2018 Federal Budget: Winners and Losers

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May 23, 2017 (San Diego) The new federal budget was released this morning. It had few surprises, given the priorities that were set earlier in the year. It will slash the safety net to the marrow and cut important programs in different departments that help the middle class and lower income Americans.

The new budget also seeks to eliminate the federal deficit by 2027, so while there will be an increase in military spending in the short term, long term military spending will also flatline.

Here is the budget, and as always, these are political documents. They tell you a lot about those who write them, and we fully recommend you take some time with it.

There are some assumptions that the budget is making. Such as the tax reforms the president wants will be enacted. This will cut corporate taxes to an effective 15 percent. The assumption is that this will lead to a 3 percent growth in the annual gross domestic product. Economist believes this is too rosy of a projection. Among other reasons, an aging population.

 
So where are the cuts? Realize these programs help is voter base the most. It will also affect about 73 million Americans who rely on Medicaid for their health insurance, and it marks a clear break in a campaign promise. Medicaid will be hit with an $800 million hit over ten years.

It does the following:

Reform Medicaid. To realign financial incentives and provide stability to both Federal and State budgets, the Budget proposes to reform Medicaid by giving States the choice between a per capita cap and a block grant and empowering States to innovate and prioritize Medicaid dollars to the most vulnerable populations. States will have more flexibility to control costs and design individual, State-based solutions to provide better care to Medicaid beneficiaries. These reforms are projected to save $610 billion over 10 years.

This section will provide incentives for states to create state-level single payer systems. California is in the process of doing that. The conservative outlook of how much it would cost it comes to about $400 billion per hear. Here is a good breakdown of what this would cost:

To that end, the Senate Appropriations Committee published today their fiscal analysis of Sen. Ricardo Lara’s SB 562. The headline that the media has run with is that the total cost would be $400 billion per year, and the state would need to cover about $200 billion of that cost (the other half comes from existing health care spending). Due to other savings, they conclude that “total new spending required under the bill would be between $50 and $100 billion per year.”

 

If Medicaid is going to face the kind of cuts that are expected, and the state will have to choose by 2020, this is part of the American Health Care Act (AHCA), meant to gut the Affordable Care Act, the state will have a larger incentive to fund its own system. With the state either getting block grants or per capita limits, it makes sense.

What other areas are being hit?

The Supplemental Nutrition Assistance Program will not only face cuts but mandate state contributions to the program. This from the budget itself:

The Budget also proposes SNAP reforms that will re-balance the State-Federal partnership in providing benefits by establishing a State match for benefit costs. The Budget assumes a gradual phase-in of the match, beginning with a national average of 10 percent in 2020 and increasing to an average of 25 percent by 2023

It will also face cuts of $478.7 B over ten years. It also has a curious line, saying that it will force recipients to work and enact welfare reform. These standards are already in place and were put in place during the Bill Clinton administration as part of the Personal Responsibility and Work Opportunity Act of 1996. It was signed into law by Bill Clinton.

According to 2016 reporting in The Atlantic it not just changed how welfare worked, but it gutted it.

More than 13 million people received cash assistance from the government in 1995, before the law was passed. Today, just 3 million do.

“Simply put, welfare reform worked because we all worked together,” Bill Clinton, who signed into law welfare reform, or the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, wrote in an op-ed in The New York Times in 2006. Clinton had campaigned on a pledge to “end welfare as we know it” and today it is all too apparent that he succeeded.

 

So the only way that this can go since we are to the bone, is into the marrow. So we must ask, what form will this reform will take?

The budget also intends to change how disability programs wok, reducing those eligible. It is also assuming, which is a popular assumption that there are widespread fraud and abuse across these programs, with [people accessing them that are not eligible. They intend to close those loopholes. ]

The budget also intends to reduce funding for the Children’s Health Insurance Program. This to the tune of $13.4 billion over ten years.

One area of the budget that will hit his voting base and rural areas, in particular, is Temporary Assistance for Needy Families, (TANF) this is expected to go down by $143.5 B over ten years. This is a cut of Even unemployment insurance will go down. This to the tune of $408.3 Billion.

All of these are essential antipoverty programs. They will make a life for people on the lowest scale harder while transferring wealth to the top one percent of earners. The tax breaks will benefit them the most.

There is also another area that will affect military children and Indian country. According to Education Week:

 It would also shrink or scrap $66.8 million in payments for federal property to districts that receive Impact Aid. The Obama administration proposed a similar cut last year. It would also shrink or scrap $66.8 million in payments to districts that receive Impact Aid, which help those with a big federal presence, such as a military base or American Indian reservation.

It will also increase funding for school choice, This will hit public schools, and further reduce their effectiveness. This is how it will be done:

As part of the school choice push, the budget would include a $1 billion increase for Title I grants for disadvantaged students, currently funded at nearly $15 billion. But that money would come up with a twist: States and districts would be encouraged to use the funds for a system of “student-based budgeting and open enrollment that enables Federal, State, and Local funding to follow the student to the public school of his or her choice.”

Buried in the budget is another line, and this is the reform of the retirement system for federal employees.

These proposals include increasing employee payments to the defined benefit Federal Employee Retirement System pension such that the employee will generally be paying the same amount as the employing agency, and reducing or eliminating cost-of-living adjustments for existing and future retirees. Viewed in the context of the broader labor environment, the Administration believes the implementation and phasing in of these changes will not impact the Federal Government’s recruiting and retention efforts.

The budget is expected to increase defense spending, while at the same time reducing foreign aid and the State Department budget. It is also hitting basic research hard.

In some ways, this is austerity spending to the point of cutting into the marrow. There is something more. Cuts this deep have been done in other countries already. We might be ready to repeat the Greek experience, including social unrest.

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