The Bush Administration's FY 2006 Budget
President George W. Bush's fiscal year (FY) 2006 budget punishes America's working families for his own misdeeds—his stubborn insistence on preserving and expanding tax breaks that mostly benefit America's wealthiest families. Unless checked by the U.S. Congress, the result of the president's misplaced priorities and irresponsible and unfair policies will produce enormous suffering for the most vulnerable of our citizens.
America's working families already are struggling to maintain living standards in a labor market that has not fully recovered from the last recession.
There are still not enough jobs to meet the needs of America's workers. Employers are not adding enough jobs to significantly cut unemployment, lure discouraged workers back into the labor force and keep up with population growth. Though overall employment has just regained pre-recession levels, we still have more than 700,000 fewer jobs in the private sector than when the recession began.
Job quality has declined. Wages have not grown for three years. We lost nearly 3 million manufacturing jobs in the past four years alone, and last month, manufacturers shed another 25,000 jobs even as factory output increased.
Health care is eroding. The number of uninsured Americans has grown each year since 2000, while the number with job-based health coverage has fallen and workers' contributions to health care premiums, especially for family coverage, have skyrocketed. Today, 45 million Americans are uninsured; most are in working families.
Guaranteed pensions are on the endangered list. Fewer than half of today's workers have job-based pensions. One in four workers with access to 401(k) savings plans does not participate in them, and only a tiny sliver of individuals in these plans—around five percent—makes the maximum allowable contribution. Savings in 401(k) or IRA plans are less than $10,000 for roughly half of the households nearing retirement.
Instead of proposing a budget that will create and retain good jobs, make health care more affordable and build secure retirements, Bush wants Congress to make deep cuts in programs all Americans rely on and that provide an indispensable backstop of economic and health security for vulnerable children and seniors, the disabled and the poor. Rather than solving problems for America's workers and their families, the Bush budget makes these problems worse, further threatening economic security for families:
The Bush budget gives a cold shoulder to Americans worried about trade and the ongoing loss of good jobs. In real dollars, Bush wants to cut trade enforcement by roughly 5 percent ($7 million) over last year's funding. And even though China engages in egregious trade violations that, in recent years, contributed to the loss of nearly half-a-million job opportunities for America's workers, Bush also wants to eliminate a China-specific trade enforcement and compliance program that Congress has mandated twice. In addition, despite the loss of millions of factory jobs, Bush proposes a 60 percent funding cut for the Manufacturing Extension Partnership, a nationwide program with a proven track record in helping manufacturers modernize, increase productivity and create and retain jobs.
Bush's budget will pit workers needing assistance against each other. Altogether, the Bush budget calls for more than $550 million in real dollar cuts in the Workforce Investment Act (WIA) and the Employment Service (ES) programs from 2005 funding levels. Since taking office, Bush has asked Congress to slash nearly $2 billion in real dollars from WIA and ES programs. Bush also wants to cut the Trade Adjustment Assistance program that retrains laid-off workers, even as American corporations continue to export jobs overseas, and to eliminate the Employment Service, a program whose sole mission is to match the jobless with jobs. Unemployed workers and poor kids should not be in competition with each other.
Bush's budget does nothing to restore eroding health care benefits for working families. Despite soaring health care costs for employers and workers alike and huge increases in states' Medicaid spending, the Bush budget does nothing to shore up employer-based health care, which serves roughly two-thirds of insured Americans, or to ease Medicaid burdens for the states. Instead, Bush wants to expand Health Savings Accounts, increasing workers' out-of-pocket health care costs, and to institute new health care tax credits, inducing even more employers to scale back coverage. Bush also calls for slashing Medicaid funding for states by $45 billion, imposing enormous new burdens, just as states are finally digging out of deep budget holes, and threatening health care for many, including poor seniors and the children of low wage workers. And under the Bush budget, veterans' health care funding will be more than 16 percent lower in 2010 than it is today.
Retirement "insecurity" takes center stage in the Bush budget. In addition to pushing for Social Security changes that are radical, risky and expensive, Bush's pension funding proposals penalize workers for their employers' underfunding of pension plans. Bush wants to cut federal pension guarantees, outlaw benefits that protect workers in the event of a plant shutdown and restrict the benefits workers earn at companies with financial difficulties. In addition, the Bush proposals jeopardize the entire defined benefit pension system by diverting $12 billion that could be used to fund pensions at financially weak companies into sharply higher premiums paid to the Pension Benefit Guarantee Corporation and imposing conditions that likely will drive many healthy companies away from providing defined benefit pensions at all.
Children lose big under the Bush budget. The president proposes to slash more than a half billion dollars in Education Department funding and to eliminate 48 department programs, one-third of the total number of programs he wants to end. Proposed cuts in child care funding would eliminate assistance for 300,000 children by 2009. And cuts in the food stamp program would end aid for as many as 300,000 individuals, most of whom are in low-income working families with children.
President Bush and his administration rationalize this tough love approach to the budget as essential fiscal discipline designed to achieve deficit reduction. But in truth, the president's budget is more an exercise in fiscal fiction than in honest and disciplined fiscal stewardship. At the very moment Bush asks working families to make health care, education, retirement security and job training sacrifices, he willfully refuses to "discipline" the single largest culprit in our budget crisis—his millionaire tax cuts—and he willingly seeks to swell the nation's debt more, with proposals to extend tax cuts and to privatize Social Security. In fact, Bush does not even address the long-term costs of these two huge deficit drivers in his budget, or factor in costs of future operations in Iraq and Afghanistan, estimated to be at least $80 billion this year alone.
Real truth in budgeting and genuine concerns for fiscal stewardship would demand forthrightness absent from the Bush budget. A budget that leveled with the American people would tell them that:
First, President Bush's tax cuts are the single greatest reason for the nation's spiraling budget deficits. According to Congressional Budget Office data, the Bush tax cuts account for nearly half of the increase in the nation's deficit since 2001. The tax cuts' share of the deficit is three times larger than the share caused by new spending on domestic programs. Making these tax cuts permanent, as Bush proposes, will add $10 trillion to the deficit over 20 years.
Unlike the budget cuts Bush now wants, which fall heavily on low- and moderate-income Americans, the budget-busting tax cuts Bush has pushed through overwhelmingly benefit the nation's richest. In 2004, 60 percent of the benefit from the Bush tax cuts went to the 20 percent of households with average annual incomes exceeding $200,000.
Second, although Congress should address Social Security's funding problems, Bush's answer—privatizing Social Security—is a radical approach that will gut Americans' retirement security and cost the nation a bundle. Privatizing Social Security would require cuts in guaranteed benefits for all future retirees. Equally troubling for the nation's fiscal health, setting up private investment accounts would explode the deficit. Privatizing Social Security would add nearly $5 trillion in new national debt over the first 20 years the system is in effect, putting us deeper in hock to such foreign governments as China and Japan. Moreover, although President Bush claims privatizing Social Security would not affect workers or retirees older than 55, the budgetary strains resulting from privatization would create enormous pressure to raise taxes or cut spending—including spending on benefits for today's older workers and retirees.
The bottom line on President Bush's budget is that it punishes America's workers and their families for the president's own misdeeds—his stubborn insistence on preserving and expanding tax breaks that mostly benefit the very wealthy. The budget most hurts America's working families who can least afford cuts in programs we all rely on in order to preserve extravagant tax breaks for the wealthiest among us. And instead of putting the nation back on surer fiscal footing, Bush's budget policies and priorities will worsen the nation's financial situation.
We hope Congress has the courage and decency to reject the president's shameful attempt to pass the buck for budget problems to America's families and will instead place the blame and fix the solution squarely where it belongs—on the president's tax cuts. It is dishonest to blame budget problems on programs that serve all Americans when their greatest source is tax cuts that benefit relatively few. It is fundamentally wrong to balance the federal budget on the backs of children, retirees, the poor and people with disabilities in order to save tax breaks for millionaires.