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WebMemo #663 on Federal Budget

February 11, 2005

President's Budget Does Not Threaten the Safety Net

By

Budgets are about setting priorities, and restraining runaway spending and budget deficits requires difficult trade-offs. Still, President Bush's fiscal year 2006 budget proposal has met with predictable opposition from those whose favored spending programs face reform. Some critics have accused the President of trying to reduce the budget deficit "on the backs of the poor" by slashing anti-poverty spending. This is not the case. Federal spending on low-income families has increased 42 percent under President Bush-a rate nearly double that under President Clinton-and it is slated to expand again in 2006. The President's budget does not disproportionately single out these programs, which will continue to have sufficient funds to carry out their missions.

Spending Trends

Table 1 shows poverty relief spending since President Bush took office in 2001.

Table 1: Anti-Poverty Spending Is Up 42 percent under President Bush

Program

2001

2005

Increase

Total

Per year

Medicaid

$129,374

$188,497

46%

9.9%

Food/Nutrition

34,053

53,103

56%

11.7%

Housing

30,091

37,255

24%

5.5%

EITC

26,123

33,790

29%

6.6%

Child credit

982

13,516

1276%

92.6%

Other

61,391

74,265

21%

4.9%

Total

282,014

400,426

42%

9.2%

(dollar values in millions)
Source: Calculated from Office of Management and Budget, Budget of the United States Government, Fiscal Year 2006: Historical Tables. Medicaid figures are from Table 8.5, while other costs reflect budget functions 604, 605, and 609 in Table 3.2. Tax credits reflect outlays only, not tax relief.

The 42 percent increase under President Bush translates to an average annual increase of 9.2 percent. By comparison, these programs grew by an average of 5.5 percent annually under President Clinton.[1] Critics may suggest that increased poverty has driven costs up since 2001. Despite the recession, however, poverty rates have increased by less than one percent under President Bush and remain lower than the average poverty rates under the Clinton Administration. Nonetheless, poverty-relief programs have grown faster under President Bush.

Results Matter More

These spending numbers are not intended to prove that President Bush has been "better" on poverty issues than other presidents. Government programs should be judged by their results and value, not just by their budgets. From the 1960s through the mid-1990s, Washington spent more than $5 trillion on anti-poverty programs that did not make a dent in the poverty rate. Record-low poverty rates were finally achieved in the late 1990s not because of extra federal funding, but as a result of welfare reforms moving low-income individuals out of the welfare system and into the workforce while also promoting family formation.[2] Those who judge America's progress against poverty by spending levels confuse inputs with outputs.

What's Really in the Budget

Despite critics' claims of major cuts, President Bush's budget actually increases spending on poverty programs by 2 percent. After expanding 42 percent since 2001, these programs certainly can stand to grow a little more slowly than before. The budget's proposals to save money from these programs are designed to increase efficiency and better serve targeted populations, not to reduce benefits. For example, the President proposes saving $60 billion from Medicaid over the decade by restructuring prescription drug payment formulas as well as by cracking down on state schemes to defraud the program. He then proposes $16 billion in new Medicaid and S-CHIP spending and a $120 billion in new health tax incentives. This is a net expansion of assistance.

And although some anti-poverty programs are reduced, they are by no means singled out. The President calls for a crackdown on corporate welfare by shaving $8 billion over the next decade from farm subsidies for large agribusinesses and by eliminating the Advanced Technology Program, which subsidizes dozens of Fortune 500 companies. In order to reduce runaway spending and budget deficits, additional spending cuts are spread across programs such as energy, justice, transportation, and water projects.

Conclusion

Budgets are about setting priorities, and all programs must be on the table in order to restrain federal spending. That said, the large increases in poverty-relief spending since 2001-and the additional (albeit smaller) increase proposed for 2006-show that the President is not disproportionately targeting poor families for budget cuts. More importantly, vital programs that have succeeded in reducing poverty will continue to operate effectively.

Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

Show references in this report

[1] Calculated from Office of Management and Budget, Budget of the United States Government, Fiscal Year 2006: Historical Tables. Medicaid figures are from Table 8.5, while other costs represents budget functions 604, 605 and 609 in Table 3.2.

[2]See Robert Rector, "Understanding Poverty and Economic Inequality in the United States," Heritage Foundation Backgrounder No. 1796, September 15, 2004, at http://www.heritage.org/Research/Welfare/bg1796.cfm.

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