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Making the Right Choice for Fiscal Stability

Making the Right Choice for Fiscal Stability

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Donna Cooper outlines CAP's plan for balancing the budget, growing the economy, and cutting poverty.
Donna Cooper outlines CAP's plan for balancing the budget, growing the economy, and cutting poverty.

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Published by: Center for American Progress on Aug 15, 2012
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1Center or American Progress | Making the Right Choice or Fiscal Stability
Making the Right Choicefor Fiscal Stability
Balancing the Budget, Growing the Economy,and Cutting Poverty is the Best Path
Donna Cooper August 2012
Introduction
Our naion’s ederal budge is he mos angible expression o our naional prioriies. A isroo i’s a moral documen. Unorunaely, he degree o which he ederal budge is meeingis core moral obligaions—o provide or he naional deense, boos economic oupu,ensure equal opporuniy, and where necessary, alleviae suering—is in serious doub.In he coming monhs, Congress and he Obama adminisraion are expeced o makeough budge choices in an eor o reign in he ederal deci. Tis issue brie sum-marizes he key elemens o a Cener or American Progress budge planor long-ermdeci reducion ha provides sucien resourceso subsanially spur economic growh and simula-neously cu povery. A key enan o he CAP budge plan is o spureconomic growh by unding new invesmens inall levels o educaion, renewable and clean energy echnologies, ransporaion and inrasrucure, and basic scienic research and developmen even while balancing he budge—invesing an annual averageo abou $70 billion above curren levels saring in2017. Some o hese argeed invesmens will alsohave he bene o reducing he number o amiliesin povery over ime, including he expansion o early childhood educaion and he expansion o job rain-ing and grans or college. (see able 1)
TABLE 1
Investing in economic growth
CAP’s balanced budget plan provides or necessary investments ineconomic competitiveness
Federal investmentScale of increaseover 20 years
Basic science and technology research100%Transportation Inrastructure20%Clean energy technology research and deployment 100%Early childhood education100%Public Education 300%Pell and other postsecondary grants25%Job training 50%
Source: Budgeting or Growth and Prosperity, Center or American Progress, May, 2011,http://www.americanprogress.org/issues/2011/05/budgeting_or_growth.html
 
2Center or American Progress | Making the Right Choice or Fiscal Stability
Te CAP budge plan also employs a sraegy o increase wages among he lowesincome earners and reduce povery. Te plan lowers he ax burden on low-income working amilies in 2017 so hey keep more o heir earnings. In addiion, i helps low-income amilies reduce child-care expenses, he cos o ood, school meal coss, andhousing coss. Moreover, addiional ederal unds ensure ha he incomes o blind anddisabled households are above he povery line. (see able 2)
TABLE 2
Investing in an opportunity society
Minimum wage and targeted investments can signiicantly reduce poverty by providinga hand up into the middle class
Federal program/policy to reduce povertyNumber of poor households or Individualsreceiving additional assistance
Minimum wage increase28 million individuals afected, with an estimated 2.2million projected to rise out o povertyExpanded earned income tax credit- maintains AmericanRecovery and Reinvestment Act expansion500,000 householdsChild and dependent tax credit 5.2 million householdsHigh-quality afordable child care 600,000 childrenSchool breakast/lunch10.8 million childrenSupplemental Nutrition Assistance Program 8.1 million individualsSupplemental Security Insurance or Blind, DisabledAdults and Youth6 million householdsHousing Subsidies 1.4 million households
Sources or data or impact o investments: Bureau o Labor Statistics, Characteristics o Minimum Wage Workers: 2011; Economic Policy Institute, A Rising Tide or Minimum Wage Increase, 2012; Urban Institute Technical Report, Estimating the Anti-Poverty Eects o Changes in Taxes and Benefts, April2007; Center or Budget and Policy Priorities, Studies Show Earned Income Tax Credit Encourages Work and Success in School and Reduces Poverty, June2012;Tax Policy Center, Taxation and the Family: What is the Child Tax Credit? and Reduce Child Tax Credit Reundability Threshold to $0, Distribution o Federal Tax Change by Cash Income Level, 2010; Department o Health and Human Services, Administration or Children and Families, Characteristicso Families Served by Child Care and Development Fund (CCDF),Based on Preliminary FY 2010 Data; U.S. Department o Agriculture, Food and NutritionServices, School Breakast and Lunch Participation Fact Sheets, 2011; U.S. Department o Education, Department o Agriculture, Characteristics o Supplemental Nutrition Assistance Program Households: Fiscal Year 2010; Koenig, Melissa and Kalman Rup. “SSI Recipients in Households and Families withMultiple Recipients: Prevalence and Poverty Outcomes.”Social Security Bulletin. 65 (2) (2003-2004); Decade o Neglect Has Weakened Federal Low-IncomeHousing Programs, New Resources Required to Meet Growing Needs by Douglas Rice and Barbara Sard. February, 2009 .
Te sum oal impac o hese invesmens beginning in 2017 are projeced o relaively quickly reduce he ranks o he poor by a leas 8 million households due o he mini-mum wage increase combined wih he number o households impaced by he increasein he Supplemenal Securiy Income increase and he expansion in ederal subsidizedhousing. Many more amilies are likely o be lied ou o povery by hese changes, as well. So le’s look a he deails.
 
3Center or American Progress | Making the Right Choice or Fiscal Stability
 The CAP plan to grow the economy, balance the budget, and cut poverty
Te CAP plan, as deailed in Budgeing or Growh and Prosperiy, achieves “primary  balance” by 2015, wih he ederal budge in he black excep or paymens on henaional deb. Te budge is ully and permanenly balanced by 2030, and reduces hedeb o jus over 40 percen o gross domesic produc by 2035. Te plan delivers wo-hirds o he deci reducion rom spending cus, and one-hird rom revenue increases.Te plan is unique because i makes room or crucial invesmens, proecs middle-classservices, and ghs povery. I does so beginning in 2017 by unding subsanial new invesmens in all levels o educaion, renewable and clean energy echnologies, rans-poraion and inrasrucure, and basic scienic research and developmen even while balancing he budge—invesing an annual average o abou $70 billion above currenlevels. Te plan also includes subsanial, argeed booss o successul anipovery pro-grams unded as o 2017 ha cu he povery rae signicanly in shor erm.Te plan conrols healh care coss or everyone, no jus hose in he public programs.I srenghens exising cos-conainmen measures in he Aordable Care Ac and ully pays or a reasonable and predicable reimbursemen rae increase or docors whoaccep Medicare paiens. Te plan builds in a cos-conainmen “ailsae” o slow hegrowh o healh care coss across he enire economy while ensuring he qualiy o care.Our plan ses “discreionary” spending a responsible levels. I brings deense, home-land securiy, and he Sae Deparmen ino one unied budge o beter mee our 21scenury naional securiy needs and delivers sraegic cus o deense o bring spendingdown o peak Cold War levels, adjused or infaion. Te plan also ses limis o nonse-curiy discreionary spending ha, over ime, conribue o deci reducion, bu alsomake room or necessary invesmens.Te plan addresses axes as well as spending. Te plan delivers comprehensive income ax reorm so he ax code is simpler, airer, and raises enough revenue. I creaes a single 15percen income ax bracke or 80 percen o Americans. I urns ax deducions ino facredis so ha every axpayer ges he same bene. I reurns he op ordinary income ax rae o levels under Presiden Bill Clinon. I also includes a emporary 5 percen surax ormillionaires ha expires in 2030 when he budge balances and caps he op capial gainsrae on realized invesmen income a he level signed ino law by Presiden Ronald Reagan.Te plan eliminaes or reorms dozens o “ax enilemens” such as oil-and-gas indus-ry subsidies and special benes or hedge und managers. Te benes o he plan’sapproach is ha 90 percen o axpayers ge an income ax cu or no change a all in heirincome ax bill. Our plan improves he sabiliy o U.S. nancial markes by enacing amodes nancial ransacions ax o discourage shor-erm speculaion and encouragelong-erm invesmen.

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