the federal budget seems like a dry, complicated issue, it is vitally
important to understand this current budget and its impact, particularly
on the “least of these among us.” Below are answers to frequently
asked questions about the Fiscal Year (FY) ‘05 budget proposal.
There has been much talk recently about the President’s
proposed federal budget-- the controversial tax cuts for the wealthy,
the unclear way in which it promises to cut the deficit, and potentially
damaging changes in the rules that govern the budget process.
does the ELCA oppose the President’s budget?
are the implications of the President’s tax cut policies?
will be most hurt by this budget?
are the current proposed budget rule changes and why is it important
to know about them?
will be the impact of the President’s budget on the domestic
is the deficit and why does it matter?
does the President propose to do about the deficit?
is a “budget rule”?
is an entitlement program?
is a discretionary program?
are reconciliation instructions?
Additional Information and Resources
does the ELCA oppose the President’s budget?
President’s budget is about priorities, and is a reflection of our
values as a society. A budget that disproportionately hurts the neediest
among us while making inequitable tax cuts permanent does not address
the needs of our society and is unsound fiscal policy.
The President’s proposed budget would:
tax cuts permanent for the wealthiest Americans
make broad cuts to important domestic
increase the already enormous federal deficit
This budget would cut
overall funding for domestic discretionary programs (what
is a discretionary program?) outside
homeland security by $141
billion over the next five years,
significantly reducing funding for many vital services like child care,
low-income housing, and job training.
ELCA Policy Base
The Evangelical Lutheran Church in America opposes
the Administration’s proposed FY ’05 federal budget. The ELCA supports a sound and balanced budget that includes
an equitable deficit reduction plan.
“Sufficient, Sustainable Livelihood for All” social statement
(adopted by more than two-thirds majority vote – 872 – 124 in 1999)
“Sufficient, Sustainable Livelihood for All” social statement calls
- “Citizen vigilance and action that challenges governments and
other sectors when they become captive to narrow economic interests
that do not represent the good of all;”
- “Correction of regressive tax systems, so that people are taxed
progressively in relation to their ability to pay;”
- “Scrutiny to ensure that new ways of providing low-income people
with assistance and services (such as through the private sector) do
not sacrifice the most vulnerable for the sake of economic
efficiency and profit;”
- “Adequate, consistent public funding for the various low-income
services non-profit organizations provide for the common good of
- “Public policies that ensure adequate social security,
unemployment insurance, and health care coverage;”
What are the implications of the President’s tax cut policies?
President’s budget proposes to make tax cuts permanent, especially
those for the most well-off. These
tax cuts are inequitable, overwhelmingly benefiting the very
White House estimates the cost of these tax cuts is nearly $1
trillion over 10 years.
federal government is spending about $500 billion a year more than
it is raising in taxes, and continued tax cuts will further
exacerbate this revenue shortfall.
cuts aren’t necessarily always bad, as long as they are part of a
balanced budget package. Tax cuts can serve a variety of purposes, such
as stimulating the economy. However, in the current environment of
dramatically increased war-related spending and a sluggish economic
recovery, tax cuts have only served to further increase the deficit
without a stimulus effect.
Who will be hurt by this budget?
The President’s proposed budget
disproportionately hurts those most in need of assistance:
more than 43 million Americans without healthcare
8.4 million unemployed Americans
more than 35 million Americans who live in poverty
250,000 low income families who could lose the Section 8 housing
vouchers that enable them to pay rent in 2005, with up to 800,000
families losing vouchers in 2009.
365,000 low income children who currently receive child care but
would not be served in 2009.
The neediest in our society will bear the brunt of
the president’s proposed cuts, while the wealthiest members of our
society will receive a continuous windfall.
All those in between will feel the effects as well. As the deficit continues to grow, it will slow economic
growth, reducing the average family’s income by an estimated $1,800 by
This is not to mention the
enormous and unfair burden it will place on future generations.
What are the current proposed budget rule changes and why are they
president’s FY ’05 budget contains several proposed changes to the
congressional rules governing the process by which federal budget policy
is enacted. These rules could have dramatic consequences for spending
and tax policy over the next 5 years.
prior years, little attention was paid to funding projections in the out
years (fiscal years after the upcoming budget year), since Congress only
appropriates funds for one year at a time. However, it is common for
Administrations to release 10 year tables using data that shows the
projected impact of the proposed budget for ten years out. The current
Administration has chosen not to follow that practice with this budget.
therefore misrepresents the costs and economic impact of the budget. It
is a subterfuge to the detriment of the average American and the poorest
Year Spending Caps
budget proposes to lock in for each year through 2009 a tight binding
cap on funding for discretionary programs. This cap would tie the hands
of future policymakers. If approved, these rule changes will require
Congress to make extreme cuts to critical domestic discretionary
The President has also proposed reinstating the pay-as-you-go
(Pay-Go) budget rule. Under the Pay-Go process (created by the Budget Enforcement
Act of 1990 in an attempt to reduce the deficit), legislation that
increased entitlement spending (what is an
entitlement program?) or decreased revenues (tax cuts) must be
offset so that the deficit is not increased. The 1990 Pay-Go rule
applied to both taxes and entitlements.
The President’s proposal differs dangerously from the 1990 rule.
The President proposes to reinstate Pay-Go only on entitlement
spending. It would impose
no constraints on new tax cuts. Essentially,
this means that any increased spending for entitlement programs would
have to be paid for by cutting other entitlement programs, but an
increase in tax cuts would not have to be paid for at all.
For example: if Congress felt there was a need to
increase spending on Medicaid/Medicare, this would only be possible if
they simultaneously cut funding for Food Stamps, or some other
entitlement program. However,
if Congress enacted tax cut benefits for the wealthy, they would not
have to offset this cost. Without
pay-as-you-go restraint on the tax side, the additional tax cuts the
Administration calls for in its new budget, along with its proposal to
make the tax cuts permanent, would add substantially to the deficit.
What will be the impact of the President’s budget on the domestic
proposed budget cuts would affect nearly every part of government —
including environmental programs, education and job training, veterans
programs, health, and transportation.
devastating effects of the FY ’05 discretionary (non-entitlement)
funding cuts would occur after 2005, except in 3 areas:
science, Space and Technology.
President’s budget effectuates significant cuts in domestic
discretionary spending over the next 5 years by use of the caps
described above (proposed budget rule changes). The cuts
generally would start in years after 2005 and grow deeper with
each passing year. By 2009, the overall funding for domestic
discretionary programs outside homeland security would be $45.4 billion
– or 10.4 percent – below the level needed to keep up with
the programs or program areas that would be cut are the following:
- Education for the Disadvantaged:
By 2009, Title I funding (funding for school districts to
improve educational outcomes for low-income and other disadvantaged
children) would fall $660 million below the 2004 level adjusted for
inflation. By 2009, the part of the budget that includes elementary
and secondary education, as well as job
training and other social service programs, would be cut by 7
percent, or $6.2 billion.
- Environment: In
2005, funding for the Clean Water Act State Revolving Fund, which
loans money to states to pay for sewage treatment plants, would be
cut 37 percent below the 2004 level adjusted for
inflation. The budget calls for even deeper cuts in this area
by 2009. Programs
which fund environmental protection and natural resources management
would be cut 20 percent, or $6.8 billion.
- Veterans Health Benefits:
Funding for veteran’s health services in 2009 would fall
17 percent — or $5.7 billion — below the 2004 level, adjusted
- Housing Assistance: Funding
for the housing voucher program, the nation’s principal low-income
housing assistance program would be cut sharply. This budget
could cut the number of families assisted by 250,000 in 2005, and
600,000 — or 30% of all assisted families — by 2009.
Most of these families live below the poverty line. These
cuts are deeper, and the policy changes more sweeping and
threatening to the low-income families and elderly and disabled
people whom the program serves, than any proposal advanced by any
prior Administration during the voucher program’s 30-year history.
- Health: By 2009, discretionary
health programs would be cut by 11 percent, or
$5.6 billion. This includes funding for the National Institutes
of Health, the Centers for Disease Control and Prevention, the Food
and Drug Administration, and community health centers.
- Child Care: Proposed
funding levels for child care programs would cause the number of
children from low and moderate income working families who receive child
care assistance to be reduced by approximately 365,000 by 2009.
- Head Start and WIC: Head
Start funding would fall 7 percent below baseline levels in 2009,
resulting in an estimated 62,000
children turned away from Head Start programs. In the
Supplemental Nutrition Program for Women, Infants and Children,
funding cuts would result in 450,000
low-income pregnant women, infants and young children served through
WIC by 2009.
What is the deficit and why does it matter?
The federal deficit is the amount by which
total government spending is more than government income during a
As the result of a weak economy, tax cuts,
spending increases, and lack of concern for fiscal discipline, the
United States has gone from a projected surplus of $5.6 trillion to
a projected deficit of about $5.1 trillion over the next ten years,
which would be the largest deficit ever in our nation’s history.
at the Brookings Institution believe the nation’s fiscal situation
is out of control, and fear this could do serious damage to the
economy in coming decades. Large, persistent deficits are harmful in
several ways, as they:
- weaken the economy
- lower family incomes
- sap our national strength
and make us more dependent on the rest of the world
- pass on large and
unnecessary fiscal burdens to future generations
What does the Presiden
t propose to do about the deficit?
The President’s budget claims to cut the
deficit in half in five years.
This claim is not credible,
and the proposed budget will actually increase
The savings that would be achieved from the
proposed cuts in domestic discretionary programs pale in comparison
to the cost of the Administration’s tax cuts. In
fact, the savings over the next five years from all of the domestic
discretionary cuts combined would be substantially less than the
cost of the tax cuts just for the one percent of households with the
What is a “budget rule”?
“Budget rules” are the rules and procedures
that govern the federal budget process. These rules were established
in 1974 to encourage Congress to set priorities for the entire
federal budget at the beginning of the year and to fit the
subsequent tax and spending actions within these parameters. While
the rules were successful in establishing a new system of budget
decision-making, they have also made federal policymaking more
complex. These budget rules have changed the focus of debate from
policy considerations to budget questions,
often making it difficult to implement desirable policy reforms.
What is an entitlement program?
An entitlement program creates a legal
obligation of the federal government to a person or entity that
meets legislatively defined criteria. These
benefits are usually financial, but can also be in the form of
government-provided goods or services. Entitlement programs are
established by law and continue unchanged and automatically funded
unless Congress passes new laws. By contrast, discretionary programs
must receive an appropriation every year, or they cease functioning (what
is a discretionary program?).
Examples of federal entitlement programs
Medicare and Medicaid
Most Veterans' Administration programs
Federal employee and military retirement plans
School Lunch Programs
Farm Programs and agricultural price supports
What is a discretionary program?
A discretionary program is a program whose
funding is determined annually by Congress. A discretionary
program is not guaranteed to continue, but rather is funded on a
year by year basis, the level depending on how much non-entitlement
money is available each year.
Examples of federal discretionary programs
8 housing rent subsidies for low income individuals and families
Childhood and Education Programs
(The Special Supplemental Nutrition Program for Women, Infants,
Bureau of Investigation
and Regional Development Programs
Reconciliation is an
optional part of the budget process.
A budget resolution may sometimes
"reconciliation" instructions, designed to ensure that
income and spending levels comply with the resolution.
Every year the House
and Senate Budget Committees are responsible for developing a budget
resolution that defines how much they want to spend in the upcoming
budget year. The Budget Committees may decide to reduce the deficit by
reconciling current income and spending levels with their budget
accomplish this by instructing various Congressional committees to
modify entitlement programs under their jurisdiction to bring
spending and revenue into conformity with the budget resolution.
For example, the tax committees may be instructed to amend
tax laws to increase revenue. Authorizing committees (committees
that design and approve programs; i.e. the Agricultural Committee
authorizes the Federal Food Programs) may be asked to find “savings,”
which they might do by cutting services or limiting participation in
certain entitlement programs.
instructions dictate to the Committees to which they apply a
deadline by which the change in legislation is to be reported or
submitted, and the dollar changes to be achieved, but do not
generally specify how these changes are to be made or the programs
to be affected. The
reconciliation process applies only to entitlement programs, but may
not be used to make changes in Social Security law. The
reconciliation process usually takes a number of months.
12. Further Information
If you would like to
find more information, research or studies relating to the President’s
current budget proposal, try the following resources:
Center on Budget
and Policy Priorities
research and analysis to inform public debates over proposed budget
and tax policies and to help ensure that the needs of low-income
families and individuals are considered in these debates. A
number of in-depth and current analyses of the President’s budget
can be found on their website:
Brookings Institution recently released a new study, Restoring
Fiscal Sanity: How to Balance the Budget, which offers a
thorough analysis of the country’s fiscal situation and suggests
specific steps that could be taken to restore balance.
Coalition on Human
Needs recently released an in-depth analysis of the President’s
budget proposal: Slamming the Door Shut on Opportunity for All Americans.
The report can be found on their website.
Bread for the
For more information
on the Federal Budget Process, see Bread for the World’s
information contact: Kay_Bengston@elca.org; phone: (202)