The GOP majorities in both chambers of Congress have crafted their 2016 budget proposals, newly confident about fulfilling promises to cut spending, reduce taxes and shrink the government. Although inequality has reached Gilded Age levels, austerity continues to dominate their internal debates. Never mind that drastic spending cuts have harmed, not helped, the struggling economies of the eurozone, where mounting evidence eviscerates the theory that austerity can spur growth.
The latest tax reform proposal from Sens. Marco Rubio and Mike Lee is a full-blown version of supply-side economics, to the tune of $4 trillion in revenue loss over a decade that would have to be offset by spending cuts. The plan targets programs that benefit the poor the most: Medicaid and the Supplemental Nutrition Assistance Program (SNAP, or food stamps). On all sides and in both chambers, the Republicans appear determined to inflict more painful austerity on those who can least withstand it.
In the near term, the proposed cuts would hurt millions of poor people, a large share of them veterans, children and the elderly. Two other factors guarantee that the pain could get much worse over the next five years: the sequester caps on spending and a plan to convert Medicaid and SNAP into block grants to the states.
The sequester formula, enacted in 2011 by the Budget Control Act, mandates large reductions in discretionary spending over a decade. In 2013, Congress passed the Bipartisan Budget Act, negotiated by Sen. Patty Murray and Rep. Paul Ryan, which eased some damaging effects for 2014 and 2015. Unless another deal is struck, however, the harsh caps will return in 2016, with automatic reductions across the board. Bipartisan solutions are less likely than when the Democrats had a Senate majority. There is much pressure (some bipartisan) to remove only the caps on military spending, which would likely result in even greater cuts to nonmilitary spending. Even under the current formula, discretionary nonmilitary spending is set to fall over the next few years to lows not seen since the early 1960s. Those funds pay for much of the safety net, already much thinner than it used to be or needs to be.
The other worrisome feature of the Republican budget proposals involves turning over funding for Medicaid and SNAP to the states as block grants. Management of the programs and many decisions about services, benefits and eligibility would be handed over to state control.
“It’s just a better way to give flexibility on the ground, where people are at,” said Lindsey Graham, a member of the Senate Budget Committee. “The more you manage something far away, the more costly and less efficient it becomes.”
Efficiency and democracy — what isn’t to like about this arrangement? Plenty. As Ezra Klein pointed out at Vox recently, “The reality is block grants don’t save money. But they’re routinely used to hide the thing that does save money, which is fixed funding formulas that require huge spending cuts.” The proposed amount for these block grants would increase yearly, based on inflation and population growth, rather than need, which drives the current formula. The Republicans claim this transition would save $700 billion over a decade.
The Center on Budget and Policy Priorities estimates that the new approach would result in severe reductions in Medicaid spending despite expected increases in demand and costs, causing deteriorating health care for millions of low-income families.
As for the SNAP cuts, the Congressional Budget Office has not estimated their effects but points out that the proposed 15-percent spending reduction would create hardship in states that are unable or unwilling to make up the difference. SNAP’s future as block grants would also depend on the formula used to increase allocations. If it is the same approach being proposed for Medicaid, there will be no provisions for emergency increases in response to local or national spikes in unemployment.
For some context on the risks to vital poverty programs, consider the 1996 overhaul of public welfare that created Temporary Assistance for Needy Families (TANF), which was similarly converted into a block grant. The federal TANF appropriation has remained at $16.5 billion for almost 20 years, regardless of changes in need, inflation and population growth. In 2008 unemployment skyrocketed, but the number of TANF recipients remained capped by the funding limit and the block-grant prerogatives of states.
Before TANF, in the milder recession of the early 1990s, the number of families receiving welfare increased sharply and then declined with recovery. After the 2008 disaster, there was virtually no change, despite large increases in income-eligible families. Caseloads actually declined in 2007 and 2008 because of lagging public revenues. During a period of extreme need, with a swell of families suffering from unemployment and eviction, public welfare was scant: The flat funding formula and variations in states willing or able to shoulder heavier costs resulted in a dearth of aid during a poverty crisis from which we are still suffering.
The response to recession was hugely different for SNAP benefits, which thus far have been funded according to need, with strong federal oversight. The number of food stamp recipients after 2008 rose steadily with the growth in unemployment; the number of recipients has continued to grow in spite of improved employment rates because wages have remained flat and low.
The Republican consensus on deep cuts to domestic spending is ominous for the future of the social safety net. For Senate Republicans, Social Security and Medicare are off the table for now, but it’s just because they’re leery about stepping on that third rail until after elections in 2016. By contrast, the House leadership apparently is willing to go all in right now. Ryan, now chairman of the House Ways and Means Committee, has a plan to transform Medicare into a voucher program (and successively raise the age of eligibility) and to effectively privatize Social Security. Tom Price, the new chairman of the House Budget Committee, has promised big changes for Social Security. In the end, the current proposals for SNAP and Medicaid may be merely a prelude to a larger Republican plan to demolish the New Deal and Great Society programs.