As the war in Ukraine grinds on, a look at the economic battlefield and how the conflict might permanently reshape the global economy. Diane talks to Sebastian Mallaby, senior fellow for international economics at the Council on Foreign Relations.
In a recent poll, more than one in three Americans reported negative effects of the sequester. That’s up from one in four when the $85 billion in budget cuts took effect in March. A Meals on Wheels Association of America survey showed nearly 70 percent of local programs have had to reduce the number of meals served to housebound seniors. Head Start programs for preschoolers have shrunk, funding for medical research is reduced and national parks are scaling back services. Diane and her guests discuss the broad reach of sequestration on Americans’ lives.
- Jared Bernstein Senior fellow at the Center on Budget and Policy Priorities, and former chief economist and economic policy adviser for Vice President Joe Biden.
- Annie Lowrey Economic policy reporter for The New York Times.
- Steve Taylor Senior vice president of public policy at United Way Worldwide.
- Vinsen Faris Chairman of the board at Meals on Wheels of America.
- Mary Woolley President and CEO at Research!America.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The managing director of the IMF, Christine Lagarde, said the across-the-board sequester cuts in the U.S. have not only reduced prospects for economic growth in the short term, they've also hurt societies most vulnerable.
MS. DIANE REHMJoining me in the studio to talk about the sequester's effects on American lives: Jared Bernstein from the Center on Budget and Policy Priorities, Anne Lowrey of The New York Times and Steve Taylor of United Way Worldwide. Do join us, 800-433-8850. Send us an email to firstname.lastname@example.org. Follow us on Facebook or Twitter. Good morning to all of you.
MR. JARED BERNSTEINGood morning, Diane.
MS. ANNIE LOWREYGood morning.
MR. STEVE TAYLORGood morning.
REHMGood to see you. Jared Bernstein, how come we're just now beginning to feel the effects of the sequester?
BERNSTEINBecause these type of things typically phase in. Most of the agencies and programs whose funds are being cut because of sequestration are operating on funds that were coming to them over the years, and they're able to go a few months on kind of rainy day funds, what they had in the bank as it were. Now we're starting to see the cuts fall. We're seeing them -- and I know we'll get into the details throughout the show. We're seeing them in Meals on Wheels. We're seeing them in housing subsidies.
BERNSTEINAs many as 140,000 low-income families could end up being denied rental assistance at a time when, of course, demand for that sort of thing is going up in a tough economy. Unemployment insurances being cut for some long-term people who are jobless, medical research, park services, Head Start, you know, that one -- can I just read one thing quickly to you? This is something that, you know, I'm -- I've been in your show a fair bit, and I consider myself a pretty hardboiled economic analyst.
BERNSTEINAnd this thing kind of brought a tear to my eye. I was reading about this Head Start program in Indiana where they're having a lottery. And if you "win the lottery," you'll lose your Head Start slot in a couple of counties. And there's one woman, wrote of her son who was chosen in the lottery. "He can say his ABCs. He's counting to 100. He writes his name. I'm very proud of him." She was heartbroken when his name was chosen, and she said, he loves school. I don't know how I'm going to tell him he's not going back.
REHMInteresting. And Annie Lowrey, you've written about many of these programs being cut. Talk about the -- in the case of the military, the civilians and the contractors.
LOWREYRight. So this is one place that's really going to feel it. It's the civilian part of the military. And there's currently about 800,000 people that are civilians in the military. And starting next month, about 650,000 of them are going to start going on mandatory furloughs. So this start -- hasn't started happening yet, but it's coming really soon.
LOWREYAnd what that's going to mean is that these people are going to miss a day of work. They're going to miss a day of pay. And in communities where you have a lot of presence of contractors of the military itself, you're really going to start feeling that, and one of those places is Washington, D.C., especially Virginia.
REHMAnd what about in the case of the poor, those who have so little money?
LOWREYSo one of the great ironies of sequestration was that it was supposed to exempt low-income programs. And they exempted a lot of them, right? It exempted Medicaid, for instance. But it didn't exempt all of them. And so you've got all of these programs through HUD, through USDA, through the Education Department that are getting cut.
LOWREYAnd in a lot of cases, the people that are feeling this most are low-income families who are losing things like rental assistance or Head Start spots or even with something like unemployment insurance. The lower income you are, the more you're going to feel that. And so actually, despite the fact that this was not supposed to hit the poor, it's hitting the poor really hard.
REHMAnd, Steve Taylor from United Way Worldwide, to what extent are your organizations able to make up some of those cuts?
TAYLORWell, that's a great question, Diane, and it's United Ways in local communities that are really confronted with the reality of these cuts. And so it's where small non-profit agencies are interacting with people that need help. That's really where the rubber hits the road. And when the government funding is cut, they are turning to United Ways and asking them for help. Bu the reality is that since 2008, 2009, when the recession hit, the funding -- the private sources of funding, the non-profits has been down.
TAYLORAnd so there really isn't private funding to make up for the cuts in government funding. You have to remember that services are really a partnership. And so it -- these non-profit agencies piece together their funding. They have some government funding sources. They have some private funding sources. But when the government -- we're really in a partnership. And when the government funding is cut, it's really like a partner is no longer living up to their obligations.
REHMAnd joining us now is Vinsen Faris. He's chairman of the board at Meals On Wheels Association of America. He joins us from Capitol Hill. Good morning, sir.
MR. VINSEN FARISGood morning, Diane.
REHMTell us about the hearing you're attending.
FARISThe hearing today is primary health and aging, and it really deals with reducing senior poverty and hungry and the role of the Older Americans Act in that.
REHMAnd what are some of the highlights of the recent survey of Meals on Wheels programs across the country?
FARISWell, the survey had to do with the impact of sequestration seen to date. And, of course, we're dealing with this at a time when one in seven seniors are going hungry across the nation. But sequestration is not making our jobs in trying to deal with that senior hunger any easier. Our programs reported back that over 40 percent of them are actually eliminating staff positions, 50 percent are reducing the number of seniors being served, and 70 percent are cutting the number of meals being served.
REHMWell, tell me how much of the Meals on Wheels programs are actually funded by the federal government.
FARISThe large number of meal programs out there, we have some that receive a good deal of federal support, some that don't receive any. Only 30 percent of all money spent for meals on wheels is from federal sources.
REHMSo how many meals are served each day, and how many volunteers are you using?
FARISWe are serving just over a million meals daily across the country, and we're so blessed to have over 2 1/2 million volunteers in -- out there helping us deliver those meals and checking on those shut-in folks.
REHMAnd how many paid employees?
FARISDiane, I do not know that. There are over 5,000 senior nutrition programs across the country.
REHMI see. OK. I gather you're also executive director of the Johnson and Ellis County Meals on Wheels program in Texas. What are you experiencing on the local level?
FARISIt is a challenge. It is a challenge. And somewhat, that Steve mentioned earlier, all of the programs are facing this. And because of that, we're finding people that we've never heard before reaching out to us. However, in our shop, we've had to reduce services by 12 percent. We have cut back one day our breakfast meals that we serve, and we've reduced some staff positions. So it's a challenge, and it's going to continue to be so.
REHMSo what happens, Vinsen, if you're delivering meals to an elderly person who cannot get out, who, in some way, is totally -- pardon me -- housebound? What happens when you say we won't be here anymore?
FARISWell, those that are on services, hopefully we're going to continue to be able to keep them on service. So we won't be cutting anyone off of their current services. We may be reducing the amount of meals that they receive. It's going to be those people calling in who -- and that are referred to us that we simply won't be able to put on service because we may not have the resources to do that.
REHMWell, I certainly wish you extending luck. Vinsen Faris, he's chairman of the board of the Meals on Wheels Association of America. I know you wanted to add something, Steve. Go right ahead.
TAYLORYeah, Diane. I just wanted to build on something that Vinsen said because I just heard from the CEO of the United Way in North Florida that provides support for that local Meals on Wheels, and they only are able to provide the seniors in their community five meals a week. One meal a day is what they provide. And for a lot of those seniors, that's the only meal that they have. And they're going to be cutting back from five meals a week to four meals a week. And so really, when you take it down on the ground, it's, you know, it's real people who are really being hit by this.
REHMYou know, it's so interesting because this sequester, across-the-board cuts, they talked a lot about defense spending, they talked a lot about big government programs. They talk very, very little about how ordinary Americans are being affected. Jared.
BERNSTEINThat's exactly what I was thinking of when I was listening to Vinsen. And we're counting some of the things that we've been talking about so far. The question in my mind is the things we're hearing about, the kid who lost his Head Start slot, the seniors who now won't be able to get on the Meals on Wheels rolls -- and these are very disadvantaged folks obviously -- we have to ask ourselves, is denying those services really the best thing for America right now?
BERNSTEINDoes that really make a difference to our fiscal situation? The answer is absolutely not. We are nibbling at the edges in a way that exacerbates economic pain, and we're not addressing what really matters to our fiscal long-term problems.
REHMJared Bernstein, senior fellow at the Center on Budget and Policy Priorities. When we come back, we'll talk about some of the programs that have been exempted from sequestration. Stay with us.
REHMAnd here is our first email as we talk about programs being affected by sequester. This from Mike in Oklahoma, who says, "While my heart goes out to those folks going on furlough days in the Department of Defense, we've already had a couple of pay periods worth of furloughs here in the Public Defender's Office. And in October, several of our jobs, including mine, are going to disappear. My guess is the DOD will continue to be able to carry out its mission, but we are increasingly challenged to do so. God help you if you need an attorney but can't afford one." Annie.
LOWREYYeah. So this is a really good point. And I think that one really interesting thing about that email is it kind of demonstrates how this -- the effect of this sequestration is being felt sort of slowly and diffusely, right? So that emailer knows that his job is going away as of October. And so, you know, that's not going to show up in the national statistics until maybe November.
LOWREYAnd so you can look around and you can kind of say, well, I don't really see sequestration showing up. The economy seems to be doing about as well as it has been. But nevertheless, this is going to accumulate over time. And absolutely even, again, if these cuts are being felt diffusely, they're absolutely being felt and -- across the entire government. And we're just sort of unraveling how these are starting to show up.
REHMJared, let's talk for a moment of how the sequester is having an impact on housing.
BERNSTEINMm hmm. Mm hmm. Well, this is a time when demand for low-income housing is increasing significantly because the economy is improving, as Annie said, but it's still weak, particularly for those at the lower end of the scale. And as I mentioned earlier, cuts to the housing authorities that amount to over $2 billion as part of sequestration this year could end up denying rental assistance to over 100,000 low-income families.
BERNSTEINBut let's talk about how that plays out on the ground a little a bit. And, you know, I can go through the states in alphabetical order, but it would take the whole show. Huntsville, Ala., in the housing authority there, they provide heating and plumbing and financial assistance. They're going to be serving 300 fewer people.
BERNSTEINIn Tucson, Ariz., the city may be forced evict somewhere between 250 and 400 families from public housing. And it goes on, Arizona, California, and not just, by the way, rental housing -- which is a lot of what we're talking about here, the kind of vouchers that support that -- but homeless programs. And homelessness is on the rise as well.
REHMSo what happens with United Way when you see these kinds of cuts go into effect?
TAYLORSo this is -- Diane, this is the exact kind of story that we hear from local United Ways every day. In Providence, R.I., there is a program that the United Way supports called Road Home, and they get 50 calls a day from people who need housing assistance. They're able to help four. And so the need has really gone through the roof, and we're just not able to meet the need.
LOWREYA few months ago, I talked with the D.C. Housing Authority, which is also absorbing a cut, and kind of asked them how this is going to affect them. And they said that they probably won't have to move anybody out of housing, but they're not going to turn spots over. And they're just going to add people to waiting lists.
LOWREYAnd the problem is in D.C. where rents are really high and there's a lot of demand because there's a lot of income inequality in D.C., people have been on waiting lists for more than a decade, in some cases. So this taking a program that's already underfunded, in terms of need, and it's just taking away money from it.
BERNSTEINThat's a great point. The last thing Annie said is really important. And we're talking about Head Start and how they're cutting slots. Well, well under 50 percent of kids who are eligible for Head Start are even getting Head Start. So we already have very large gaps between eligibility and services. And it's the same thing with public housing. So we're really cutting, you know, to say you're cutting to the bone doesn't go far enough.
REHMAll right. And joining us now is Mary Woolley. She is president of Research!America. She's also CEO. Good morning, Mary.
MS. MARY WOOLLEYGood morning, Diane.
REHMWho does Research for America (sic) represent?
WOOLLEYResearch!America is a nonprofit alliance of patient organizations from the very large, like American Heart, American Cancer to the small ones that deal -- help people deal with rare diseases and disorders. We -- our other members include the academic university institutions that conduct research, the private sector -- that's pharma, biotech and the medical device companies -- and scientists themselves. So it's a quite large alliance of many of those who are direct stakeholders in research for health.
REHMSo last month, you issued a report titled "Sequestration: Health Research at the Breaking Point." That sounds pretty drastic.
WOOLLEYWell, it is drastic. Sequestration could not be coming at a worse time when you consider the people who in every family, ordinary Americans with family members struggling with cancer, Alzheimer's, diabetes and so many other difficult conditions and diseases that those families, all of us, would be expecting that we're pursuing every avenue of medical research at the level of the opportunity in science that really is there.
REHMAnd we've been hearing stories of people being turned away from cancer centers. What can you tell us about that?
WOOLLEYSadly, that is true. Thousands of people are being turned away from cancer centers all across the nation, New Mexico to New York, South Carolina to Florida to Oregon. And they're being turned away because sequestration -- for two reasons. Sequestration has cut some of the aspects of Medicare that directly apply to reimbursement for treating cancer patients.
WOOLLEYThey're also being turned away from the clinical trials that are funded through the National Institutes of Health and its National Cancer Institute where many cancer patients have the opportunity to benefit from new treatments. And those are treatments who are -- that are being put on indefinite hold as researchers are being furloughed and let go and focusing on what's their next job going to be rather than on finding cures.
REHMYou know -- and you have to wonder what this could mean for the U.S. as the leader in developing new technology.
WOOLLEYWell, I think it's the handwriting is clearly on the wall. Many other nations have taken a page from the United States playbook that we've been using for several decades but have currently been ignoring because those companies know that both their economic growth and the health and prosperity of their citizenry depends on investing robustly in research and development and depends, in addition, on assuring that the policy climate for the private sector will stimulate innovation rather than choke it off.
REHMMary Woolley, she is president and CEO of Research!America. Thanks for joining us.
WOOLLEYThank you, Diane.
REHMAnd turning to you, Jared Bernstein, all of us are wondering, how long is this going to last?
BERNSTEINOh, that's a really important question. Because people don't -- a lot of people think that if we can just slog through 2013, we're done. Unfortunately, the answer is 2021. OK? This thing is in place for nine years, 2013 to 2021. And it ultimately is supposed to cut $1.2 trillion off of the budget over that time period. And we've seen $85 billion of those cuts. That's what we're talking about so far. So there is a lot more to come unless Congress can figure out a way to either get rid of it or replace it.
REHMAnd let's talk about who and what has been exempted from sequestration, Annie.
LOWREYSo the best way to think about this is that the parts of the budget that in the long term are going to cause the most trouble have been exempted. So in the long term, health care costs are the really, really big challenge for the government. Even though we've seen this great slow down recently, the aging of the population is going to drive those costs up, and there's some concern that they might return to -- closer to trend growth.
LOWREYAnd so you saw some small cuts in Medicare, but you didn't see cuts in Medicaid. You didn't see cuts in Social Security, which eventually might need some sort of budgetary fix. Instead, you saw a lot of cuts to defense and non-defense discretionary programs, and those are not the part of the budget that people really worry about.
REHMWhat about the air controllers?
LOWREYSo some money got put back. You know, there was some concern, for instance, that WIC, which is a really important program for pregnant women and women with infants who are very low income, that funding got put back. The air traffic control funding got put back, but virtually nothing else got put back. There's really important programs that are still absorbing cuts.
BERNSTEINI mean, meat inspection got put back for a similar -- but -- by the way, on the Medicare, Annie's right, but people think that there are no cuts to the social insurance program, Social Security and Medicare. There is a cut to Medicare, as Annie mentioned. It's 2 percent, and that actually amounts to $11 billion, and that's behind what we just heard from Mary Willy on some of -- Mary Woolley, sorry -- on some of those cancer treatments that people aren't getting.
REHMAnd what can people expect when they go to the parks this summer, Annie?
LOWREYYeah. So this is another part of the budget that's getting crimped, and so you're starting to see places that are either shutting parts of parks down, people who are losing their jobs. And one other cut to the bureau of the Interior that, I think, people don't quite realize that affects low-income people is to American Indian and Alaskan Native communities, which are among some of the sickest and poorest in the country, and they're absorbing huge cuts because they get money from a lot of federal programs.
REHMIs it fair to say that the burden of sequester cuts is falling on those who can least afford it, Steve?
TAYLORAbsolutely. And it's just -- what's -- what I find really ironic is when Congress is embarrassed about something, when there's long lines at the airport or when the White House stops giving its tours or people have trouble getting into parks, Congress gets motivated to do something about it. But when it's cuts to kids getting Head Start programs or cuts to seniors getting meals assistance, they're silent, and it's just -- it's really astounding that Congress isn't doing something about our most vulnerable.
BERNSTEINI mean, I think that's absolutely right on the non-defense side of the issue. We also should remember that there are $43 billion in 19 -- in 2013 of defense cuts as well. So it's kind of an interesting thing. You often think that Congress would never allow defense to be cut. They'll just go after the kind of programs Steve was just talking about. And it is true: They're the most vulnerable folks, but let -- but the defense cuts are real.
REHMAll right. It's time to open the phones and to remind you you're listening to "The Diane Rehm Show." Here -- first to Indianapolis. Good morning, John.
JOHNYes, good morning.
REHMGood morning, sir. Go right ahead.
JOHNIs it true that our aid to Israel has not -- has been exempted from the sequester?
BERNSTEINI believe -- I actually don't know the answer to that question. It's a...
BERNSTEINIt's a small piece of the puzzle.
REHMWe'll see if we can get an answer to that question. Let's go to Sarah in Raleigh, N.C. You're on the air.
REHMYes. Go right ahead, sir.
CRAIGHey, this is Craig from Denny's, if you remember me...
REHMGo right ahead.
CRAIG...from the restaurant. OK. My comment is that it amazes me congressmen that -- and politicians that we vote don't really care about people that give so much to this country, and the only food that they can get is maybe five meals a week and need to get cut to three. I mean, I work -- I mean, I have a restaurant. I also volunteer in the food shelter, teaching very problematic students about how to cook from -- real food that come from the ground. It amazes me that it's so hard to feed people that cannot afford it.
TAYLORYeah. You know, I agree, and what we are seeing is folks who have never needed help before who are showing up at social service agencies asking for help. They are folks who used to give to the food pantry, make contributions to their local charity, and now they find themselves in a position where they're having to go and ask for help. And that's some of the furloughs resulting in that. You have people whose pay are being cut by 20 percent. It's maybe a single mom. They're getting by paycheck to paycheck, and then the next thing you know, they're needing help there in the system.
REHMAll right. To Francestown, N.H. Good morning, Dennis.
DENNISGood morning. I just -- I appreciate what has already been said, and I want to just add to the same comment that it -- you know, to me, this is about Congress not answering the questions that they need to answer. But more specifically, it's about the voice that people have. And the people that you're talking about today, which I really appreciate, are people who do not have a voice.
DENNISBut the people who do have a voice, like the air traffic controllers, they're -- that gets straightened out. I think this is a real injustice, and I hope you continue to comment on that and talk a little bit further about it. Thank you.
REHMThank you, Dennis.
BERNSTEINI think Dennis makes a great point in terms of who has voice and who doesn't here. One of the only areas that we've been cutting in this budget amidst all of this deficit cutting that's been going on in the last few years is on the discretionary side, and as I mentioned, that includes defense. That's not always such an easy lift for some of the politicians.
BERNSTEINBut it also includes what we call non-defense discretionary. That's everything we've been talking about so far, except for defense -- the Meals on Wheels, the Head Start, the housing, the medical research, all the stuff that Steve tries to help people with -- and those folks do not have a political voice.
REHMAnd, Steve, tell us what happened when a Toledo 2-1-1 call center lost its government funding credit.
TAYLORRight. Well, I -- and I just heard from the CEO of the Toledo United Way yesterday, and they're very concerned because they get a chunk of funding for this information and referral line 2-1-1 where people call to get help. And we have more and more people who are calling to try to get directed to services, and now the 2-1-1 call center is not -- does not have enough funding to take the calls. And so, you know, even just trying to connect people to help has become more and more of a challenge.
REHMAnd the domestic abuse center in Albuquerque?
TAYLORRight. So United Ways are -- they try to meet whatever the needs are in their communities. And so in Albuquerque, the United Way saw that there was a need for victims of domestic abuse, and they set up a center in conjunction with the police department there and with medical providers there. And they're providing this really desperate need in the community, and they're just not going to be able to help as many people.
REHMSteve Taylor, he's senior vice president for public policy at United Way Worldwide. Short break, right back.
REHMAnd on that question of Israel, according to Josh Rogin, who writes for Foreign Policy magazine, Secretary of State Kerry testified before the House Foreign Affairs Committee, saying that there is a plus-up in the budget but then there will be a reduction from the plus-up because of sequestration. The State Department's new budget request also includes 370 million for the West Bank and Gaza.
BERNSTEINWell a couple of things. First of all, sequestration cuts across the board and so the State Department's...
BERNSTEIN...budget -- Israel -- that would be cut. But let's think about that number, 370 million. Now, I'm not saying that's nothing, but we're talking about an $85 billion sequestration and a $3 plus trillion budget. So people often think that foreign aid is the biggest part of the budget. It's actually relatively small. Look, I think the larger point here, whether you're talking about Israel or anything else we've been talking about today, is that this is what a dysfunctional Congress looks like on the ground, OK?
BERNSTEINA lot of times in this room, we talk about the dysfunctional Congress. And maybe it's even a giggle, like all those guys can even decide where they keep the lights on, which is kind of true. But when you start talking about people's lives and the way these kinds of cuts play out on the ground, then you actually see how this dysfunction is playing out. And not only is it pretty horrible but it has nothing to do with improving our fiscal position.
REHMAll right. To Syracuse, N.Y. Good morning, Mark.
MARKYeah, I had a statement. First, you know, we have been living on credit for a long, long time. We have gone through self-security. We've gone through all the retirements for the military and the civil service, and, you know, we all got to tighten our belt here. We got to do something because we have nothing left. We have no resources left except taxation. And we've already taxed to the maximum. And the second question I have is for the lady who spoke about the housing in D.C., if they were on the list for that long, you said, a lot of years, there are multiple years, where are they current living?
LOWREYSo in a lot of cases, people who qualify for housing assistance are just spending out of pocket, right, or they're doubled up in houses, they're living with family. So, you know, in some cases, they're homeless. That's -- there's a problem with that in D.C. as well. And so, you know, there's really diverse situations. And in a lot of cases, these are families and folks who are disabled. And so maybe they seek other social services. And I don't know specifically, you know, where those folks were living but some place in D.C. presumably.
LOWREYAnd year after year, they qualify, but they don't find assistance. And to the earlier point about living on credit, I think that the important thing to remember about sequestration is that neither Democrats nor Republicans really wanted this. It's a really big cut over 10 years. It's a cut that moves them a lot closer to their goal. But it's a cut in a way that both agreed was really stupid.
LOWREYIt's not tackling the long-term problems. It's not tackling entitlements. It's not tackling spending through the tax code. It's kind of a silly way to cut. And they still think that. And they just haven't managed to undo it. And I think that it's going to be very interesting in future budgets watch them kind of wrangle with this because the path of least resistance is just to let the cuts go.
REHMAll right. Thanks for calling, Mark. And here's a question from Christina in South Bend, Ind. She says, "Nobody is talking about the fact that sequestration is based on bad math. Please address this, help me understand." Well, we have a bit of an explanation here.
REHMA 2010 study by Harvard University economists Carmen Reinhart and Kenneth Rogoff that had a huge influence on Washington policymakers argued that high government debt is associated with slow economic growth, and that growth is particularly weak when gross government debt exceeds 90 percent of gross domestic product. Now, the authors acknowledge they made a mistake in the spreadsheet.
BERNSTEINSo now I understand what she means by bad math. I mean, the math of sequestration is pretty straightforward. What she's really saying, and she's got a great point, is that the impetus, the motivation for these kinds of sharp and across the board and meat cleaver kinds of cuts with the consequences that we've been documenting throughout the show comes in part from this mistaken economic research.
BERNSTEINIt was partly based on a math error but largely was erroneous because it made a big mistake. It assumed that high levels of debt lead to slow levels of growth when, in fact, at times like this, it's the opposite that's true. Slow levels of growth lead to high levels of public debt. So what we ought to be doing is actually trying to grow faster to create more employment, to create more tax revenues, to help serve all the people we've been talking about. But we're doing the opposite, it's called austerity, and it's lead to double-triple deep recessions in Europe, and it's hurting this economy right now.
REHMSteve, talk about how changes to tax law for charitable giving affect United Ways' ability to help?
TAYLORRight. Well, so overlaid over the whole sequestration discussion and the cuts is a discussion about tax reform. And so we're looking at some significant potential impacts to the same populations in tax reform. One of them is the earned income tax credit and their efforts in Congress to scale back the earned income tax credit.
TAYLORAnd that really pumps billions of dollars of money into communities through people at the bottom of the economic spectrum. At the same time, charities are facing potential limits to the charitable deduction, which we think is going to really hurt our ability to raise private funds. So government finding is being cut. At the same time, private funding could go down as a result of government tax policies. So...
BERNSTEINAnd I just want to say, these earned income tax are very important wage subsidy for low-wage workers. If you don't have a job, you don't get it. So bringing down the unemployment rate, as I was saying in my last comment, is critical to solving the problems we're talking about, whether it's people's hardship or the larger revenue issues.
REHMAll right. To Pittsburgh, Pa. Good morning, Chris.
CHRISGood morning, Diane. I have a question about an article I heard today on NPR. Apparently GM and the other car companies have done extremely well in raising their productivity right after the impact of a huge recession. How can that lesson be applied to government spending?
BERNSTEINThat's an interesting question. I mean, I should say, full disclosure, I was working for the Obama administration at the time. And I was a member of the (word?) team, and I think many of us looked back at that intervention and see where we are now and think it's been a real positive. I think to lesson from the caller's comments is -- ties into what I was saying a second ago.
BERNSTEINThis is the time for the federal government to be stepping in and temporarily trying to help the disadvantage folks we're talking about, the businesses we've taken a hit, the homeless families, the people dealing with food stamps, all the overload that Steve is facing in the volunteer sector. Instead, we're going in the opposite direction and blindly meat cleaverly cutting -- it's completely upside down whether it's fiscal or economic.
REHMAll right. To Beloit, Wis. Hi, Monty.
MONTYHello. I just wanted to point out that the sequestration was Obama's idea, firstly, and Obama promised to veto any effort to get rid of sequestration. Harry Reid blocked all attempts by Republicans to give the president discretion in the cuts. And it seems obvious that the cuts are designed for maximum damage, you know, so it could be reported on news broadcast and the like that the Congress has hurting people instead of having the cuts in places in government where it wouldn't be felt by the public.
LOWREYSo it's true that the Obama administration and Congress agreed to this and agreed to the policy as a lever to force them to take other budgetary action, and it didn't happen, right? The sequestration was not a policy that was designed to come into place, and I think that we could have a whole other...
REHMWasn't supposed to happen.
LOWREYYeah. If we could have a whole other show about the politics of this, right?
REHMRight. And we have done this many, many times.
LOWREYIt's very complicated. But, you know, I'd go back to a point I made before, which is that future Congresses can restore this funding. They can move the cuts around. They can do all sorts of things. And the question is whether they're going to agree to do that because right now, again, the path of least resistance is just to let it go.
LOWREYThat's, you know, you could keep on funding the government in short term and the way that they have. And I think that it's this very big question as to how they're going to tackle this issue because I think there's a certain degree of exhaustion on the health from dealing with budget issues.
REHMBut, you know, if they don't hear from the people who are being affected by these kinds of cuts, they'll just keep on keeping on.
BERNSTEINThat's exactly right. I mean, this becomes the new normal. It becomes acceptable, and you've been on the waiting list for numerous years. I have the story here about a guy, it's in The Washington Post, about a guy who was on the waiting list for housing assistance. He finally got off the waiting list. He was getting ready to get his assistance, and they said sorry, you're back on the waiting list.
BERNSTEINSo that's precisely the kind of people. Now, the question is, will Congress react to public sentiment on this? And frankly, I'm a little skeptical because it seems like part of what's driving this is this basic ideology about shrinking government and by avoiding any new revenues in any deal. And, of course, the Democrats, in the White House say, we're happy to replace this, but it's going to take both spending cuts and new revenues and that's where the gridlock is.
LOWREYAnd it's maybe worth pointing out that Congress is going to get another bite at the budget apple. They're going to have to raise the debt ceiling at some point this fall, sometime around October, maybe a little bit later, depending. And they've already been wrangling a little bit behind the scenes on what each is going to demand. And, you, know, we're going to be pitched back into this fight at some point.
REHMSo how far apart are they right now, Republicans and Democrats?
BERNSTEINIn my view, they are extremely far apart.
BERNSTEINThey're so far apart that I don't see how they do anything other than continuing to slog through with what's called continuing resolutions, meaning just keep doing what we've been doing. And why I say that, just to be clear, is because there's no -- the Democrats and the president believe this, and I happen to think it's true, you really can't achieve a sustainable fiscal path on spending cuts alone. You also have to include new tax revenues. So as long as there are enough members of Congress who refuse to compromise on that issue, we're stuck in gridlock.
REHMAll right. To Cooksville, Md. Good morning, Janet.
JANETI lived and worked in rented private apartments for about 40 years. And in 2009, I was evicted for the first time and spent three years in a homeless shelter. And then my county gave me a special housing voucher, and I moved into a senior apartment, but that's for only one year. And so I have applied to HUD-sponsored senior housing, and I was wondering, you know, what are my chances?
REHMWow. So sorry for that situation, Janet. Annie.
LOWREYSo the unfortunate thing is that this HUD funding -- again, there was already pretty extraordinary demand that HUD was not able to meet with the funds that it had. And it's not clear that private entities, nonprofits would be able to make that funding up. And so there's a lot of concern that, kind of miraculously during the recession, homelessness didn't rise in the way that some economists thought it would.
LOWREYThat was because in the stimulus bill, there was a lot of money to prevent homelessness with these programs that would reach in and help families that were on the verge of becoming homeless. It was really effective, and the Veterans administration also had this kind of surge of funding to tackle veteran homelessness.
LOWREYBut now there is a lot of worry that actually now after the recession, it's going to go back up.
REHMAnd you're listening to "The Diane Rehm Show." So what do we say to Janet, Steve?
TAYLORWell, the recommendation that I can make to Janet is that she dial 211. 211 is available in Maryland, and she can call, and she can ask them if there's other resources that she might be able to access.
REHMGood. Janet, good luck to you. I really am concerned for you. And to Patchogue, N.Y. Holly has left us. Unfortunately, she was asking about Meals on Wheels, about which we have talked. Finally, to Miami, Fla. Oren, you're on the air.
ORENGood morning. I think this president, for whom I voted twice, needs to grow a backbone and stop blinking, stop folding his cards whenever he gets confronted by the Republicans. I think case in point is the furloughing of the FAA air traffic controllers. If he stood his ground and inconvenienced the general public as well as the congressmen and women who want to go for the holiday, it would've, I think, brought more to the surface how foolish (unintelligible) the sequestration is.
BERNSTEINTwo points. First of all, on the FAA, I completely agree with you. That's a story I think Annie told earlier about how air traffic controllers were ultimately exempted from sequesters so people wouldn't have to be inconvenient as flyers. And somebody quipped -- I think it was one of Annie's colleagues at The Times quipped, you know, what you really ought to do is if you're a family with a poor kid who's losing Head Start, go to your airport and line up on the runway.
BERNSTEINNow, obviously that was a joke. But the point is that it's got political point earlier. They don't have a voice. Now, flyers who were standing in long lines, they do have a voice. So that's point one. Point two...
REHMAnd they have money to fly.
BERNSTEINCorrect. Point two, so in defense of the president, I think what the president and a lot of Democrats thought was that by including defense cuts in sequestration, they would bring Republicans to the table. But it turns out that many conservative Republicans were more interested in protecting businesses and high-income people from tax cuts than they were about protecting the defense industry.
REHMDo you agree with that, Annie?
LOWREYI think it's hard to sort out who wanted what given that again the policy was designed to be painful. And I think that one of the weird...
REHMThe policy was designed to be painful but was never supposed to happen.
LOWREYExactly. And now it's happened. And I think that, you know, one of the things that the caller pointed out is that there's been this political pressure from the left to make it as painful as possible in the hope that Congress would undo it. But again, Congress hasn't shown any ability to undo it.
TAYLORThe gap here, I think, is not so much between the Republicans and the Democrats, but it's between Washington, D.C., and the rest of the country. So I hear from local United Way COs just astounded that Congress isn't doing anything about it. And that's what people across the country, Republicans or Democrats, think, and then you're inside Washington, and they can't reach agreement.
REHMSo what does each of you, Steve and Jared, suggest people do now that they heard this program, heard from people who are being affected?
TAYLORThey have to call their members of Congress and Senators. They have to call.
BERNSTEINI agree. And I think they also have to, just for urgent needs, tap their volunteer sector as best as they can and report to members of their community how that's working out for them.
REHMJared Bernstein at the Center on Budget and Policy Priorities, Annie Lowrey of The New York Times, Steve Taylor of United Way Worldwide. I hope we started the conversation. Thanks for listening, all. I'm Diane Rehm.
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