Off the Charts Blog | Center on Budget and Policy Priorities

Here are three things to keep in mind in examining the official figures on poverty in 2009, which the Census Bureau will release on Thursday:

1.  Poverty may increase by a record amount in 2009. Both the number and percentage of Americans in poverty could show record one-year increases, in data that go back to 1959.  (The existing records are increases of 3.2 million and 1.3 percentage points, both in 1980.).

The expected large increase reflects the recession and the unusually high degree of long-term unemployment.  Between the start of 2008 and the end of 2009, the number of jobs fell by over 8 million.  Further, by late 2009, the proportion of unemployed workers who had been out of work for more than six months topped 40 percent, another record.  The longer people are out of work, the more likely they are to fall into poverty.

Even worse, the current economic downturn follows an economic recovery that was the first on record in which poverty was higher — and median income for working-age households lower — at the peak of the recovery (2007) than in the previous recession (2001).

2.  Thursday’s figures will omit the impact of large parts of the 2009 Recovery Act. The Census Bureau’s official poverty data account for the cash income that households receive, including unemployment benefits for jobless workers, but they leave out any assistance that families receive in the form of tax credits or non-cash benefits.  So Thursday’s data won’t show the poverty-reducing impact of tens of billions of dollars’ worth of Recovery Act tax credits for low-income working families (such as the new Making Work Pay Credit) and expanded food stamp benefits.

3.  Poverty will likely rise even higher next year if recovery provisions are allowed to expire. Forecasters generally expect unemployment to remain high through 2011, and poverty will likely remain high even longer than unemployment does.  In each of the last three recessions, the poverty rate did not begin to decline until a year after the annual unemployment rate started to fall.

Many pieces of the Recovery Act aimed at low- and moderate-income households are scheduled to expire soon.  If Congress fails to act, extra weeks of unemployment benefits for the long-term unemployed will expire on November 30, the TANF Emergency Fund jobs program will expire on September 30, and the expanded Child Tax Credit for working families will expire after 2010.  If these measures do not continue, poverty — particularly as measured by an expanded poverty measure the Census Bureau will issue this fall, which includes tax credits and non-cash benefits — will likely go up in 2011.

On Thursday, we’ll post an analysis of the new data.

Since last October, the Office of the Actuary at the Centers for Medicare & Medicaid Services has issued several projections of national health spending under various versions of health reform legislation, the most recent of which came out last Thursday.  Each time, health-reform critics have contended that the projections show that health reform won’t slow the growth of health care costs.  And each time (see here, here, and here), we have explained why the critics are wrong.  So here we go again.

As we and others have made clear, health reform will increase national health spending at first, because it greatly expands coverage and insured people receive more health care than uninsured ones.  In its new report, the actuary’s office estimates that the Affordable Care Act will reduce the number of uninsured Americans by 32.5 million by 2019.  The increase in total health spending, however, is very small — only 0.3 percent of gross domestic product in 2019.

More important, health reform aims to slow the growth rate of health costs, generating savings that will grow over time.  The new projections confirm that the Affordable Care Act will modestly reduce the rate of growth of national health expenditures over the 2014-2019 period.  The actuary’s projections don’t extend beyond 2019, but the Congressional Budget Office estimates that, over the following decade, the federal government will spend less on health care than it would have without the new law.

The Senate will vote tomorrow on an amendment to small business legislation that would seriously weaken an essential element of the new health reform law — the requirement that individuals obtain health insurance or pay a penalty  — and eliminate preventive care funding aimed at reducing the onset of chronic diseases and improving overall health.

Sponsored by Senator Mike Johanns (R-NE), the amendment would repeal a provision of the health reform law designed to improve businesses’ compliance with the tax laws.  Repeal would cost $17.1 billion over the next ten years, the amount of additional revenue that would have been collected due to improved tax compliance.

To make up for this loss, the amendment would do two things.  First, it would eliminate all $11 billion in Affordable Care Act funding for the Prevention and Public Health Fund for fiscal years 2010-2017 — taking away critical investments that could help reduce the incidence of chronic illness and infectious disease, improve overall health, and reduce the cost of treating preventable medical problems.

Second, it would weaken health reform’s individual mandate, which is designed to lower the overall cost of coverage by encouraging healthy people (who cost less to insure) to enroll in coverage rather than wait until they get sick.  While the Affordable Health Act would allow some people to remain uninsured without incurring a penalty, the Johanns amendment would allow many more to do so, meaning that fewer people would receive federal subsidies to help them buy coverage.

This would reduce federal costs for these subsidies, but at the price of increasing the number of uninsured people by 2 million (relative to what would occur under the health reform law), driving up premiums by as much as 4 percent for people with coverage through the new health insurance exchanges (because the pool of people in the exchanges would be less healthy, on average), and raising the cost to health care providers and state and local governments of providing health care to the uninsured.

While critics have argued that the tax-compliance provision would create excessive paperwork for businesses, senators who want to modify it can do so without undermining health reform.  An alternative amendment from Senator Bill Nelson (D-FL), which the Senate will also consider on September 14, would scale back rather than eliminate the provision to ease the burden for small businesses and make up for the lost revenue by reducing tax subsidies for the largest oil companies.  That’s a much more sensible approach.

Analysts Mark Zandi, Peter Orszag, and Howard Gleckman have all said sensible things about what would be the best policy for dealing with the expiring Bush tax cuts (which include a panoply of “middle class” tax cuts as well as cuts in marginal tax rates for the richest 2 percent of taxpayers).  Unfortunately, their smart policy analysis has been lost in the headlines generated by their actual proposals, which are colored by their political judgment about what might be achievable in today’s fractious (and fractured) Congress.

Here’s some of the good stuff:

• Orszag: “Ideally only the middle-class tax cuts would be continued for now.”

• Zandi: “Some people [argue] that higher taxes on the wealthy could pay for additional economic stimulus — like a bigger job tax credit or resurrected 1930s-style work programs.  This view has theoretical merit — some of my own analysis has been used to support it.”

• Gleckman: “I wish Obama and Congress could agree on a brief extension of only those tax cuts that are most likely to boost the short-term economy.”

You would get a smart policy for addressing the current short-term jobs deficit and also make a down payment on the long-term budget deficit if you did the following:  Extend the middle-class tax cuts for a few years, let the top-rate cuts expire on schedule at the end of December, and use the revenue gains in the first year or so to pay for effective job-creating stimulus.  The middle-class tax cuts and the stimulus measures both would end once the economic recovery becomes more sure-footed.  The deficit reduction from ending the tax cuts would be permanent.

Apparently, Zandi, Orszag, and Gleckman don’t think such a policy could get enacted and have suggested compromises that include extending the high-income rate cuts.  We at CBPP have a different take.  We think that if Congress acts now to extend all of the tax cuts for two years, the political reality is that Congress very likely will continue extending all of them beyond that point — especially since the next Congress will likely contain many more tax-cut proponents than the current one and a crucial election will be coming up in 2012.

Admittedly, there’s a similar risk in extending the middle-class tax cuts:  policymakers may very well end up continuing them indefinitely.  This fact, however, underscores the importance of allowing the high-income tax cuts to expire at the end of this year and at least securing those budget savings.  That would be the right policy and would give us a fighting chance of keeping these tax cuts from coming back.  Unfortunately, we may be stuck with the high-income tax cuts for many years if we extend them and the middle-class tax cuts together for two years or a similar period of time.

This week on Off the Charts, we featured a quiz challenge, the looming debate on taxes and spending cuts, and housing affordability problems.

• Each day during our quiz challenge, we focused on one key issue facing Congress when lawmakers return next week.  Here they are: Day 1: The 2001 and 2003 Tax Cuts (answers here), Day 2: The Estate Tax (answers here), Day 3: Unemployment (answers here), and Day 4: Did Stimulus Work? (answers here). Do each quiz and tell us how many questions you answered correctly to receive a free Center on Budget and Policy Priorities T-shirt.
• On the tax vs. spending debate, Robert Greenstein responded to House Minority Leader John Boehner’s proposal to cut funding for discretionary (i.e., annually appropriated) programs other than defense, homeland security, and veterans and to extend all of President Bush’s tax cuts for two years, including those for the wealthiest Americans.  Chuck Marr answered questions about the future of the estate tax, outlining policy implications and potential paths for political action. Chuck also blogged about the high-income Bush tax cuts and why they should expire on schedule.
• On housing, Doug Rice explained how renting has in recent years become even more difficult for those living below the poverty line.

In other news, the Center released reports on “fairtax” proposals to replace state income and business taxes with expanded sales tax, the Boehner proposal to cut non-security discretionary programs 22 percent, and a podcast on the estate tax.  You can find it on iTunes here.