however, we are testing new ways to deliver health care designed to lower costs while improving the quality of care that could help slow costs throughout the U.S. health care system over the long run.

The new House rule requires the budget resolution to track growth over the previous decade and the projected growth in the years covered by the budget resolution (often a decade) of two groups of entitlement programs:  those focused on low-income people, such as SNAP and Medicaid, and those not just focused on low-income people, such as Medicare and Social Security.

The rule may obscure more than it illuminates:  CBO projects that low-income entitlements including health care will grow both in inflation-adjusted dollars and as a share of the economy in coming years; but if you remove health care costs, the picture is entirely different, with low-income entitlements outside health care falling over the next decade as a share of the economy and in inflation-adjusted terms.

If the data that the new House rule requires obfuscate this fact, then the rule could be misused to bolster the false claim that low-income entitlement programs are out of control.