Former Massachusetts Gov. Mitt Romney says his income from speaking fees, totaling more than $374,000, is “not very much,” even though this represents seven times the income of the average family. At the same time he says that his income is taxed only at 15 percent—much lower than the average worker, who gets taxed on his or her labor, not million-dollar investments.
This disconnect from the realities of everyday Americans may help explain Romney’s tax and budget plans. One common thread throughout his proposals are policies that offer huge tax breaks to the 1 percent while slashing the safety net for those in need of a hand up during hard times, which in turn threatens all of us when particularly hard times threaten the broader economy.
Romney’s plan, for example, offers $2.24 trillion in tax cuts to the top 1 percent of earners, which works out to an average tax cut of $165,000 for those who have an average income of $1.25 million according to the nonpartisan Tax Policy Center. In contrast, Romney is proposing cuts of about equal value to critical federal government programs relied upon by millions low- and moderate-income families today. (see Table 1)
Romney would institute these cuts by sending safety net programs “back to the states,” with capped funding in the form of block grants. He markets such proposals as reducing the deficit and providing more flexibility for states. But make no mistake: Block-granting programs such as food stamps (now called the Supplemental Nutrition Assistance Program, or SNAP) and Medicaid would increase hardship for struggling families, shift the burden to state budgets, and hinder the government’s ability to respond to future recessions. These cuts will harm low- and moderate-income families immediately, and will impact all of us as cuts ripple through the economy, costing jobs and forcing states to cut back on other programs to provide basic services.
So let’s look in more detail at the examples of SNAP and Medicaid.
Rep. Paul Ryan’s (R-WI) budget proposal, hailed by Romney as a visionary plan, included a plan to send SNAP and Medicaid “back to the states” as a block grant. The details for Romney’s own plan are not fully developed, but he has embraced the principles of the Ryan budget plan, which is the basis for this comparison.
According to analysis by the Center on Budget and Policy Priorities, the Ryan proposal would either cut the benefit level so low that it wouldn’t even meet the U.S. Department of Agriculture’s definition of a bare-bones diet, or it would kick more than 8 million vulnerable citizens off of food assistance, likely resulting in a spike in hunger.
It would also undermine SNAP’s ability to respond to recessions and result in higher hunger-related costs for state governments to bear. The reason: When unemployment goes up or natural disaster strikes, SNAP responds automatically to ensure that all families who meet the eligibility requirement can access nutritional assistance and, in doing so, creates jobs for other Americans as SNAP dollars ripple through the economy. Under a block grant, the program would lose this flexibility. Instead, states would have to decide at what level to set the benefit or eligibility—meaning families who lost a breadwinner would probably receive SNAP benefits set so low that struggling families would need to divert funds from other basic needs such as heating their homes or paying rent just to put food on the table—or else the program would turn families away.
The results would be particularly dramatic for households with children, seniors, or people with disabilities since nearly 75 percent of SNAP participants are in families with children, and more than 25 percent of participants are in households with seniors or people with disabilities. A spike in hunger would be costly to state economies too, resulting in lower educational achievement, lower workforce productivity, and higher health care costs—consequences that affect middle-income families as well.
For Medicaid the results would be even more dramatic. Cuts such as those proposed in the Ryan plan would not allow the program to keep pace with medical breakthroughs, an aging population, or rising health costs. As a result states would have to significantly cut eligibility or benefits for their Medicaid programs, reduce payments to health providers such that they may not be willing to treat Medicaid enrollees, or cut other vital state-run services or significantly raise taxes to continue helping vulnerable populations access basic health services.
Because Medicaid is already such a lean program, with costs significantly lower than private health insurance, there is not much spending that states could cut without significantly hurting Medicaid beneficiaries or the providers of their health care in the form of lower payments. Children represent the largest group of beneficiaries by far, accounting for about half of all enrollees, but people with disabilities account for the largest share of the program’s costs. Therefore block-granting Medicaid would hurt some of our most vulnerable citizens.
Similar to SNAP, block-granting Medicaid would also undermine the program’s ability to respond to recessions. This would hurt the 99 percent in a variety of ways. Medicaid enrollment rises as unemployment increases, and these dollars circulate through state and local economies, creating 17.1 new jobs for every $1 million in federal Medicaid spending. Under Rep. Ryan’s proposal to block-grant Medicaid, this would translate to a loss of nearly 3.1 million jobs between 2013 and 2020.
In short, block-granting safety net programs such as SNAP and Medicaid would have harmful effects on our most vulnerable citizens, shift costs to state governments, and undermine our ability to respond to recessions effectively and efficiently. What’s telling is that all these consequences that would disproportionately harm the most vulnerable and impact the 99 percent could be avoided for the cost of Romney’s tax cuts to the richest 1 percent of Americans.
Budget proposals reflect priorities. Based on Romney’s plan, it’s plain to see his policy proposals favor the 1 percent.
Melissa Boteach is the Half in Ten Manager at American Progress.
Sources for chart:
(1) Tax Policy Center Analysis showing that 34.3 percent of tax change goes to top 1 percent.
(2) Center for American Progress has shown that Romney’s tax plan totals $6.6 trillion over 10 years, and 34.3 percent of this is 2.24 trillion.
(3) Medicaid and health reform numbers come from Center on Budget and Policy Priorites paper here; SNAP numbers come from CBPP paper found here; 46 million Americans on food stamps comes from USDA; 72 million on Medicaid number comes from calculations based on this study.