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Debt Default Bill Rewards Tax Cheats, Cuts Services for Working Families

By June 6, 2023No Comments

The United States, the richest nation in the world, came to the brink of default last week as a game of political chicken forced a deal that cut nutrition, housing, and other services while rolling back tax enforcement for the nation’s richest tax cheats. Thanks to the upside down priorities of Republicans in Congress, many wealthy households making over $400,000 per year will keep getting away with paying lower tax rates than working people struggling to make ends as inflation continues to soar, raising costs on everything from food to medicine. 

While the Fiscal Responsibility Act averted the economic chaos and tremendous harm that would have come with default, it nonetheless inflicts damage that affects the long term health and economic security of millions of Americans. 

That’s because the deal makes cuts to discretionary programs like nutrition, housing, public safety and education by capping spending so that these programs will not keep up with needs or the usual growth rate of the federal budget. Capping spending amounts to cuts in services which have already endured over a decade of underinvestment. The Center on Budget and Policy Priorities estimates that, in fact,  many of these discretionary domestic programs are already funded at 10 percent below 2010 levels when adjusted for inflation and increases in the US population. Past spending caps have led to underfunded services and shortages for basic services like childcare, housing assistance, safety inspections and many other services. Under the Fiscal Responsibility Act, more cuts will occur that deny people services they need especially in today’s high inflation context when everything costs more. 

Although most recipients already work, under the new law, Republicans insisted on increased work requirements to qualify for the Supplemental Nutrition Assistance Program (SNAP, commonly known as food stamps) as well as for Temporary Assistance for Needy Families (TANF, or cash welfare). The changes in SNAP target adults without dependents. Currently, childless adults between the ages of 18 and 49 who do not have a disability are generally required to work or volunteer for 80 hours a month. If they fail to do so, they will only qualify to receive SNAP benefits for a maximum of three months over a three-year period. The debt ceiling deal targets older people by expanding the age range for these rules to apply to 50- to 54-year-olds, though it  also now includes new exemptions from work requirements for homeless people, veterans, and people aging out of the foster care system.

Although the Republicans’ intent in imposing more work requirements is to cut people from the program and reduce the deficit, the bill’s CBO (Congressional Budget Office) score shows that these changes will cost more money, not less, while at the same time adding 78,000 more people to SNAP. Meanwhile, these new hurdles will not actually result in more people working.

President Biden has repeatedly proposed to raise taxes on the rich and corporations in order to address the rising deficit, particularly since it is decades of tax breaks and handouts for the rich and corporations, which have added more than $10 trillion to the debt and are responsible for 57% of the increase in the debt as a share of the national economy. The GOP resoundingly rejected President Biden’s proposal to raise new revenue by closing tax loopholes despite the fact that many wealthy households pay lower tax rates than middle-class workers and that corporations are raking in record-shattering profits while paying lower tax rates than a decade ago.  The GOP refusal to make the wealthy and big corporations pay what they owe in taxes contradicts their insistence on “fiscal responsibility.” 

The truth is, that if Congress can afford more tax breaks for the rich and corporations, then it can also afford to help provide food, education and housing for low income and working poor families who cannot keep up with the rising price of food, rent and other services. 

Nurses, teachers, and firefighters are paying their fair share – we need the wealthiest people and corporations in the country to do the same, and the American people agree. According to a Navigator Survey, most of those polled would prefer to reduce the deficit by raising taxes on billionaires and corporations rather than cutting specific programs. Now that the threat of default is behind us (for another two years, at least) we have work to do to take the plurality of support for taxing the ultra-rich and making it into a reality.

Make no mistake: our economy is better off for having avoided default. Social Security and veterans’ benefits checks will keep going out, retirement accounts will remain intact, and Medicare and Medicaid patients will be able to see their doctors as normal. But even as we breathe a sigh of relief, the GOP continues to push for tax policies that divert more money to the richest households at the expense of everyone else.

It’s clear that the GOP’s idea of “fiscal responsibility” has less to do with actual responsibility than it does with protecting the interests of their wealthy donors. Common sense dictates that if Congress can afford to let wealthy tax cheats get away without paying what they owe and can protect tax loopholes that reward corporations who avoid paying their fair share of taxes, they can also afford investments in healthcare, nutrition, housing, and other basic services that help working families afford the basics.