Checking In: June Update

Jun 15, 2011

Checking In ... On Our Nation's Checkbook

June 15, 2011

The Kitchen Table Conversation Continues

We have been sitting here at our kitchen table for months now, trying to get our nation’s budget and checkbook in order. We’ve got the problem figured out: we spent way more than we took in over the past several years. So the solution is pretty clear now: spend less and bring in enough income to cover what we actually need.

As we looked more closely at spending and income patterns, we’ve noticed two things:

  1. There was a big jump in spending on all that “security hardware” – we’ve talked about that before, but now we see just how much it is costing us.

    According to our accountants (see Table 4.1), our Pentagon budget has doubled since 2001!
  2. Not everybody in the household is paying a fair share toward what we really need. The breadwinners in our house are contributing about 19 percent of their earnings and they work pretty hard to be able to make that contribution.

    But Cousin Charlie, who has been living with us and relying on the basic support we provide, has done very well for himself, even during the recession. He makes about four times as much as we do, but he contributes only about 22 percent of his much larger income. So while we’re trying to make ends meet, including supporting his basic infrastructure needs, he’s driving that fancy car and taking a lot of vacations. If he would contribute a fairer share of his income, our checkbook would look a lot more balanced!

Those of us laboring at the kitchen table have just over a month to get our finances settled or our nation’s credit rating will be severely damaged. But fortunately, we have a plan.

Here’s Our Plan:

◊ Cut Military Spending

We’ll take the advice of the bi-partisan group that has been advising Congress on military spending. That plan will cut about $960 billion from U.S. military spending over the next 10 years.

◊ Make Other Smart Spending Cuts

We’ll also find other ways to cut that won’t harm the economy or our chances to recover from the effects of the recession. We can save billions over the next five years by making cuts like the following:

  • Discontinue production of obsolete spare parts and supplies for the Pentagon: saves us $184.5 billion.
  • Reduce high-risk contracts and improve contract oversight: $200 billion in the bank.
  • Eliminate gas and oil subsidies: more than $19 billion saved.
  • Collect duplicate payments to contractors: $340 million in savings.
  • And more.

We won’t cut into our basic needs: We need nutritious food on the table, a decent house to live in, good schools for the children, energy resources for cooling and heating (and other important things), transportation, local and state governments that can function, and health care. We have to have enough income for all of that.

We need our government to be paying attention to the environment and helping us counter or slow down climate change, including investing in “green jobs.” Lots of people used to make cars in Michigan, but that industry has slowed way down. Many of them haven’t worked in so long that their unemployment payments are being cut off, and yet there are no new jobs to support new kinds of energy systems. Our government needs enough income to invest in the health of the environment and economy.

◊ Increase Revenue by Collecting a Fair Share from Wealthy Corporations and Millionaires

According to the Center on Budget and Policy Priorities, large corporations are not paying their fair share of taxes. Tax revenue received from corporations is at an historic low in the U.S. Although the corporate tax rate is 35 percent, a U.S. Treasury report shows an average effective tax rate (the amount actually paid after all deductions and credits, i.e. “loopholes”) is only 13.4 percent. Corporations in other developed nations pay an average of 16.1 percent.

Wealthy individuals are also paying less than their fair share of taxes. The effective tax rate in the U.S. generally is the lowest among developed countries, except for Australia. The effective tax rate on millionaires, and especially on the 400 wealthiest individuals in the U.S., are at all-time low, and are costing the rest of us billions of dollars.

Tell Congress: Continuing tax cuts that were adopted during the last recession (2001 and 2003) to the richest individuals and corporations is costing the rest of us billions of dollars. Please end those tax cuts for millionaires and close tax loopholes that allow major corporations to pay less than half of the corporate tax rate that is actually in the law.

What is Congress Working on Right Now?

Hunger Programs vs. Agriculture Subsidies: The House Appropriations Committee has finished its work on 2012 Recommendations on farm, rural and hunger programs; the House will vote very soon. This bill would cut deeply into the WIC program (the supplemental nutrition program for low-income nursing mothers, infants and small children). It also cuts funding for the commodities programs that supply food banks and Meals on Wheels for elders who have a tough time getting out of their homes to shop and don’t have enough money to buy what they need.

The bill does cut some funds from direct agricultural subsidies. Although these direct payments benefit some small farmers, 74% of the subsidies paid out between 1995 and 2009 went to the largest 10 percent of agri-business companies.

Tell Congress: If you want to cut redundancy and waste, cut the benefits that go primarily the largest agri-business corporations that don’t need taxpayer subsidies. The last thing you should cut should be nutritious food for pregnant women, nursing mothers, small children, and frail elders.

How do the cuts in hunger programs compare to the tax breaks to millionaires? Check out this chart from the Center for American Progress:

budget chart

Housing – Pulling the Floor Out from Under Low-Income Families: In 2008, Congress established the National Housing Trust Fund to help primarily low-income families find affordable housing. The fund is primarily for the benefit of very low-income households – 75 percent of the funds must create or support rental units for these families. Other funds can support low and moderate income rental development and assistance to first time home-buyers.

The fund was to be financed by small percentage transfers from the housing finance agencies (Fannie Mae and Freddie Mac). Then the recession hit, and housing finance agencies went into receivership. Since then, the administration has tried to find ways to set aside money for the National Housing Trust Fund. There’s a billion dollars in the FY2012 budget for this fund; the House is now entertaining legislation to wipe it out, saying that is nothing more than “a slush fund for special interest housing groups.”

Tell Congress: Support stable funding to create stable housing for very low income families – support the funds for the National Housing Trust Fund.

Health Care: Health care wouldn’t cost nearly so much if the government could coordinate a nationwide system, but Congress hasn’t yet agreed to that, so the high cost of health insurance is something we have to factor in to our budget. Two programs are the focus of budget cutters: Medicare and Medicaid.

Medicare provides health insurance to elders generally; Medicaid provides nursing home care for frail elderly, co-payments for very low-income elderly, and general health insurance for low income families and children.

Tell Congress: The people who need to rely on our health care programs are, by definition, vulnerable. Please think about the consequences of limiting or ending health care coverage for elders, and low-income children and families. We need to provide enough revenue to carry out this commitment to the most vulnerable among us.

Military Spending: Now There’s a Place to Look for Savings

There are lots of reasons to rein in military spending. More people are interested in cutting military spending than there have been in many years. Moderates and conservatives of both parties have joined the call for specific and significant cuts in the military budget. All members of Congress need to hear support from home – from you - for these cuts as well.

Tell Congress: Now is the time to take a hard look at military spending. We encourage you to review the recommendations of the bipartisan Sustainable Defense Task Force which lists specific ways to cut military spending, adding up to almost $1 trillion savings in 10 years, and to find significant savings in the Pentagon budget over the next 10 years.

Additional Resources:

Communications Packet: Budget advocacy tips and tools (6/9/11)
A national map featuring stories about the importance of various federally funded programs. Tell your story!
Health care: State-by-State Changes in Medicaid Financing (Kaiser Family Foundation, May 2011).
A short video on health care reform: “Will Health Reform Reduce the Federal Deficit?
Federal aid to states: National Priorities Project: Federal Aid to States - Select Programs
Webinar: Stop the Slashing -- Watch It. Presentation Slides. (6/7/11)
American Jobs Plan: A Five-Point Plan to Stem the U.S. Jobs Crisis (Economic Policy Institute)
Hunger: SNAP/Food Stamp Benefit Reductions by State (Center on Budget and Policy Priorities, April 2011)

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