SNAP Spending Has Started Falling

November 20, 2013 at 4:33 pm

Our new report has important news for House and Senate negotiators considering SNAP (food stamp) cuts as part of the Farm Bill:  recent government data show that SNAP spending, which doubled as a share of the economy (gross domestic product or GDP) in the wake of the Great Recession, fell as a share of GDP in fiscal year 2013, which ended September 30.  Moreover, CBPP projects that, in fiscal year 2014, SNAP spending will not only continue to decline as a share of GDP but will fall 5 percent in nominal (non-inflation-adjusted) terms, largely because of the expiration this month of the 2009 Recovery Act’s benefit increase.

And, as the economic recovery continues and fewer low-income people qualify for SNAP, the Congressional Budget Office (CBO) expects SNAP spending to fall further in future years, returning to its 1995 levels by 2019 (see graph).  Because SNAP isn’t projected to grow faster than the economy, it isn’t contributing to the nation’s long-term budget imbalance.

SNAP spending primarily reflects the number of participants and their average benefit:

  • Participation has leveled off. Consistent with patterns from previous recessions, the number of SNAP participants rose substantially between 2007 and 2011.  Caseloads leveled off in 2011 and 2012 and have remained essentially flat for the past year.  This is true across the nation: state data for recent months show small participation declines in about half the states and small increases in the other half.  As the economy improves, CBO expects the number of participants to fall by 2 to 5 percent each year over the next decade:  from 47.7 million in fiscal year 2013 to 47.6 million in 2014, 46.5 million in 2015, and 34.3 million by 2023.
  • Benefits have dropped. The expiration of the Recovery Act benefit increase cut SNAP benefits for all households by 7 percent, on average, or about $5 billion for fiscal year 2014.  In future years, SNAP benefits will simply keep pace with food price inflation.

Some critics have called for large cuts in SNAP — like the House-passed bill to cut a couple million people off the program — in part on the grounds that SNAP is growing out of control.  But these recent data show that that the spending growth has ended and that SNAP is following the pattern of previous recessions, as CBO and other experts expected.

States Can Reduce Kids’ Uninsured Rate Further by Expanding Medicaid

November 20, 2013 at 2:40 pm

The Georgetown University Center for Children and Families’ annual report on children’s health coverage, released today, brings welcome news:  the rate of children without health coverage fell for the fifth consecutive year, from 9.3 percent in 2008 to 7.2 percent in 2012 (see chart).

The report notes that state decisions whether to expand Medicaid under health reform, which would extend coverage to adults earning less than 133 percent of the federal poverty line ($25,975 for a family of three), will build on these gains in children’s coverage.  Here’s why:

Nearly 70 percent of the nation’s 5.3 million uninsured children are already eligible for Medicaid or the Children’s Health Insurance Program but are not enrolled, according to Georgetown’s researchers.  When states expand Medicaid for parents, the number of uninsured children falls, because parents are more likely to sign up their eligible children for coverage when the whole family can get coverage, research shows.  Research also finds that when parents have coverage, their children are less likely to experience breaks in coverage and are more likely to receive preventive care and other needed care.  As a result, making coverage available to more low-income parents through health reform’s Medicaid expansion should further reduce the ranks of uninsured children.

Twenty-five states and the District of Columbia already have decided to expand Medicaid next year.  As policymakers in Maine, New Hampshire, Pennsylvania, Tennessee, Virginia, and other states contemplate whether to expand their Medicaid programs, they should consider the positive impact that expansion will have on children’s health coverage and access to needed care.

A First Look at the Baucus Draft on International Corporate Tax Reform

November 20, 2013 at 12:00 pm

Yesterday’s staff discussion draft on international corporate tax reform from Senate Finance Committee Chair Max Baucus recognizes the importance of tax reform’s budgetary impact over the long term, not just in the first decade.  It also recognizes that the tax code gives multinational corporations an incentive to move profits and investment offshore, and it narrows or closes several ill-conceived and heavily exploited tax loopholes.  It is distinctly superior to various ideas that various corporate lobbying coalitions are circulating and to a draft proposal that House Ways and Means Committee chair Dave Camp circulated earlier this year.

At the same time, while the draft takes important steps to address the tilt in favor of foreign profits, it leaves some foreign profits on active business in a more favorable tax position than domestic investments and profits.

First, let’s consider the fiscal impact.  The Baucus draft states that it is “intended to be revenue-neutral in the long-term” (emphasis added).

On the one hand, the target of revenue neutrality is disappointing.  If international corporate tax reform is revenue neutral over the long term, any savings from closing loopholes that encourage multinationals to shift profits and investments offshore wouldn’t contribute to long-term deficit reduction.  Multinationals would make no contribution to that, even as others are asked (sooner or later) to sacrifice.

On the other hand, the draft lays down an important standard:  policymakers must measure tax reform’s fiscal effects over the long term, not just over the next ten years.  The draft calls, for example, for a one-time, 20 percent tax rate on corporate profits now held offshore (in part to avoid U.S. taxes), but it doesn’t use these one-time revenues to construct a tax plan that is revenue-neutral for the initial ten years but loses revenues over time.  The draft commendably avoids timing shifts and temporary revenues that can make a plan look fiscally responsible (when only the first ten years are considered) when, in fact, a plan might be anything but responsible over the longer run.

In addition, the draft wisely doesn’t adopt a cartoon version of “territorial taxation,” in which multinationals would pay little or no taxes on overseas profits.  It includes some important provisions to address some of the most egregious loopholes and to reduce incentives for corporations to shift manufacturing offshore.  Importantly, it proposes an effective tax rate floor — that is, a minimum tax — on U.S. multinationals that currently pursue the most aggressive tax avoidance strategies.  That will help address the current lopsided tilt toward foreign investments and profits.

Still, the draft does not fully correct for that tilt.  That’s because the draft still allows some foreign profits to be taxed at a discounted tax rate compared to domestic profits.  Some foreign profits would be taxed at either 60 percent or 80 percent of the U.S. corporate tax rate — a proposition that surely would prove difficult for any average U.S. taxpayer to understand.

Congress Must Not Break 40-Year Commitment to Let WIC Provide Most Nutritious Food

November 20, 2013 at 10:32 am

The potato industry and several senators are pressuring congressional negotiators on the farm bill to break a 40-year commitment that has ensured that foods provided by the WIC program reflect the best advice of nutrition scientists.  They want to require WIC to allow the low-income women and young children who participate to purchase white potatoes with their WIC benefits, which would crowd out purchases of vegetables they don’t get enough of.

The House farm bill calls for a study of the benefits of white potatoes.  But the industry and some senators want to go further.  The provision that they hope to add to the farm bill in conference to mandate that WIC offer white potatoes — even though such a provision is in neither the Senate nor House bills — would mark a deeply misguided precedent for WIC.

The WIC program serves close to 9 million low-income pregnant and postpartum women, infants, and young children who are at nutritional risk, and it is widely regarded as among the most successful of all federal programs.  Its success at markedly improving birth outcomes and participants’ nutrition and health is well documented.  WIC provides a “prescription food package” of items that are needed, but lacking, in the diets of its target population.  In WIC’s 40-year history, Congress has never intervened to require that WIC include, or exclude, any particular food item.

The foods provided by WIC — officially, the Special Supplemental Nutrition Program for Women, Infants, and Children — are based on the scientific judgment of the nation’s leading nutrition experts who have spent years reviewing the research on what nutrients needed for healthy births and child development are lacking in the diets of low-income women and young children.  The law already provides for another such review to be conducted in a couple of years.

Throughout the program’s history, members of Congress whose states or districts produce or process various food items have, in response to lobbying pressures, expressed interest in WIC food package decisions and urged WIC to include particular items produced in their states.  But Congress has held firm under Democratic and Republican majorities alike in the position that having lawmakers override the science — and mandate WIC food decisions on parochial political grounds, rather than letting the science prevail — would cross the line.

If this Congress violates that standard for the first time, there could be a cascading effect; it could open the door to more aggressive lobbying on WIC foods.  Various segments of the food industry would almost certainly seek to line up members of Congress to push their products, as well.  The integrity of the WIC food package — and the program’s high degree of effectiveness — could erode significantly over time.

In this case — the case of the white potato — the research clearly shows that the low-income women and children whom WIC serves already consume plenty of starchy vegetables, the most popular of which is the white potato, while under-consuming fruits and other vegetables.  If participants start using their WIC fruit and vegetable vouchers — which are for a modest fixed dollar amount of just $6 or $10 a month — to buy white potatoes, that would not only lead to more starch consumption but would leave less for foods that participants don’t eat enough of, such as dark green leafy vegetables.  If we are truly interested in the nutritional well-being of low-income children, this makes no sense.

Congress should not head down this road.  It should not bow to the pressure of lobbyists and break its 40-year commitment to apply the best science to WIC.  Congress should reject efforts to intervene in the foods that WIC provides and should place children’s well-being first and let the science prevail.

Replacing Sequestration With Equivalent Ten-Year Savings Makes Sense

November 20, 2013 at 9:00 am

Congressional budget negotiators are looking to replace some or all of the “sequestration” budget cuts for 2014 and perhaps 2015 with changes in mandatory programs, fees, or revenues that reduce program costs or raise fees and revenues over the next ten years.  There are good reasons to do so on a one-to-one basis — substituting every $1 of repealed sequestration cuts with $1 of ten-year savings from mandatory, fee, or revenue changes.

Some Republican policymakers, however, reportedly argue that each $1 in sequestration relief for 2014 or 2015 should be offset by more than $1 in entitlement, fee, and revenue savings over the 2014-2023 period.  Such a demand is excessive and unwarranted.

Here’s why replacing sequestration with equivalent ten-year savings makes sense:

First, measuring savings over ten years is standard practice.  The Congressional Budget Office examines the fiscal impact of most legislation over a ten-year period and, when Congress seeks to pay for policies, it typically uses a ten-year period as its litmus test.

Some may argue that replacing sequestration in the short term with savings in later years is unwise because the “out-year” savings are merely promises and may never materialize.  But, that’s incorrect:  the out-year savings would be the law of the land and would take effect unless policymakers undid them — which would require approval by the House, the Senate (probably with 60 votes), and the President.  This would prove extremely difficult because proponents of any legislation to undo these savings would surely face political pressure to find equivalent alternative savings.

Second, changes in revenue and entitlement law would typically be permanent.  Unlike the one or two years of sequestration cuts they would replace, permanent changes to revenue and entitlement law would continue to reduce deficits beyond ten years.  A package of permanent changes that produces $1 in entitlement, fee, or revenue savings over the first ten years for every $1 in short-term sequestration relief would, for example, generally produce $2 or more in savings for every $1 in sequestration relief if measured over 20 years.

For example, assume that negotiators replace $100 billion of sequestration cuts over the next two years (2014-2015) with changes in entitlements, fees, and revenues that save $100 billion from 2014 through 2023.  Over ten years, the entitlement cuts and increased fees and revenues would fully offset the additional $100 billion in program funding from easing sequestration in 2014 and 2015.  To the extent these changes were permanent, they would yield further savings every year after 2023, while the higher program funding provided in 2014 and 2015 would not continue beyond those years.

Over the long term, then, permanent savings would produce far more deficit reduction than continuing sequestration as currently in law.

Replacing short-term savings with savings in later years also provides economic advantages.  The recovery from the Great Recession remains anemic, and sequestration is a significant drag on job growth, as the Congressional Budget Office has reported.  Economically, it would be better to delay budget cuts to years when the economy will be stronger and better able to absorb them.

In addition, savings from permanent changes in mandatory programs and revenues would lower the budget deficit in the decades after 2023, when debt as a percent of the economy is projected to be higher and the need for deficit reduction will be greater.

Sequestration is harming important public services and essential government functions and creating unhelpful fiscal headwinds for our still-struggling economy — thereby costing hundreds of thousands of jobs.  Replacing the ill-targeted and ill-timed cuts scheduled for the next couple of years with smarter deficit reduction that shifts cuts to later years makes fiscal and economic sense.