Cutting the Budget, Bleeding Us Dry

Michelle Chen

The poor aren't feeling the benefits of the economic "bounceback"--and cutting Social Security won't help. (Image from Shutterstock.)

If you feel like that recovery we keep hearing about hasn’t quite trickled down to your block, there’s a good reason. A huge swath of the country’s workers are out of sync with the economic cycle, continually falling further behind the rich. And, now Obama’s proposed budget may hinder them even more.

According to a new multi-year study by Pew’s Economic Mobility Project, many families are priced out of recovery” for reasons that long predated the recession and will persist indefinitely even as the economy bounces back.”

Though it’s unsurprising that economic insecurity becomes more ingrained over time, the Pew study reveals that struggling families have had to make trade-offs that further deplete their’ resiliency for coping with the next crisis. According to the analysis, Those without personal savings and kinship networks to support them frequently used resources they had allocated for their children’s education or their own retirement to fund short-term needs.”

Experiencing unemployment is linked not only to temporary income loss, but to a long-term erosion of wealth over many years. With long-term joblessness still at epidemic levels, the trauma of the recession may bleed into a lifetime of hardship, freighted with crushing debts, or dependency on meager public benefits, or the foreclosure of their children’s college prospects. 

Racial barriers amplify the financial strain; Pew reports that families of color were more vulnerable to job loss than white families, and there remains a massive gap between blacks and whites in median household wealth.

The researchers conclude, unemployment and the trade-offs it requires affect families’ short-term economic security and their long-term mobility prospects.” They also warns lawmakers that without substantial emergency funds or access to institutional supports, low income families and households of color are much more vulnerable to economic hardship during any financial downturn.”

That might sound like a obvious conclusion, but it hasn’t yielded anything resembling a commonsense solution in Washington.

In fact, in the name of deficit reduction, both parties want to slash funds for critical social programs when families are more dependent on them than ever. Obama’s budget goes even further than the GOP’s plan by eroding Social Security through the chained CPI” calculation, which would cumulatively bleed seniors’ income over time.

This isn’t just an abstract fiscal math trick but a very real assault on people who are nearing the end of their working lives and have seen the recession swallow up their retirement nest eggs. In a stagnant labor market glutted with low-wage, low-benefits gigs, many out-of-work and underemployed peopleespecially the nearly 40 percent of the unemployed who’ve been jobless for 27 weeks or longerwill now drift from the devastation of joblessness to deprivation in retirement. Rebecca Thiess, an analyst with the Economic Policy Institute, tells Working In These Times via email:

Many long-term (and even shorter-term) unemployed people rely … extra-heavily on [retirement] benefits like Social Security. Many long-term unemployed will opt to collect early retirement benefits if they cannot find work, and in doing so they collect lower benefit levels than they would have had they waited until the full retirement age. Adding in another reduction to benefits via the chained CPI, a policy included in the president’s budget, is a double whammy for people already forced to collect reduced benefits.

With modest initiatives to boost education funding, raise taxes on the wealthy and control healthcare costs, Obama is selling his budget as an alternative to greater evil: the Republican agenda for dismantling major social programs like food stamps and Medicaid.

But Obama’s lesser evil still reduces discretionary social spending overall, while undermining workers’ retirement incomes. More nefariously, the framework preserves bloated Pentagon budgets and a hugely pro-corporate tax structure.

The Obama budget does propose some funding for infrastructure-based stimulus projects, along with a boost in the minimum wage. But these moves are too weak to really close the jobs gap” produced by the recession. (A more worker-focused plan from the House Progressive Caucus proposes $4.2 trillion in stimulus over ten years.)

It’s simply just a cost-burden shift that threatens to land costs more squarely on lower, working and middle-class families,” says Jo Comerford, executive director of the progressive think tank National Priorities Project. If federal investments vanish, local communities would have to absorb the shock of losing critical resources like Community Development Block Grant funds for housing or environmental clean-up. Much of the cost may ultimately then get dumped onto residents. Local governments are going to try to go forward with needed infrastructure, housing and environmentally based reforms,” says Comerford. “[But] to do so, they’re going to have to draw funds from someplace else. For example, to shore up school budget deficits, cities may be forced to pass budget overrides or raise property or sales taxes.”

Cutting the deficit won’t reduce people’s unmet needs, it will just offload the cost onto institutions and individuals who can least afford it. At the household level, the Pew report describes working parents forced to mortgage their retirements to shore up their children’s increasingly precarious futures as students and workers.

To families, the cost of these social deficits vastly outweighs the risks posed by the deficit boogeyman, trotted out by lawmakers to justify plundering the public trust. The basic problem isn’t runaway social spending, but rather a dismal economy built on a regressive tax code, along with corporations’ relentless drive to lower wages and working conditions.

When politicians lecture us about living within our means,” they’re insulting the people they have quietly robbed of the means to live.

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Michelle Chen is a contributing writer at In These Times and The Nation, a contributing editor at Dissent and a co-producer of the Belabored” podcast. She studies history at the CUNY Graduate Center. She tweets at @meeshellchen.

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