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Deborah Weinstein

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Don't Sacrifice Our Future

Posted: 07/12/11 04:07 PM ET

It comes down to this: Is it more important for millionaires to have all of their tax breaks preserved or for Gail to have her life saved by Medicaid?

Gail lives in Utah. She knew something was wrong with her breast, but didn't have insurance, and so put off having it examined until she learned of a free breast cancer screening that led to her being enrolled in Medicaid for treatment. You can hear her describe how Medicaid saved her life in a brief video.

Now that Congress and the president are engaged in a high stakes game of chicken over reducing the deficit, should people like Gail find themselves on the cutting room floor? The Republican leadership keeps insisting they will not agree to any revenue increases, even to those individuals and corporations with the highest incomes. They want trillions in deficit reduction to come exclusively from cuts in spending.

It is not hyperbole to talk about Gail. Many states are already cutting back on Medicaid. One of the main state strategies for cutting back is to deny Medicaid coverage to people like Gail (she's not a poor child, not over 65 or permanently disabled, the categories of low-income people states must cover.) Oregon, for example, closed enrollment in a Medicaid expansion program that served low-income adults younger than 65 without minor children. By 2008, the state realized it could afford to cover more people, and so held a lottery which 90,000 eligible people entered and 10,000 were chosen. A recent study found the lucky 10,000 got 30 percent more hospital care, 35 percent more outpatient care, and were 60 percent more likely to have a mammogram than the unlucky others who didn't win the health care lottery.

Proposals to cut Medicaid as part of deficit reduction range between $100 billion and $1.4 trillion over the next decade. Even the low end of the range, proposed by the Obama Administration, represents 5 percent of state Medicaid funding. States grappling with a 5 percent cut will reduce pay to doctors and hospitals, driving more physicians out of the Medicaid program; they will deny coverage or increase costs to all those they don't have to cover (like Gail).

Medicaid cuts will result in people going without needed health care. They will also cost jobs. According to a study by Families USA, a 5 percent Medicaid cut in 2011 will cost more than 250,000 jobs nationwide. Even in a small state like Gail's Utah, 1,350 jobs would be lost; in big states like Florida or New York, job losses are estimated at 11,320 and 28,830, respectively. That is not what our economy needs.

Is there no alternative? David Stockman, budget director under Ronald Reagan, thinks there's another way. He was on public radio on Saturday pointing out that the low 15 percent tax rate for capital gains makes no sense and causes millionaires to pay lower tax rates than their maids and gardeners. He estimated that raising it could conservatively bring in about $50 billion a year.

The Senate Budget Committee thinks there's another way, too. Chairman Kent Conrad (D-ND) just released a plan that points out we lose $1.4 trillion over ten years in offshore tax havens and abusive tax shelters; even recouping half of that would gain us $700 billion. Chairman Conrad's plan also would make $886 billion in military savings over ten years; the same amount saved in the bipartisan Bowles-Simpson plan

There are many other options. The oil and gas industry gets $40 billion in subsidies over 10 years, despite $1 trillion in profits this decade earned by the top 5 multinational energy companies. This is just a fraction of the $1 trillion a year in federal tax expenditures (that is, giving money through the tax code to individuals or corporations). Many of these tax expenditures are deductions or credits that help the middle class. But let's not forget that the wealthiest taxpayers benefit enormously from tax expenditures. In fact, the top 1 percent of taxpayers gets an average increase in their after-tax income of a whopping $205,615 because of them. The top of our income scale is not by any stretch of the imagination overtaxed. According to the IRS, the effective tax rate for the wealthiest 400 people was only 18.1 percent in 2008, down from 29.9 percent in 1995.

But the right wing is willing to risk big increases in interest rates for mortgages, consumer credit, and business loans by threatening to stop the federal government from borrowing to pay already-incurred bills -- just to make sure that none of these sources of potential savings is tapped.

Despite strong evidence to the contrary, the defenders of enormous tax breaks for those at the top assert that any reduction in those breaks will hurt the economy. But they are blind to the hurt inflicted by service cuts. The House just passed an appropriations bill that would drop WIC nutrition aid next year for 300,000-450,000 infants, young children and pregnant women. Research is clear that children living in households that cannot afford enough nutritious food are more likely to suffer health and development problems, including more hospitalizations, compared with children of similarly low-incomes who were not "food insecure." WIC and food stamps both help families afford enough food and improve health, education, and later employment outcomes for children.

Cuts recommended in the House budget would deny employment and job training services to more than 8 million workers, including 276,000 youth (despite nearly one in four teenagers unemployed in June). In addition, 1.4m low-income college students will lose Pell grants under the House plan. We know that more and more of new jobs require post-secondary education. The unemployment rate for those with a high school diploma but no college is above the national average (10 percent in June); for those who have not finished high school, the unemployment rate is 14.3 percent. Cutting off entry points to better (or any) jobs simply makes no sense.

The $2 trillion or more in service cuts proposed by the Republican leadership are not abstractions. They will mean people like Gail will not get medical care, that joblessness will remain high, that children will go without adequate food, and that investments in our future will not be made. Fewer tax breaks for those at the top and less wasteful military spending will allow us to invest in vital services. That is the practical route to economic security.