This morning I’ve been invited to talk with you all about the state of our national policy agenda for low-income families and particularly how the welfare reauthorization debate—such as it is—reflects that agenda.
First, let me provide a bit of federal budget context. Since President Clinton left office almost 3 years ago, much has happened. We’ve had to deal with the impact of a recession, terrorism, and now a war. Meanwhile, we’ve gone from record surpluses to record deficits—for years to come. We’ve seen tax cuts for the wealthy, increases in defense spending, increased health care costs with attendant federal budget impacts, and we still face baby-boomers retiring and the pressure that will put on entitlements like Medicare and Social Security.
My colleague Isabel Sawhill, a codirector of our Welfare Reform & Beyond initiative at the Brookings Institution, has described the budget picture as “The Big Squeeze”. She points out that while federal tax revenues are declining rapidly, spending for Social Security, Medicare, Medicaid, defense, and interest are going up rapidly. She finds that within 8 years there will be no money left for other domestic spending.
What does this mean? We have three choices: living with deficits, cutting spending, raising taxes (sometimes also known as eliminating prospective tax cuts).