This Week in Poverty: Responses to the 'Cliff' Deal
January 04, 2013 | By Greg Kaufmann | The Nation | Link to article
My post today lacks any of my own writing because my kids-little walking Petri dishes that they are-passed along their latest bug as a New Year's gift.
Fortunately, I received many great, informed responses to my post on Wednesday regarding the "cliff" deal. They run the gamut-from strong agreement to politely telling me that I have no idea in hell what I'm talking about. This is exactly the kind of conversation that I hoped would occur when we launched This Week in Poverty almost one year ago to the day.
The people below have kindly agreed to let me post their comments. They were given the option to expand on the ideas they originally e-mailed to me-some did, some didn't. The opinions expressed are their own, and do not necessarily reflect the views of their respective organizations-titles and affiliations are for identification purposes only.
‘There is no way I would have agreed to this'
Greg, we can't afford any of the Bush tax cuts. It makes sense to keep those for the non-super-rich until the economy fully recovers, but if we want to help the poor, they all have to be phased out.
The Washington Post states: "...the Center on Budget and Policy Priorities shows how the Bush tax cuts are likely to continue be a major driver of federal budget deficits 20 years after they were first passed. With Congress raising taxes on the wealthy on Tuesday, the effect on deficits will be somewhat less-about $600 billion less than shown in this chart. Still, they will remain the largest component of deficits for the foreseeable future." In six years, when Republicans are again howling about deficits, will they be pushing for cutting programs for the poor or for raising taxes?
There is no way I would have agreed to this. I could have accepted a five-year limit on extending the new version of the Bush tax cuts, but making them permanent is a colossal mistake.
So, yes we have five years of some good low-income tax credits, but we are stuck with a permanent budget-buster that is 98 percent of the Bush tax cuts. And on top of those tax cuts there is whipped cream and a cherry for the rich (and in most places, $250,000+ is undeniably rich): "Dividend tax rates were permanently extended at the Bush-era levels; The estate tax was permanently set at levels far more generous to inherited wealth than before the Bush era tax cuts."
Again, who is going to pay for these permanent tax cuts? The poor will pay. If not now, in six years.
Director of the race, ethnicity and the economy program
Economic Policy Institute
‘Let's figure out how best to fight'
My take is similar to yours. There are some real wins in the bill that avoided the "cliff." Yes, we've got a big fight ahead in the next few months, with serious threats to programs that are critical to low-income people. But let's figure out how best to fight for them, rather than wringing our hands about how we're doomed.
As I wrote in my post for CLASP, "While we can breathe a sigh of relief over avoiding a drop off the cliff, there is no time to rest. We must let policymakers and opinion leaders know that it is unacceptable to reduce the deficit by targeting the most vulnerable and that it is outrageous to hold the entire economy hostage. In this season of resolutions, we must resolve to stand up for those whose voices are rarely heard."
Policy coordinator and senior policy analyst
Center for Law and Social Policy (CLASP)
‘Obama settled for too little'
Good point, to give credit where credit is due-to notice that the cliff deal will help the poor and near-poor get by. I wonder, though, when we'll ever get around to helping low-income people do more than stumble onward. Critics on the left feel that Obama settled for too little given the strength of his hand-that he missed an opportunity to do something special. That's how I feel, although I know it may be wishful thinking.
‘A good step forward for working poor families'
I totally agree. This year-end deal is a good step forward for working poor families. Now that there has begun to be a little balance of raising revenue to offset the tremendous cuts in domestic spending already made in earlier deals, the next deal should be based on $1 of additional revenue for every $1 of cuts. Additionally, the Pentagon is the best place to start looking for savings and not safety net programs that have already paid their fair share. A faithful budget has reasonable revenue for responsible programs.
SISTER SIMONE CAMPBELL
‘All low-income workers will see their incomes go down'
You are right to note that the fiscal "cliff" deal extends some important tax benefits for poorly compensated workers. But it's also worth noting the limited nature of these provisions, especially in light of previous commitments made by President Obama and what the deal concedes to the 1 percent.
In 2008, Barack Obama pledged to provide a refundable $500 tax credit to all low- and middle-income workers. A version of this Making Work Pay tax credit was included in the Recovery Act, but only for 2009 and 2010. According to the Tax Policy Institute, roughly 70 percent of tax filers with incomes below $40,000 received the credit.
By contrast, when viewed from a low-income, working-class perspective, the tax provisions you highlight-the ones that were truly at risk of being left out of a deal-are extremely modest.
There were only two EITC extensions in this deal that were truly at risk of being left out: (1) an increase in the EITC benefit for married couples (different-sex ones only) with incomes in the upper range of EITC eligibility (over roughly $17,000); and (2) an EITC increase for families with three or more children. According to the Tax Policy Center, only 2.6 percent of tax filers with incomes below $20,000 and about 9 percent of tax filers with incomes between $20,000-$40,000 will receive any benefits from these two ETIC extensions.
The only element of the Child Tax Credit truly at risk was a provision that allowed workers with earnings between $3,000 and around $13,000 to benefit from the credit. (Parents with earnings of less than $3,000 remain ineligible for the credit.) If this provision had not been extended, about 16 percent of tax filers with incomes below $20,000 would have lost an average tax benefit of $863 as a result.
Don't get me wrong, I'm glad these modest provisions were included. But we should be clear that they (1) reach narrow segments of workers, (2) except for the Child Tax Credit extension, provide very limited benefits to the most poorly compensated workers and (3), as you noted, are limited to only five years, unlike the permanent and much larger extension of tax benefits for the wealthy.
Finally, we need to remember this: all low-income working people will see their incomes go down in 2013 compared to 2012 because of the expiration of the payroll tax cut. Typical workers in poorly compensated jobs (like home health aides and cashiers) will bring home about $300-500 less this year as a result. An amount, by the way, equivalent to the Making Work Pay tax credit promised by Barack Obama in 2008.
Senior research associate
Center for Economic and Policy Research
‘Hard to balance long- and short-term goals on poverty alleviation'
I really appreciate this piece. It is very hard to balance the issue of long- and short-term goals on poverty alleviation. This is a less than perfect outcome, but it is important to recognize the critically important aspects of the safety net that were retained. Thanks for this.
Host of MSNBC's Melissa Harris-Perry
‘A blow to low-income families'
Greg, the two most important pieces of the 2001-2011 tax cuts for low-income families were the reduced refundability threshold of the Child Tax Credit (CTC) and the 2 percentage point cut in payroll taxes.
Extending the changes to the CTC were never a given, but it's a blow to low-income families to have all but the most important CTC provision extended permanently. In 2012, the reduced refundability thresholds for the CTC provided an average tax refund of almost $900 for families with children in the lowest 20 percent of the income distribution, and over $1,100 for families in the next 20 percent of the income distribution. By not extending this portion of the CTC changes permanently, this deal leaves this relatively large benefit vulnerable to future cuts.
The 2 percent reduction in payroll taxes was, no doubt, expensive and poorly targeted and raised concerns because it required financing a portion of Social Security from general revenues. However, the payroll tax holiday was rooted in a much more targeted tax credit, the Making Work Pay tax credit (MWP). A Tax Policy Center analysis showed that in 2011, MWP provided an average tax cut of almost $400 for people in the lowest income quintile (roughly double what the expiring payroll tax cut provided) and an almost identical benefit of $467 for people in the second income quintile-at roughly half the total bill of the payroll tax holiday.
Given the fragile economy low-income families continue to face, I had hopes something akin to MWP would be revived. Doing so would have kept taxes from rising on this still vulnerable population.
Senior research associate
The Tax Policy Center/The Urban Institute
‘There is reason to be fearful over the next set of deals'
I think your column and some others are right to note that lower-income Americans didn't lose a whole lot in this deal. No entitlements were cut, and the drastic domestic discretionary spending cuts of sequestration were delayed for two months. So really, the major immediate loss for low-income people was the payroll tax relief not being made permanent. That's significant, but it could have been much worse.
However, if you look at the broader situation, there is reason to be very fearful over the next set of deals-debt ceiling and sequestration.
The president's primary leverage on these issues was the expiration of the Bush tax cuts. Now that those have expired but largely been restored, generating less new revenue than progressives might have hoped for, the president may face Republicans determined to maintain the side of sequestration [cuts] that covers non-defense spending. Whether or not this occurs will likely depend on the outcome of a game of chicken. As we reach the debt limit, which side will blink? Will Republicans accept meaningful additional revenues or will Democrats, concerned over damage to the economy, cave to drastic spending cuts? And even under a deal that balances revenues and spending cuts, where will the spending cuts come from?
It seems likely that defense cuts will be spared-completely or at least largely, given the bipartisan congressional opposition to them that seems to have developed. This leaves non-defense domestic discretionary spending-a term that sounds technical but really is synonymous with "programs that help low income and middle class people" at real risk. Of course, entitlement cuts could be on the table instead, but those cuts are hardly better for low-income Americans.
National Law Center on Homelessness & Poverty
‘Fiscal cliff debate has once again [ignored] the poor'
Paul Krugman recently explained about the political and public understanding of the fiscal cliff: "It speaks to the state of confusion that all the deficit fearmongering has created. And if headline writers at a major newspaper can't get it straight, how can you expect ordinary voters to get it?"
Little has been said, however, about how the fiscal cliff debate has maintained the public gaze in the US on the middle class and the wealthy, once again ignoring the poor, the working poor and the working class. Your focus, then, is a valuable contribution now that a deal has been struck: "But I'm troubled by the lack of attention being paid to how this deal benefits the more than one in three Americans living below twice the poverty line."
Political and popular discourse in the US tends either to ignore the poor, the working poor and the working class or to characterize those at the bottom of the economic ladder as lazy or simply feeding off the wealthy-as perpetuated by Romney's "47 percent" comment.
Claiming equity of opportunity, the great American meritocracy, exists-which it doesn't-is quite different than seeking that meritocracy. Public policy and the discourse around that policy need to keep a central focus on the marginalized poor, at least along with concern about the middle class and affluent, as a harbinger for achieving the equity and opportunity Americans claim to honor.
PAUL THOMAS, EdD
Associate professor of education,
‘Chow some superfood and boneless wings and start the fight afresh'
Greg, you score some points with this one. But YOLO* (You Only Live Once), so here's an attempt to explain why the last-minute (actually, past the last minute) deal to avoid the so-called Fiscal Cliff* is nevertheless aggravating.
(*Spoiler alert: If we have to talk about this, it's satisfying to see how many of these annoying and recently banned words can be used to make the point that this bill isn't exactly terrific.)
It's unlikely anyone could be more passionate* about this topic than our guru*, Senator Tom Harkin, who explained why he voted NO on NPR.
It was rewarding to hear him express frustration about the bill's failure to address a key priority, job creation*; or as he more accurately puts it: "creating good jobs."
He also pointed out that while the income tax breaks for the wealthy are permanent, "The tax benefits...to help modest-income people, those are made temporary. To me, that just stands logic on its head."
Plus, the Senator noted, he didn't buy the trending* hype about a catastrophe. The markets and economy would have survived another couple weeks and we could have postponed spending cuts without giving away tax breaks. It's pure perception politics that the deal had to happen now.
Finally, Harkin warned that since Congress "kicked the can down the road"* on spending cuts and the debt ceiling, there's nothing left for the president to use as leverage in the next negotiation.
That means when the deadline comes again in a couple months, it's highly likely that we'll face cuts in important federal programs designed to strengthen our economy. And that the charitable deduction so important to communities will be at risk of harmful changes to raise revenue.
So what should we do now? Build broad public support for the policies that ensure jobs pay enough to meet the basics. Do better at sharing information to generate support for policies that create prosperity and a strong economy for us all.
Whatevs. I can concede the deal's not all bad. (UI especially!) Chow some superfood* and boneless wings* for energy and we'll start the fight afresh.
‘A positive step that avoided the worst of the austerity proposals'
As an attorney representing low-income people with disabilities, I agree with the premise of your column that this was a good deal for low-income Americans.
The latest budget deal did manage to avoid cuts that would be most harmful to the poor, unemployed, homeless and disabled. Although ending the payroll tax cut will reduce the net income of working people, the cut was unsustainable in that it did negatively impact the long-term solvency of the Social Security Trust Fund. While Social Security is solvent for years to come, and has contributed nothing toward the deficit or debt, it's important that any reforms to Social Security do not reduce benefits or endanger the long-term solvency of the program.
It was also a major victory that the budget deal did not include a switch to the chained CPI, which would have effectively been a benefit cut to the retired and disabled.
Although there is some concern that this deal might make the next deal worse, I believe there are viable alternatives to resolve the next budget impasse without significant cuts to entitlement programs, including: raising the cap on income subject to FICA, closing corporate tax loopholes, imposing a modest cap on various deductions (such as the mortgage interest deduction), imposing a small tax on speculative financial transactions, and making reasonable cuts to non-entitlement spending, including defense.
It's also important to consider that the economy is improving, the Affordable Care Act may start to realize savings through healthcare efficiency and cuts to lower-income taxpayers should be expected to further stimulate the economy.
All told, this was a positive step to more balanced budgeting which avoided the worst of the austerity proposals.
STEVEN WEISS, attorney
Regional SSI advocacy coordinator
Bay Area Legal Aid
Joel Berg on Sandy Relief Bill
Conservative Republican Representative Peter King, who represents a Sandy-battered area, was rightfully apoplectic when the GOP House leadership originally killed the Sandy-relief bill. He said: "When your people are literally freezing in the winter-and they're without food, they're without shelter, and they're without clothing-and my own party refuses to help them, then why should I help the Republican Party?... Turning your back on people who are starving and freezing is not a Republican value."
Yet Representative King repeatedly voted for GOP proposals to slash funding for hunger and homelessness-prevention programs nationwide. New Jersey Governor Chris Christie has also expressed support for such cuts. Given that they proclaim that none of their own constituents should become hungry or homeless due to a natural disaster, I would hope that, in the future, they would also work to ensure sufficient food and shelter for all Americans who are victims of human-made disasters such as economic downturns.
New York City Coalition Against Hunger