One-Sided Budget Proposals Threaten Women and Families, Shield Millionaires and Corporations

Congress is considering proposals to slash federal spending by imposing a cap on spending through legislation or a balanced budget amendment to the Constitution.  Though these measures do not identify specific cuts, they would force radical changes to programs that millions of women and families depend on.  At the same time, a cap only on the spending side of the budget ledger would do nothing to restrain tax cuts for wealthy individuals and corporations that add trillions of dollars to the deficit.

What is a global spending cap?  A global spending cap would limit total federal spending – including spending on entitlement programs like Medicaid, Medicare, and Social Security – to a fixed share of the Gross Domestic Product (GDP).  Current proposals call for capping spending at less than 21% of GDP within the next decade, a level that is unreasonably low in light of current needs and responsibilities.  For example, federal spending averaged 22 percent of GDP even during Reagan’s presidency – before the baby boomers had reached retirement age, swelling the population eligible for Social Security and Medicare, and when health care costs were much lower.¹  Under current proposals, if federal spending were projected to exceed the cap in a given fiscal year, the limit would be enforced through automatic cuts.  It would take a supermajority vote of all members of the House and Senate to approve spending above the cap.

How would a global spending cap affect women and families?  A global cap would require radical changes to Medicaid, Medicare, and Social Security.  Because these programs account for a very large share of the federal budget, they would be subject to tremendous automatic cuts if spending exceeded the cap.²  For example, under the proposal introduced by Senators Corker and McCaskill,³ if the reductions needed to reach a cap at 20.6 percent of GDP were achieved solely through the formula for automatic cuts, Social Security, Medicaid and Medicare would be cut annually by increasing amounts.  Across-the-board cuts would reach 19 percent in ten years.⁴

To avoid automatic across-the-board cuts, Congress would have to enact policy changes in specific programs that achieved similar reductions.  But the only policies capable of achieving the necessary savings are exactly the type of draconian measures proposed in the House Republican budget: converting Medicaid to a block grant with sharply decreased funding, replacing traditional Medicare with a voucher program, and slashing Social Security benefits.⁵  A cap would also force substantial cuts to other mandatory and discretionary programs, unraveling much of the safety net for millions of families in need.    

•        Medicaid.   Capping Medicaid – the federal and state program that provides health coverage for low-income elderly, people with disabilities, pregnant women, children and some parents and others – would arbitrarily limit federal Medicaid funds to the states, leading to a federal contribution that declines over time (relative to current law) even as health care costs or enrollment rises.⁶  As a result, states would be forced to cut people from the program, reduce covered health care services, cut already low reimbursement rates to providers, and/or increase costs for recipients.  This would affect  millions of women who rely on Medicaid, including half of all women with disabilities and more than 4.5 million older, low-income women on Medicare who rely on Medicaid to help cover the cost of their long term care services (such as nursing home stays) and out-of-pocket Medicare costs.

•        Medicare.  Cutting federal Medicare expenditures by replacing Medicare’s guaranteed benefits with a voucher to purchase private health insurance would force Medicare enrollees to pay substantially more for less coverage.  For example, under the plan in the House Republican budget, total out-of-pocket health care costs for a typical 65-year-old with Medicare would likely more than double (from $6,150 to $12,500) in the first year that the voucher program took effect.⁷  Women would be especially likely to find themselves underinsured and unable to afford supplemental coverage for needed services; they comprise a majority of seniors with Medicare, and are disproportionately likely to have incomes below 200 percent of the federal poverty level.⁸

•        Social Security.  Women would bear the brunt of Social Security benefit reductions, as they represent a large majority of beneficiaries and rely more heavily on income from Social Security than men do.  Current benefits for women 65 and older average just $12,000 per year yet provide most of their income.⁹  A 19 percent cut to the program could mean that an elderly woman receiving the average benefit would see her benefits drop to $9,720 per year in today’s dollars, well below the poverty line for a single person 65 and older ($10,458 in 2010).¹⁰

•        Affordable Care Act.  To comply with the cap, Congress would likely also have to repeal all or most of the Affordable Care Act’s provisions extending more affordable health coverage to an estimated 34 million Americans who otherwise would be uninsured.¹¹

•        Other mandatory programs.  Mandatory funding for other vital supports for low-income individuals and families – such as the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps), Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), and funds to boost Pell grant awards – would also be subject to steep cuts under a global cap.  Under the Corker-McCaskill proposal, across-the-board cuts to all of these programs would reach 19 percent in ten years if the reductions necessary to meet the cap were implemented automatically.  Again, the House Republican budget illustrates the harsh measures that would be necessary to approach cuts of that scope.  For example, the budget would cut SNAP by close to 20 percent over ten years and convert the program to a block grant, which could force families off the rolls and/or reduce their benefits by thousands of dollars per year.¹²

•         Discretionary programs.  Even with drastic cuts to Medicaid, Medicare, Social Security, and other mandatory programs, Congress would still likely need to make additional cuts to domestic discretionary (i.e., non-entitlement) programs to keep spending below a global cap.  These programs include child care, Head Start, K-12 education, much of the Pell grants program  job training, housing and energy assistance, family planning and other women’s health services, domestic violence services, and services for vulnerable children and elders..  Indeed, even the House Republican budget – which slashes spending for non-security discretionary programs by one-third between 2010 and 2021, in addition to its severe cuts to entitlement programs – would not cut deeply enough in some years to meet the spending level called for by some global cap proposals.¹³  

Separate caps on entitlements, total federal health spending, and multi-year caps on discretionary spending, which also have been suggested, could have effects similar to a global spending cap.

How would a global spending cap affect tax breaks for millionaires and corporations? Because a spending cap only applies to the spending side of the budget, it would not place any limit on tax cuts.  Congress would be free to enact costly tax breaks for millionaires and corporations while slashing programs for low- and moderate-income people (just as the House Republican budget proposes to do).  And cuts required by the cap could not be avoided by raising revenue, even if the added revenues fully paid for the additional spending, so Congress would have little incentive to take on the powerful special interests defending tax loopholes.  Because a spending cap does not restrain tax cuts – the policy that has contributed most to debt growth over the past decade¹⁴ – it would not necessarily reduce deficits.    

How would a global spending cap affect the economy?  A cap would prevent the government from responding to economic crises, such as the current recession.  Federal programs like unemployment insurance, food stamps, and Medicaid are specifically designed to allow enrollment to expand automatically during an economic downturn, when the need for these supports grows at the same time that GDP shrinks.  A global cap, however, would prevent these programs from expanding in recessions and restrain the government from taking additional measures to meet new demands – and would risk making a weak economy even worse. 

What about a balanced budget amendment?  Current balanced budget amendment proposals would write a global spending cap into the Constitution at even more restrictive levels than the Corker-McCaskill proposal, forcing even more extreme program cuts than those described above.¹⁵  In addition, the version of the amendment introduced by Senators Hatch and Lee (S.J. Res. 10), currently supported by all Republicans in the Senate, would tilt the scales even more towards program cuts by requiring a two-thirds vote in both the House and Senate to raise taxes in any way – making tax breaks for the rich and corporate special interests virtually untouchable. 

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Caps that apply only to the spending side of the budget are both unfair and fiscally irresponsible. Any budget enforcement mechanism or deficit reduction agreement must rely at least as much on revenue increases as on spending reductions.

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One-Sided Budget Proposals Threaten Women and Families, Shield Millionaires and Corporations