Bush’s New Deal

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Every year, the release of the president’s proposed budget sets off a ritual of sky-is-falling wails from youth advocates and people who run youth programs. This year, the howls sound different: louder and more painful than at any time in recent memory.

“The volume is higher, and the level of anxiety is higher,” notes Irv Katz, CEO of the National Human Services Assembly. That’s because the 2006 budget that President Bush proposed last month wouldn’t just slice into a slew of favored programs next year; it seeks fundamental rule changes that would reduce the federal government’s legal obligations to several key social programs, and set some on a path of long-term, if not permanent, decline.

Marian Wright Edelman, president of the Children’s Defense Fund, warned 600-plus supporters in a conference call last month that Bush is out to “turn back the clock to pre-New Deal days. This is an across-the-board assault … to erode the federal framework of laws that would guarantee funding” to programs that serve children and the poor.

To many conservatives, the budget proposal is a bold step toward chipping away at discretionary spending that has ballooned over the decades, particularly through programs enacted under Democratic Presidents Franklin Roosevelt and Lyndon Johnson.

“The president’s proposal to trim discretionary spending is a necessary step to bring spending under control,” Alison Acosta Fraser, an economic policy analyst at the Heritage Foundation think tank, writes in a budget analysis. “The next steps will require taking even tougher tough action: addressing entitlement programs.”

The major changes include a cap on discretionary programs through 2010, which appears to set the stage for increasingly severe cuts. “The budget proposes to make things worse with each subsequent year,” says Deborah Weinstein, executive director of the Washington-based Coalition on Human Needs.

The budget would also institute a requirement, called PayGo, that any increase in funding for a discretionary program be offset by cuts in another program, without the option of paying for the increase with new revenue, such as tax increases. This could pit social programs more directly against each other in the competition for dollars.

And finally, it would give states greater flexibility for Medicaid and foster care spending, in exchange for lump sum payments from the federal government. To many advocates, this opens the way for states to shift funds away from many needy youth, while freeing the federal government from obligations to increase its financial contributions if more children need services. To be sure, passage of any part of the budget proposal is far from certain; this is the opening move in a months-long match. Some of the measures, such as turning Medicaid into a block grant, have been proposed before and been rejected by Congress.

But the budget plan makes a clear statement about the president’s priorities for the next four years. Fresh from a solid re-election, and with a stronger Republican majority in Congress, Bush is shooting for significant, long-term changes in how the federal government spends its money.

“The president says he’s got political capital and he’s going to spend it,” says Robin Nixon, director of the National Foster Care Coalition. “He’s a bulldog on things he wants to do. And he wants to reduce the size of government, period.”

Several factors have coalesced to create an ideal environment for big cuts in domestic discretionary spending: booming budget deficits, the war in Iraq, homeland security needs, the cost of the new Medicaid prescription drug benefit and the need to shore up Social Security. Add to that the large tax cuts in recent years and the president’s insistence that those cuts not be rolled back.

With this budget, “We’d be starting down a path that may lead to a dramatic reduction in the role and size of the federal government,” says Robert Greenstein, executive director of the Washington-based Center on Budget and Policy Priorities. “All of the deficit reduction is to come from domestic programs,” with much of the budget-cutting burden “on the backs of families and children.”

The Cuts

Everyone knew big cuts were coming. (See “Times are Tough – Get Used to It,” January, under archives at www.youthtoday.org/youthtoday.) Jeffrey Butts, senior research associate at the Urban Institute’s Justice Policy Center, notes that the Republican majority in Washington “told us their philosophy is to starve the beast – to cut back on federal funding by gradually closing down programs.” The philosophy was widely touted by the Reagan administration, and Bush appears intent on carrying it out even more extensively.

Most of the 99 programs the president proposes to eliminate are in the Departments of Education (48), Health and Human Services (14) and Justice (nine). They include:

• Juvenile Justice – Repeats failed efforts in the fiscal 2005 budget proposal to eliminate the Juvenile Accountability Block Grants (funded at $54.6 million this year), Juvenile Mentoring ($14.9 million this year) and the Safe Schools Initiative ($4.3 million this year). Juvenile Justice Programs would be slashed from $384.2 million this year to $187 million in 2006. The budget would be “a disaster for juvenile justice policy-making,” says Jason Ziedenberg, executive director of the Washington-based Justice Policy Institute.

• Vocational Education – The stand-alone $1.2 billion program would be wiped out. Vocational activities would be allowed under a new $1.2 billion High School Intervention program, which would provide for assessment-based individual student performance plans.

• Safe & Drug-Free Schools – Eliminates the grants to local initiatives but would keep the national programs, which include emergency preparedness in schools and school-based drug testing. The overall result is a cut from $672 million to $317 million.

• Community Development Block Grants – This $4.8 billion program, long relied on by many community-based organizations for a variety of initiatives for disadvantaged youth and families, would be eliminated.

• Youth Offenders – Eliminates the $49 million Department of Labor training and employment program for adjudicated and at-risk youth.

Many programs, however, would be maintained at their current levels (such as 21st Century Community Learning Centers) and some would go up slightly (such as abstinence education). Declaring winners and losers in any federal budget plan is like finding the ball in a shell game: Programs that are cut in one place show up under different names somewhere else, or are bundled with other programs under one budget figure.

For instance, the president’s new High School Intervention program is funded at $1.2 billion, but “he’s cutting programs that serve these same high school children” by about $2.1 billion, says Bethany Little, director of government affairs for the Children’s Defense Fund.

On the other hand, Brian Riedl, a budget analyst at the Heritage Foundation, writes that “federal spending on low-income families has increased 42 percent under President Bush, and is slated to expand again in 2006. The president’s budget does not disproportionately single out these programs.” He says that programs slated to be cut have not proven their effectiveness.

In the Long Run

The president’s proposals to change the budget process would shake up federal funding for years to come. Fraser at Heritage argues that without the big cuts and the process changes, entitlements will gradually swallow bigger chunks of the budget, until there is virtually nothing left for discretionary social programs, such as those that serve youth. But Little at CDF says Bush is trying to permanently reduce federal funding for numerous youth services “by rolling back the framework of laws that has been built up over the decades,” going back to Roosevelt’s New Deal and Johnson’s Great Society initiatives.

Here is what observers say about the impact of the biggest changes:

• Spending caps: Supporters such as Fraser hail the prohibition on increases in discretionary spending from 2006 through 2010 as a crucial step to rein in spending.

The Center on Budget and Policy Priorities estimates that if defense, homeland security and international affairs are funded at the levels proposed by the president, “by 2010 the rest of discretionary spending will need to be cut by 16 percent” to stay within the spending caps.

One reason is that from 2008 through 2010, the defense and non-defense spending (except for highway and mass transit) would be in the same category in the budget, notes OMB Watch. Defense spending is expected to continue rising. The result, says OMB Watch: “The remaining discretionary programs will be forced to fight for a proportionally decreasing slice of the pie with the military.”

“The caps are extraordinary,” marvels Ron Haskins, a senior fellow specializing in economic studies at the Brookings Institution, who spent 14 years on the staff of the House Ways and Means Human Resources Subcommittee. “They would have tremendous bite in the out years, so much so that I doubt that Congress could do it.”

• PayGo: The Clinton administration enacted a policy that required new spending proposals to find their funding through savings in other areas of the budget, such as cuts, or through new revenue sources, such as closing tax loopholes or raising taxes. The Bush version comes with a big difference: Don’t touch taxes.

“The only option for increasing funding for mandatory programs under this proposal,” says OMB Watch, “would be decreases in funding for other mandatory programs, once again pitting programs serving low- and moderate-income America – such as unemployment insurance, Food Stamps and Medicaid – against each other.”

• Flexible funding to states: Medicaid would become a block grant to the states, which would get greater flexibility in how they spend the federal funds. Opponents fear this would remove federal guarantees on who gets Medicaid, as states might change eligibility requirements or otherwise shift funding priorities. And if Medicaid costs rose rapidly, as they sometimes do, people would be dropped from the program because the federal government wouldn’t provide any more money.

“Millions of children may face the loss of coverage entirely or the loss of benefits they get through coverage,” says Little of CDF. The budget would also cut Medicaid funding by $60 billion over the next five years, and add about $14 billion in new spending, including $1 billion in outreach to include more children in Medicaid or the State Children’s Health Insurance Program.

Medicaid changes could affect youth in child welfare, says Nixon of the National Foster Care Coalition, because some states use Medicaid funds for targeted case management services, such as substance abuse treatment, for foster youth.

The budget also proposes a form of block grant for foster care funding, allowing states to accept a cap on federal funds for the next five years in exchange for greater flexibility in how that money is spent.

Nixon says that’s not such a bad idea, “if we could guarantee that the federal government would maintain its fair share and keep in place backup dollars in case there was a big spike in the foster care population,” and if Washington would “maintain a role in accountability and monitoring” of how states spend the money. That, she thinks, is unlikely.