Don't Cause Harm to Low-Income Americans: Letter to the Deficit Commission

Sep 18, 2010

See the PDF Version with the 119 Major Organization Signers

September 14, 2010

To Members of the National Commission on Fiscal Responsibility and Reform:

We are writing to urge the Commission to take special care not to cause harm to America’s low- and moderate-income households in formulating its recommendations this year. In particular, we ask that:

1) The Commission adopt as a basic principle that its proposals should not make lower-income individuals and families worse off. The Commission’s recommendations should not harm those who already have difficulty getting by. Its proposals should not push people into poverty or make those who are already poor still poorer.

2) To aid it in meeting this goal, the Commission should assure that it obtains and makes public in a timely way a distributional analysis (e.g., by income deciles or quintiles) of the impact of the proposals that it considers. Understanding and making transparent how different paths would affect different income groups is an essential means of determining fairness in who bears the burdens of changes in spending and tax policy.

Even before the recession, low- and moderate-income people in our nation had been largely shut out from the benefits of the nation’s economic growth for two generations. From 1979 to 2006, the average after-tax income of the bottom fifth of the population rose only 11 percent over 27 years, from $14,900 to $16,500, in inflation-adjusted 2006 dollars, according to the Congressional Budget Office. This includes non-cash income like food stamps, housing assistance, and refundable tax credits. The average income of the second fifth rose a modest 18 percent, to $35,400 — still well under 1 percent per year. In contrast, the average income of the top fifth rose 86 percent, from $98,900 to $184,400 during this period, and the average income of the top 1 percent increased 256 percent, from $337,100 to $1.2 million.

Moreover, during the last economic recovery, from 2001 to 2007, poverty actually increased and the median income of working-age households declined, even as income at the top of the income scale continued to rise.

In other words, after nearly three decades of overall economic growth, America saw only very weak gains for the bottom two-fifths of the population and substantially widened gaps between the top and bottom of our society. Income stagnation and rising inequality have left lower-income households bearing a heavy cost.

Reducing public supports for this population would be unwarranted. This population has borne an undue share of the pain of the economic and political transformations of the last several decades, not to mention the deep recession from which the country is only beginning to emerge.

Reducing the federal deficit is a means to an end — the strongest possible economic future for the nation. Under-investing in low- and moderate-income children and adults would not be consistent with that goal. Indeed, smart and more adequate investments for them could help strengthen the economy and the nation.

We believe that an explicit goal to protect the most vulnerable in our nation, together with impact analyses to ensure the goal is being met, will assist the Commission in producing recommendations that can put the nation on a sustainable fiscal course without harm to those who have no margin to sacrifice more.