WASHINGTON – Lawmakers returning to Capitol Hill this week face a bruising fight over whether to curtail poverty programs.
A showdown is expected between conservative House Republicans and their more moderate Senate counterparts as congressional negotiators try to resolve differences in cost-cutting measures GOP leaders argue are necessary to cut the deficit. The problems the spending poses were underscored last week by Federal Reserve Chairman Alan Greenspan, whose gloomy economic forecast weighed on the stock market.
Democrats and advocates for the poor argue that program reductions are the price for Bush administration tax cuts that largely benefit higher-income brackets.
The budget-reduction proposals would minimally trim the growth of future spending for Medicaid, food stamps and other programs.
The changes come as a handful of states are dealing with the immediate and long-term costs of providing support for families displaced by hurricanes Katrina and Rita.
Rep. Joe Barton, R-Texas, chairman of the House Energy and Commerce Committee, is leading efforts to win approval of what he describes as desperately needed Medicaid reform that he says will not hurt the poor.
“All we are doing is nipping and tucking around the edges,” said Barton, noting the changes were developed in part by a bipartisan group of governors under the auspices of the National Governors’ Association.
Specifically, the $48 billion House bill would reduce Medicaid spending by giving states the option of reducing benefits and imposing premiums and co-payments on beneficiaries. It also would reduce payments for prescription drugs and make it more difficult for seniors to dispose of assets so they can qualify for long-term nursing home care.
The House also seeks to tighten eligibility for food stamps. That would cut off 220,000 people nationwide. The proposals include a provision requiring legal immigrants to wait seven years to receive food stamps instead of five years.
The Senate’s smaller $35 billion package contains fewer savings in poverty programs and would reduce funds the government pays to encourage private insurance companies to participate in Medicare. The White House opposes the provision.
The House bill also would clamp down on seniors seeking nursing home care from Medicaid by making individuals with more than $500,000 in home equity ineligible for benefits. Proponents such as Barton argue the elderly are soaking up two-thirds of Medicaid’s funds, denying benefits that were intended for the poor.
Fiscal conservatives such as Rep. Jeb Hensarling, R-Texas, said containing future spending is needed to begin slowing runaway spending for the entitlement programs that account for two-thirds of the federal budget.
“If we do not reform these programs, we will end up doubling the taxes on our children,” he said.
Stan Collender, a budget analyst and managing director at Financial Dynamics in Washington, finds elements of truth on both sides. The overall size of cuts is small but individual beneficiaries are likely to be hurt by higher costs or a loss of benefits.
“This will affect real folks, and they will feel it,” Collender said.
Jennifer Ng’andu, a health policy analyst at the National Council of La Raza, said the choices will be unpleasant ones for food stamp recipients.
“With heating prices expected to soar this winter, we’re going to see people having to choose between whether they feed their families or whether they freeze,” she said.
The House proposals would reduce future Medicaid spending growth by just 0.3 percent each year, allowing the program to continue growing 7 percent annually over the next five years.
“It is not a cut. I am not going to use the rhetoric of the liberal left,” Barton said. “Spending is going up. It is not going down.”
The white-hot rhetoric underscores how modest reductions can affect individual beneficiaries of the nation’s social safety net at a time of renewed attention on the Bush tax plan.
“It is totally about tax cuts,” said Scott McCown, executive director of the Center for Public Policy Priorities in Austin, Texas. “Our current deficits are not the result of critical spending to help low-income Americans. They are the result of tax cuts given in 2001 and 2003.”
The House is expected to vote on a $56 billion package of tax cuts after they return this week. The Senate, which does not return to the Capitol for another week, already approved a different mix of $59.6 billion in tax breaks.
Once House and Senate negotiators sit down to resolve differences in their proposals, an extension of a break on capital gains and dividends is expected to be a key issue. Critics contend the tax cuts – not set to expire until the end of 2008 – overwhelmingly benefit families earning more than $1 million annually.
Outgoing Congressional Budget Office Director Douglas Holtz-Eakin sees this year’s debate as the opening act in a multi-year political drama. He said lawmakers will have to curtail spending of Medicaid, Medicare and Social Security – leading eventually to tax increases.
“There is no free lunch,” he recently told reporters. “You cannot borrow that kind of money, so you would have to raise taxes.”
As Republicans tangle over tax cuts and safety net spending, one plan affecting children has also raised alarms among conservatives: House-proposed cuts to child support enforcement.
The House wants to slash $5 billion from federal efforts to collect child support from deadbeat parents. Sen. John Cornyn, R-Texas, charged this could cost children $24 billion over the next decade.
In a speech on the Senate floor last month, Cornyn noted that for every federal dollar spent, Texas authorities collect $6.81 in child support.
“The problem with these cuts is that they are likely to reverse dramatic improvements in the child support program’s performance over the past decade, and they may well force many families back on the welfare case load,” Cornyn said.
With so many contentious issues in play, Collender said it is possible that the unusual post-Thanksgiving congressional session will fail to produce a compromise. Instead, he said Congress might opt to approve a continuing resolution that keeps the programs funded at current levels for another year.
And, he added, it is unlikely lawmakers facing re-election next year will want to tackle the difficult options for reducing the deficit: cutting spending or raising taxes.
“Anything that would have a substantial impact on the deficit is politically unacceptable,” Collender said.
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