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The Inclusive Economy

Skinny Budget Starves Critical Programs

By Joanna Ain, Chad Bolt, Anju Chopra and Emanuel Nieves on 03/16/2017 @ 04:00 PM

Tags: Federal Policy, News

President Trump released his “skinny budget” earlier today – a document that is both a broad outline of his priorities and a troubling budget forecast for low- and moderate-income families trying to get ahead. It is not a budget that will help build an opportunity economy. It comes on the heels of an Affordable Care Act “repeal and replace” bill that turns tax credits to help Americans afford health insurance upside down and was scored by the Congressional Budget Office as causing 24 million Americans to lose their health insurance by 2026. It was accompanied by $33 billion in supplemental requests for the current fiscal year for additional funding for the Department of Defense and the Department of Homeland Security, to start building a wall on our southern border.

Light on details, the FY18 budget includes a $54 billion increase for defense spending, offset by commensurate cuts for “non-defense discretionary spending,” or the part of the budget that funds housing, consumer protection, community development and some safety net programs. These cuts underscore just how devastating this budget would be for low- and moderate-income families. The budget also exacerbates the ever-growing gap between the wealth of white households and households of color, by cutting or completely eliminating programs that make targeted investments in communities of color.

It’s important to reiterate up front that Presidents’ Budgets are usually very different from what Congress eventually adopts. Congress has its own prerogatives and priorities that will be debated over the next few months, first in what are called “budget resolutions,” expected in early spring. The budget resolution sets overall spending levels to begin the appropriations process, which determines specific program-by-program funding levels. In recent years, the whole process did not conclude until December. Along the way, Congress will likely make significant changes to the President’s budget, although it’s not clear yet where or by how much.

Nevertheless, this is a very challenging point from which to start the budget process for advocates for low- and moderate-income families. While there are very few specifics in the budget, highlights (really low-lights) include:

Safety Net

The budget proposes cutting programs that support low-income households and make up the first rungs of the ladder of opportunity that lead to financial security. While there are no specifics on the Assets for Independence (AFI) program, the budget proposes an 18% cut for the U.S. Department of Health and Human Services (HHS) – over $15 billion. These cuts include the elimination of the Low Income Home Energy Assistance Program (LIHEAP), which assists low-income families with energy costs, and the Community Services Block Grant (CSBG), which supports families in poverty with services that include housing, employment and nutrition.

Though it does not appear that the Supplemental Nutrition Assistance Program (SNAP) is at risk for now, the budget does propose a cut of $200 million to the U.S. Department of Agriculture’s Women, Infants and Children (WIC) program that provides nutritional and health supports to low-income women and their children.

Several independent agencies and commissions that support low-income communities are also being recommended for elimination, including the U.S. Interagency Council on Homelessness, which works to reduce our homeless population, the Legal Services Corporation, which funds free civil legal assistance for low-income households, and the Corporation for National and Community Service, which funds the AmeriCorps program, mobilizing Americans to serve vulnerable populations.

Housing and Community Development

The President's budget slashes spending on programs that support affordable housing and homeownership opportunities for low- and moderate-income families. The U.S. Department of Housing and Urban Development (HUD) receives just $40.7 billion in discretionary funding, a $6.2 billion reduction from 2017 levels. Notably, the budget only identifies $4.1 billion in program reductions of the $6.2 billion that that it eliminates from HUD. This 13% cut to HUD puts critical, asset-building programs like the Family Self-Sufficiency (FSS) program at risk of ending up on the chopping block.

A number of important programs that help make homeownership safer and more affordable for low-income families are also singled out in the budget for elimination. These include the Community Development Block Grant (CDBG) program, the HOME Investment Partnership Program, Choice Neighborhoods, the Self-Help Homeownership Opportunity Program and Section 4 Capacity Building for Community Development and Affordable Housing. It also eliminates the Department of Energy’s Weatherization Assistance program and the Environmental Protection Agency’s Energy Star program, which help families lower their energy bills.

NeighborWorks America, the Delta Regional Authority and the Appalachian Regional Commission would also be eliminated under this budget. These are organizations that give an economic and social boost to distressed, primarily low-income communities by improving job opportunities, investing in business development, identifying community leaders, improving infrastructure and transportation and developing programs that contribute to community health and wellness.

Finally, the budget eliminates $210 million in funding for CDFI Fund grants, asserting that the 20-year old program supports a “now mature industry where private institutions have ready access to the capital needed to extend credit and provide financial services to underserved communities.” The Fund, which continues to see increased demand for grants, invests in low-income communities and administers the New Markets Tax Credit, which continues to help attract needed private sector investment in distressed communities.

Consumer Protections

In line with the rest of his budget, the president’s regulatory focus is light on details as he focuses only on his action to enact a government-wide regulatory freeze and his two executive orders to curb regulations and enforce his regulatory agenda. Overall, despite the president’s focus on reining in burdensome regulatory costs and unnecessary regulations that cost jobs, consumer choice and economic growth, his budget’s focus on this issue is limited to a total of three pages.

While this may seem like a victory, the next budget will likely not be light on details or friendly to various agencies working to protect families in the consumer financial market as well as in other aspects of life, such as housing and retirement. If anything, the president’s initial take to eliminate 62 agencies and programs—many of which have shown to be effective in providing much-needed resources and support to communities and families throughout the country—indicates where the next round of cuts will come.

Key among future possibilities are reductions and changes to the Consumer Financial Protection Bureau (CFPB), which in just six short years has done a lot on behalf of families everywhere. In fact, despite being labeled as inefficient, the six-year old investment taxpayers have made to the agency since it opened so far has yielded a return of $4 dollars for every $1 spent. Overall, that’s resulted in nearly $12 billion being returned back to about 30 million consumers. The Bureau has not only been efficient with its resources, it’s also been effective as well. Through its supervisory and regulatory powers, the CFPB has not only given a voice to consumers through its complaint system, it’s also established rules to protect consumers across a number of markets, including mortgage, credit card and payday lending markets.

If the president truly believes “the American people deserve a regulatory system that works for them, not against them—a system that is both effective and efficient”, then his budget should strengthen, not eliminate or weaken, agencies like the CFPB and others that are protecting families against unfair, deceptive and predatory financial practices.

Tax Time

The budget proposes a $500 million cut to the Department of the Treasury, a 4.4% decrease from last year. This includes cutting $239 million by “diverting resources from antiquated operations that are still reliant on paper-based review in the era of electronic tax filing.” There are no further details on this proposal at this time, and the budget doesn’t come close to specifics on the funding level for Volunteer Income Tax Assistance (VITA) grants.

More Left Out and More to Come

Notably, the budget released today leaves out a number of components that are normally included in a budget – even “skinny” ones released in the first year of an administration. A summary of policy changes, revenue and tax policy proposals, entitlement reform proposals, and economic assumptions were all not included. OMB Director Mick Mulvaney has said we can expect more details on these components, along with program-by-program specifics, in May.

A budget that builds an opportunity economy would have proposed strengthening the Earned Income Tax Credit and integrating financial capability into Community Health Centers. It would have supported the CFPB and helped put affordable homeownership in reach for all Americans. And it would have included administrative actions to close the ever growing wealth gap between white households and households of color.

What can you do? If you haven’t already, sign up for one or more of our campaigns to stay on top of the latest developments and opportunities to defend and advocate for our priorities. The nuts and bolts of the budget process – including committee hearings and appropriations requests – often take place well below the headlines. Make sure you’ve signed up so we can let you know when these key opportunities for advocacy are coming up.

Upset about these cuts to programs you support? Contact your members of Congress and tell them you do not support these massive budget cuts. This is just the first of more bad news to come, but if we stick together and push back against policies and budgets that don’t reflect our priorities, we can lessen the impact – if not score outright victories for the opportunity economy.

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