What Happens When the Poor Fall Over the Fiscal Cliff?

December 21, 2012 | Marketplace Radio |  Link to article

House Speaker John Boehner canceled last night's vote on his Plan B to avoid the fiscal cliff. Boehner didn't have the Republican votes to pass the proposed legislation, and with no plan C on the horizon before the holiday, we're edging closer to a freefall that will impact low-income Americans.  

People who have been out of work for a while, are the tip of the spear among those who will be impacted by the government's failure to come up with a budget.

"So, the biggest impact on the first day will really be for workers who are out of work and collecting unemployment benefits," says Sharon Parrott, the vice president for budget policy and economic opportunity at the Center on Budget and Policy Priorities. "Two million workers, at the end of December, would lose access to those extended benefits."

Elizabeth Lower-Basch, a senior analyst at CLASP, a nonprofit that promotes policies for low-income Americans, says if you're not getting extended unemployment insurance but you're poor, you'll feel the pinch gradually. She says spending will be cut by eight percent on government programs that help low-income Americans: job training programs, Head Start for pre-schoolers, and federal housing assistance.

"But again," says Lower-Basch, "it won't be all of the sudden that agencies are holding off on putting out contracts and spending money."

Another way the fiscal cliff could hurt poor families, says Parrott, is when certain tax credits aren't extended.

"A mother working full time at the minimum wage, raising two children could lose almost all of her $1,700 child tax credit," says Parrott, adding, that won't happen until later, when 2013 taxes are due.

"The biggest danger to low income Americans if we fall off the fiscal cliff is the risk of recession," says economist Nick Eberstadt, author of "A Nation of Takers: America's Entitlement Epidemic." Eberstadt says cuts to programs that help the poor will have a minor impact compared to the rise in unemployment, if Congress can't fix this.

All three experts agree that the real hurt from a tumble off the fiscal cliff will come long after Jan. 1st.

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