Don’t let poor and middle class bear burden of deficit reduction

Cleveland Plain Dealer - November 19, 2011

by Wendy Patton

Income inequality in America is growing. Between 1940 and 1979, U.S. income grew (in real dollars) by enough for every American to earn $28,749 more. The richest 10 percent got about a quarter (28 percent) of that, and the bottom 90 percent shared the rest. In stark contrast, between 1979 and 2008, U.S. income grew (in real dollars) such that it could have provided a $10,401 boost to each American — but every penny went to the richest 10 percent. Income for the bottom 90 percent actually declined.

Keep these figures in mind as you watch our elected officials in Washington grapple with the federal budget deficit. Many state and local programs reduce inequality and help middle- and low-income families at key points in our lives.

For example, Social Security, Medicare and Medicaid help millions of elderly and disabled Ohioans pay the mortgage or rent and the clinic bills. Federal programs help hundreds of thousands of Ohio’s children get off to a good start — more than half the infants born here in 2010 were eligible for nutrition assistance under the Women, Infants and Children (WIC) program. More than half of those WIC families were employed — at low-wage jobs, at part-time jobs, the new jobs of post-recession Ohio.

Safety net programs are there when people fall on hard times. In this troubled economy, when many have lost jobs and health insurance, safety net programs reduce the strain for struggling families. Food-stamp use in our state grew by more than a third (36.8 percent) between fiscal year 2009 and fiscal year 2011. Medicaid eligibility is up by 15.5 percent. Hard times have lingered here in Ohio, even after the “official” end of the Great Recession in June 2009.

Federal support is critical to Ohio’s ability to provide for people in hard times. At the state level, more than a quarter of Ohio’s budget comes from the federal government. Agencies that provide health and human services rely even more on federal dollars. For example, 74 percent of all funds appropriated for the Ohio Department of Alcohol and Drug Addiction Services are derived from federal sources. In the Department of Aging, the share is 82 percent.

Right now, a committee made up of 12 members of Congress, including Ohio’s Sen. Rob Portman, is working to find $1.5 trillion in savings from the federal budget over 10 years. Congress already agreed to slice nearly $1 trillion from federal spending over the next decade. Many of these cuts will come from programs that affect mainly middle- and lower-income Americans.

Within the past two weeks, the Republicans and Democrats on the Joint Committee exchanged deficit-reduction proposals. The Democrats proposed to reduce the deficit by $4 trillion over 10 years, while the Republican plan saved $3 trillion.

The main difference between the two offers is revenues. The Democrats proposed increasing revenues by $1.3 trillion. The Republicans proposed only $40 billion.

We have a revenue problem. Effective federal income tax rates for America’s top earners have fallen significantly, from 30 percent in 1995 to 18 percent in 2008. Tax cuts are a major reason for the growth in federal deficits, since the budget was last in balance at the end of the Clinton administration. Yet half of the Joint Committee refuses to even discuss restoring tax rates on top earners to the levels of the economically healthy 1990s, or closing even egregious loopholes.

Sen. Portman should take heed. Wages have dropped further in Ohio than in any other state. Cincinnati and Cleveland are among the top 10 poorest big cities in the nation. The poverty of the cities is mirrored in rural counties. Yet unless he and his colleagues consider including revenues in their debt-reduction plan, the poor and middle class will bear the burden of deficit reduction, making income inequality worse and deepening poverty.

That’s heading in the wrong direction. The wealthy should be asked to step up to the plate. It’s time to return to an America where everyone contributes and everyone benefits.

Wendy Patton is the senior project director for Policy Matters Ohio.

Don’t let poor and middle class bear burden of deficit reduction

Print Friendly