A Few Facts1. Federal spending in FY 2000 and 2001 as a percent of GDP is the lowest since 1966.

2. Federal government spending (not including social security, Medicare, and Medicaid) is the lowest since 1962 (first year in CBO historical tables).

3. From CBO’s “Effective Federal Tax Rates, 1979-1997”, the total effective federal tax rate on households in the middle quintile is lower today than in any year from 1979 to the present (1979 is the first year covered by this study).

4. The CBO study shows that in 2000 the top 1% have the highest share of pre-tax and after-tax income since 1979 (the first year of the study).

1979 1989 1997 2000, IRS

Share of pre-tax income

9.3 12.5 15.8 20.8

Share of after-tax income

7.5 11.4 13.6 17.8

Choices Made By Bush in 2001 and 2002

• Tax Cuts (Huge share to wealthy) was highest priority• Partially refundable Child Tax Credit• Some improvements in EITC

• Farm Bill (some significant improvements in Food Stamp bill)

• No increase for health coverage for working parents

• Prescription drug benefits that covered less than 25% of elderly prescription drug costs

• Little to improve employment of non-resident fathers- more limited child support pass through

• Not nearly as generous UI bill as in 1990s despite a more serious recession

• Return of deficits with implications for promises made to elderly

• Truly this was the Congress of missed opportunities

Choices Made By Bush Thus Far in 2003

• An economic stimulus package of $674 ($925 billion if interest is included) where 60 percent of direct benefit flows to 10 percent of the population with the highest income

• A welfare package with real cuts in child care and TANF

• No additional assistance to the 1 million unemployed individuals who have exhausted all benefits and are still out of work

• Cuts in housing and job training

• No fiscal relief to states despite their budgetary problems

• The return of large deficits with implications for interest rates

Has TANF Been a Success?

• Yes:– Employment gains– Rising income and falling poverty

• Of course, poverty should go down with a strong economy

• No:– Some families are worse off– Income gains should have been larger– Serving fewer families

• A recent Urban Institute study shows that poverty would decline by almost 4 million individuals if all eligibles participated in food stamps, SSI, TANF, and EITC

AND: Many families still have not reached time limits.PLUS: Change in families and a reduction in the teen birth rate.

What Produced Employment Gains?

• Strong Economy– Lower unemployment– Increase in real wages at bottom of wage distribution

• Work Supports– $7 billion more in child care funding per year– EITC increases

• TANF– Flexibility– Funding for services

• Does the Administration’s TANF proposal build on this success? No.– Funding cuts– Less flexibility

1993 to 1995 1995 to 2000 2000 to 2001

Total Disposable IncomeQuintile 1 13.3% -3.9% -10.0%

Decile 1 16.5% -12.3% -20.9%Decile 2 11.7% 0.5% -5.0%

Quintile 2 11.2% 9.9% -3.5%Quintile 3 14.9% 12.2% 0.8%Quintile 4 12.8% 14.0% -0.6%Quintile 5 10.1% 15.9% 7.8%

Quintile 1Earnings 200 565 -216Means-Tested Income 426 -1,567 -351Disposable Income 966 -319 -790

Quintile 2Earnings 420 4,454 -550Means-Tested Income 577 -4,197 -272Disposable Income 1,431 1,414 -545

Percent Change

Dollar Change

Average Income of Female-Headed Families Living with No Other Adultsby quintile, in 2001 dollars

TANF Has Not Performed Well as a Safety Net in this Recession

• Caseload growth has been anemic

• Need for assistance has grown

AFDC/TANF Food Stamps1979-1983 1.1%* 5.2%1989-1993 6.6% 9.4%2000-2002 -5.0% 4.5%*Affected by Reagan welfare cuts

Average Annual Growth in Caseloads

Percent of families with: 1990 1993 1999 2000 2001Head earnings 40% 35% 55% 45% 43%AFDC/TANF 57% 62% 34% 33% 24%Food Stamps 66% 71% 57% 59% 56%No earnings or TANF 18% 18% 27% 32% 39%

Single Mothers with no other adults

Looking Ahead• Local, state and federal governments will be starved for resources- little chance for

significant social investments

• Provide additional monies to states to prevent cuts

• Do not cut safety net programs; instead increase funding for TANF and child care program

• Improve funding for Head Start and ensure that all children have access to quality pre-school programs

• Ensure that all children have access to health insurance. Improve coverage for working parents

• Most Important Ways to Help Low-Income Families:– Implement new Food Stamp provisions in the Farm Bill– Increase participation by simplifying process and reducing hassle

• Enact additional weeks of temporary federal UI benefits and extend these programs until employment growth has reduced unemployment significantly

• Provide work supports and earnings subsidies to non-custodial parents

• Make sure that more child support actually benefits children