Tax cuts likely to have long-term negative effects

Nancy Milio, Chapel Hill News, 6/22/03

The federal "scaled-down" tax cut of "only" $350 Bil., in addition to the acceleration of the 2001 $1.6 Tril cut?both strongly favoring the wealthy?is a chimera. It will last 5 years to make it appear to be "small", but Republicans will do everything possible to make it permanent before it expires, raising the cost to over $1 Tril. This budget package locks long term changes into Americans' lives. A new North Carolina Justice Center Report shows six in ten of our families?including a million children?do not have enough money for the basics of decent living, the basis for hope in a better future, as readers learned in these pages ("Budget Impasse in Raleigh", 6-4). Federal cuts make state support programs ever harder to sustain, despite the one-time $500 mil. coming to NC in federal fiscal relief.

The federal budget lays out the priorities of this Administration: to make room for war and tax cuts for the wealthy, hundreds of billions are cut primarily from health, education, child, environmental, and income security programs over the next decade. Defense gets a huge increase, rising to $500 Bil in 2009 to maintain troops in 85 countries?not counting $20 Bil yearly for occupation and reconstruction in Iraq; these troops are part of more NC families than in most states.

Child care cuts will mean that 268,000 fewer children will be served in 2013 than today. Food stamp cuts mean funds allotted per meal will drop from 91 to 84 cents per meal; currently, only 20 of 33 mil. eligible people get food stamps. More than 1 in 10 NC families need these, yet only half actually get them, depriving local grocers and farmers of those food funds too.

The widening income gap in our country is the worst among 26 affluent nations. Currently, $260,000 is the yearly income of individuals in the top 5 percent; for the poor, income is $2700, even when public benefits are included. There are now over a million African American children living in extreme poverty (less than half the poverty level even when food stamps, school lunches, and housing subsidies are added). NC was the 10th most unequal state in family income, even before the current recession. The federal tax cut itself means NC will lose several hundred millions in taxes unless the General Assembly "decouples" the state's tax code from the federal code.

Mushrooming deficits will add more pain to US-based businesses and home buyers for years to come, and will mean lost chances for students who will not be able to pay for higher education. The shape of government too will change.

Under the newly-enacted plan, funds are diverted from international and governmental programs into the private sector by "outsourcing" to commercial enterprises or to direct Administration control of funding rules, bypassing the public processes required of Federal agencies and Congressional scrutiny.

1. Medicare is pushed toward the corporate market, where older and disabled people are not profit-makers for HMOs. In 1999-2002, HMOs dropped over 2 mil elder enrollees to stem business losses.
2. The budget pushes toward the "de-entitlement" of Medicaid, in an indirect and complex way, threatening the 1 in 6 Americans that it serves. For every $1 mil cut in federal Medicaid, North Carolina will lose over $3.5 mil in additional business activity and $1.3 mil in wages.
3. Many health and human services are being turned into voucher programs. This re-routing of funds to scattered programs with little or no monitoring weakens the voluntary sector infrastructure, where experience and expertise exist, and impairs their ability to plan in an uncertain economy for the increasing needs of vulnerable people.
4. The 170,000 jobs at the new Department of Homeland Security are effectively de-unionized, which will mean "outsourcing" of tasks to nonunion commercial firms, and job losses.
5. Enforcement funds for the Occupational Safety and Health Administration are cut, limiting monitoring violations of minimum wage, family and medical leave, sweatshops, and child labor laws.
6. Fifteen billions for AIDS, budgeted over 5 years, are re-routed away from collaborative, tested, international programs to direct US administration, while $500 mil. is actually cut from international child health programs for 2004. Fully one third of AIDS prevention funds must go to abstinence-until-marriage programs and US bilateral AIDS funding is restricted, excluding some rural health facilities in poor countries, allowing American religious agencies in Africa to opt out of providing condoms or condom education to clients, and imposing "buy America" requirements, like purchasing branded drugs instead of cheaper generics.

The net effect of these little-known economic and rule changes further remove the U.S. from the international community, weaken the compassionate side of governments at home, and widen the already huge economic inequalities here and elsewhere. Will all this make North Carolinians and other Americans more secure?

Nancy Milio is on the Policy Committee for the Friends Committee for National Legislation; chairs a Chapel Hill non-profit, Affordable Rentals, Inc, and is Professor Emerita of Health Policy, UNC-CH.