Effects would add more hurt to Great Recession’s impact
By Charles Hallman
Low- and moderate-income people will immediately be adversely affected if the country plunges over “the fiscal cliff” at the beginning of the year, predicts a former Obama administration member.
Automatic tax hikes and spending cuts will take place unless Congress and the White House reach an agreement by December 31. Last week, on a New America Media-scheduled teleconference with reporters, including the MSR, Center on Budget and Policy Priorities Senior Fellow Jared Bernstein said that “low-income people will feel [it] right away if we go over the fiscal cliff” on January 1.
“Current conditions actually are very tough on low-income people,” said Bernstein. “Fifteen percent of the population are in poverty, and if you look at folk who are disproportionately low-income, African American poverty is closer to 28 percent [and] Hispanics at 25 percent.
“We are still dealing with the aftermath of the Great Recession,” continued Bernstein, who was Vice President Joe Biden’s former chief economic adviser and a member of President Obama’s economic team. “Frankly, the poverty line probably is really too low to officially measure, to really capture, the hardships these folk face.
“If you double the poverty line [to] around $40,000 for a family of four, now you are talking about half of African American and Hispanic families below those levels.”
When the MSR asked Bernstein how long he thinks the fall off the fiscal cliff could last and what immediate or long-term impact it could have on Blacks and other people of color, he said, “I don’t have a numerical estimation of hurt to this particular group and how long. I can tell you that if you look at the overall unemployment rate right now, it’s 13 percent for African Americans, [and] for Hispanics it’s 10 percent. For folks [with] less than a high school degree, it’s 12 percent; with a college degree, it’s eight percent. You can double that in many cases if you take underemployment into account.
“The idea that you’re taking away support for programs that provide health coverage, educational benefits, housing assistance, early childhood help, and tax credits to working and low-income people, that’s obviously and totally misguided,” said Bernstein. “I think undermining those programs is a bad idea in a strong economy [because] even in a strong economy many of these venerable groups are struggling. But in a weak one like this, where people have been struggling for years, it strikes me as malpractice.”
University of St. Thomas Law Professor Nekima Levy-Pounds said last week that the public, especially low-income Blacks and other low-income communities of color, really isn’t aware of the full ramifications of the fiscal cliff. “Much of the discussion locally and nationally has been from a race-neutral perspective, which can mask the severity of the problems that poor communities of color will face if the fiscal cliff occurs,” she pointed out.
The fiscal cliff negotiations in Washington “are being held hostage” due to political grandstanding, added Ramsey County Commissioner Toni Carter. “Twin Cities families already struggling to pay for food, rent, gas and other necessities could wake up on New Years’ Day finding it harder to make ends meet” if a deal is not reached by year’s end, she believes.
Bernstein said that even if the fiscal cliff is avoided, “$1.5 trillion over 10 years of spending cuts is already on the books…passed and legislated by the Congress” and will be implemented. “The programs that are most exposed to spending cuts are the ones most important to low-income households.”
He cited as examples Medicaid, SNAP (formerly known as the Federal Food Stamp Program), early childhood and post-secondary educational programs, and low-income housing programs — “non-defense discretionary programs.”
“A third of overall non-defense discretionary spending goes directly to state and local governments,” noted Bernstein.
“We must begin to see the fiscal cliff as a pressing social justice issue that requires both careful consideration and urgency in light of the detrimental, and possibly irreversible, impact to poor families of color,” said Levy-Pounds. “I am fearful of the unintended consequences that will flow if Congress fails to reach a timely resolution.”
Bernstein said that he doesn’t see much likelihood of a compromise reached by the GOP leaders and President Obama before New Years’ Day, but he thinks one would come “pretty quickly” thereafter. Macalester College economics professor Gary Krueger told the MSR last week that the fiscal cliff issue for most Americans is “more like rolling down the hill than a cliff.”
The fiscal cliff first was avoided two years ago, explained Bernstein. “When I was working at the White House, we went off the cliff in 2010 because that was when those [tax] cuts first expired and extensions were made,” he recalled, adding that a “super committee” was later created partly to avoid the present cliff scenario.
Levy-Pounds noted that although everyone will be affected by the fiscal cliff, the effects will be more severe for poor and middle-class families of color. “This will likely throw many of our poorest families deeper into the realm of poverty and downward economic and social mobility,” she surmised.
Bernstein does not support cutting essential safety-net programs in order to balance the federal budget. “Income inequality and diminished mobility already are plaguing poor communities,” he argued. “We need to implement a lot of deficit reductions through revenue increases and some spending cuts.”
Deficit reduction “isn’t our biggest problem right now,” said Bernstein. “Our biggest economic problem right now is very high unemployment, particularly in minority communities, [and the] income and wage losses that families have faced… The more disadvantaged these families are, the bigger the losses that have occurred.
“If we actually went off the cliff and stayed off the cliff… [if] taxes rose and spending declined…you’d find that the economy would be thrown back into a recession. I predict that if all of these tax increases and cuts take place over the course of next year, not only would the economy stop growing and go into reverse, but also the unemployment rate that has been falling of late would rise from its current level to as high as nine percent,” Bernstein said.
“African American families in Minnesota are already experiencing unemployment rates, poverty rates, incarceration rates and high school dropout rates in the double digits,” concluded Levy-Pounds. “This is unacceptable.”
Charles Hallman welcomes reader responses to challman@spokesman-re corder.com.