The Impact of Federal Funding in West Virginia – Part I

Federal funds play an important role in West Virginia’s economy and make up a vast portion of the revenue the state receives. Historically West Virginia has been provided with a larger share of federal funds per capita than most states. The continued federal support enabled the Mountain State to build up and sustain its programs that assist low- and moderate-income West Virginians, such as Medicaid, the Children’s Health Insurance Program (CHIP), Temporary Assistance for Needy Families (TANF), and many more.

This blog series examines what programs federal funds support, the structure of that federal support, how those funds are administered to facilitate programs,  funding levels and how proposed budget cuts could impact West Virginia. President Trump and Republican congressional leaders have proposed a budget that slashes $2.9 trillion over the next decade from programs that aide low- and moderate-income Americans.

In Fiscal Year 2017, the state received an estimated $5.3 billion from the federal government in appropriations, making up 38 percent of the state’s total revenue. That money was dispensed to state agencies to facilitate health care, education, infrastructure projects, community development, and other programs.

 

Federal funds come into the state in a “match” formula. State government officials first allocate the state’s share and then the federal government allocates its funding based on a matching percentage rate. For instance, if the match rate for a program is 75 percent federal and 25 percent state, then for every dollar the state puts into that program, the federal government will put in three.

 

Health and Human Services make up the largest share of the federal funds in West Virginia due to Medicaid, which brought in $3.4 billion in FY 2017. The rest of the federal funds go toward a variety of programs across the state. West Virginia operates hundreds of federally assisted programs, ranging in cost from a few thousand dollars to billions of dollars. For a complete catalog of federal funds in West Virginia, consult the West Virginia Consolidated Report of Federal Funding in the West Virginia State Budget Office.

The next post in this series will take a deeper dive into non-discretionary programs supported by federal funds.

 

 

 

SNAP Helps Over 81,000 West Virginia Workers

SNAP plays a crucial role helping workers in low-paying jobs afford a basic diet in West Virginia. Each year between 2013 and 2015, an average of 81,000 West Virginia workers lived in households that participated in SNAP within the last year, according to analysis from the Center on Budget and Policy Priorities.

For many of our friends and neighbors, work doesn’t provide enough income for them to feed their families. Many workers earn wages so low that a full-time worker doesn’t earn enough to lift a family out of poverty. Low-wage jobs often have irregular schedules, where the number of hours changes frequently. Crucial benefits such as paid sick leave are rare in low-wage positions. Many of these jobs also have high turnover rates, so workers in low-wage jobs experience periods of unemployment at higher rates than higher-paid workers.

Because many workers struggle to feed their families in West Virginia, they often turn to SNAP to help supplement low wages, smooth out income fluctuations due to shifting schedules, or help sustain them during periods of unemployment.

In the Mountain State, close to one-fifth of working SNAP participants work in service jobs, most commonly as cooks and wait staff, security guards, home health aides, and folks who clean homes and do yard work for a living. Almost one-fourth of working participants work in either sales jobs, most commonly as cashiers or retail salespersons, or in office and administrative support positions, largely as customer service representatives or stock clerks.

These jobs typically have low wages. For example, the top four occupations among West Virginians participating in SNAP have average hourly wages far below the state average of $19.35 in 2016, and many with wages low enough to be in the bottom quarter, according to Bureau of Labor Statistics data: cashiers ($9.65); personal care aides ($9.54); cooks ($10.58); nursing, psychiatric, and home health aides ($11.14).

In some occupations, SNAP participants make up a significant share of all workers. For example, more than one-in-five housekeeping cleaners, grounds maintenance workers, security guards and gaming surveillance officers, and nursing, psychiatric, and home health aides in West Virginia report participating in SNAP. One-third of personal care aides in West Virginia participate in SNAP.

In sum, for over 81,000 West Virginians, SNAP responds to low wages and job instability by providing workers and their families with supplementary income to buy food. Show your support for them by signing your organization on to this letter being circulated on Capitol Hill by our friends at the Food Research Action Network.

President Trump’s Draconian Budget Hits West Virginia Hardest

For President Trump’s proposed Federal “Blueprint” Budget for 2018, the bottom line is clear: West Virginia stands to lose more than any other state. The proposed budget, which was sent to Congress virtually unchanged from its original form in March, cuts discretionary funding for major federal agencies by $54 billion and it is estimated to cut mandatory funding by $5 billion for 2018, and an estimated $800 billion over the next 10 years. Discretionary funds are appropriated by the federal government to states for vital services and programs, while mandatory funds go toward safety net programs that bypass the state legislature.

West Virginia relies more on federal assistance than other states because of our high poverty rates, low-wage jobs, and our generally unhealthy and aging population. In FY 2017, West Virginia received over $965 million dollars for discretionary spending from the federal government, which will be reduced by nine percent, or about $86.5 million overall, in the president’s FY 2018 proposal. The cuts at the federal level will shift the responsibilities onto states to provide the necessary funds to maintain discretionary programs such as 21st Community Learning Centers and the Appalachian Regional Commission. It is highly unlikely West Virginia would chose to fund any of these programs.

Cuts to mandatory funding will have a deep impact as well. In FY 2017, the state received over $4 billion in mandatory funding, for programs like Medicaid, Supplemental Security Income, Social Security and Disability Income, and Supplemental Nutritional Assistance Program. If the president’s proposal is enacted, West Virginia will lose about five percent or $187 million, of those funds next year. West Virginia is in no position to inherit this combined $273 million expense next year in light of the current budgetary shortfalls. Over the next 10 years, that number will grow as reductions in vital safety net programs such as SNAP begin in 2020.

Proposed Budget Cuts to Discretionary Funds

The fiscal impact of the elimination of federal grant programs by the president’s budget will vary from state to state. Some states simply require less federal assistance than others due to the relative disparities in economic strength. A $94 million reduction in discretionary funds is disconcerting because it will lead to increased economic insecurity and decrease access to programs that provide basic housing, nutritional, and health needs. These funding cuts will come from eliminating educational programs, vouchers for nutritional and housing needs, job training programs, and other federal initiatives aimed at economic development in Appalachia’s rural communities. The only department that is not seeing any cut is the Department of Transportation, which is getting a $9 million increase. However, this slight increase counts for only 1 percent of the total discretionary funds.

The Department of Education has served an estimated 200,000 West Virginian students since 2004 through the 21st Century Community Learning Centers program, which provides academic enrichment opportunities during non-school hours for children, particularly those who live in high poverty and low performing school districts. President Trump’s budget completely eliminates this program. As of 2014 there are 133 sites across the state providing mostly elementary students with resources to meet state and federal education standards.

The Appalachian Regional Commission (ARC), which the President singled out and entirely eliminated under his proposed budget, was one of the most ambitious programs currently investing in West Virginia and the Appalachian region. The ARC brought nearly $24.1 million to 55 projects throughout West Virginia in the last two years and was set to attract nearly $28 million more in private investment to create economic opportunities, a ready workforce, and critical infrastructure.

Proposed Budget Funding Cuts to Mandatory Funding

Cuts to mandatory funding could be somewhere around $800 Billion over the next 10 years, according to experts. Programs that serve as a basic safety net have long since been considered instrumental to the country’s national wellbeing. For example, without Social Security an additional 122,000 seniors in West Virginia would live in poverty. In West Virginia, and in many other states, safety net programs are also a large share of the state’s economy.

An illustrative way to measure how much of an impact these programs have on West Virginia’s economy is to look at each program’s contribution as a percentage to the state’s personal income – a proxy for a state’s economy.  Medicare for instance, brings in about 6.4 percent of the state’s personal income, the most of any state.

The Supplemental Nutritional Assistance Program (SNAP), also known as food stamps, which helps struggling families and workers put healthy food on the table, reached nearly 357,000 West Virginians, or 20 percent of the state’s population and put approximately $499 million into West Virginia’s economy. The president’s proposal cuts $193 billion (25 percent) of SNAP’s funding nationally over the next 10 years. For West Virginia, that would mean an annual state contribution of $125 million, and $869 million over the next 10 years to replace the loss in federal funds.

West Virginia will likely see deep cuts in Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI), as well. SSI and SSDI benefits go directly toward low-income households who had professional careers cut short due to a disability and families caring for children with disabilities such as down syndrome, autism, and blindness. The president’s proposal cuts $72 billion over 10 years to disability programs, including SSI and SSDI. A reduction to these funds will mean those already struggling to make ends meet will struggle even more for the assistance they need to support themselves and their families and stay out of bankruptcy. Once again, West Virginia relies more on these programs than any other state.

The president’s proposed budget is an effort to reduce overall federal spending on programs and strengthen the military, it achieves this through targeting the nation’s poorest and most vulnerable populations by drastically reducing funding for the programs they rely on. The figure below is an illustration of major federal programs (SNAP, SSI, SSDI, Medicaid, and Medicare) together as a share each state’s personal income. West Virginia stands to lose the most from the funding cuts proposed by the president not only in real dollars flowing into the state, but perhaps even more importantly, in the quality of the services these programs provide (Figure 1).

Fiscal Policies Like a Balanced Budget Amendment Have No Place in U.S. Constitution

The House Judiciary Committee is likely to take up a dangerous resolution – House Concurrent Resolution 36 – that calls for a constitutional convention of states to propose a balance budget amendment (BBA) to the U.S. Constitution. As I discussed earlier, there are no established ground rules for how this would transpire and it could open up the Constitution to radical and harmful changes.

Aside from the inherent risk in calling a convention,  the proposed BBA amendment language in HCR 36 is fraught with technical problems. For example, it states:

Applying for an Article V Amendments Convention to Propose a Constitutional Amendment permitting a calling of a convention of the states limited to proposing an amendment to the Constitution of the United States requiring that in the absence of a national emergency the total of all federal appropriations made by the Congress for any fiscal year may not exceed the total of all estimated federal revenues for that fiscal year together with any related and appropriate fiscal restraints.

Requiring that revenues offset federal spending in any fiscal year collected in that same year would drastically undercut the design of programs like Social Security and would leave serious questions regarding enforcement of that requirement. As federal budget expert Richard Kogan noted in 2014: 

Currently, Social Security holds $2.8 trillion in Treasury securities. But under the balanced budget amendment, it would essentially be unconstitutional for Social Security to draw down these savings to pay promised benefits.  Instead, benefits would have to be cut, because all spending would have to be covered by tax revenues collected during that same year. More precisely, Social Security would be allowed to use its accumulated Treasury securities to help pay benefits only if the rest of the federal budget ran an offsetting surplus.

The same problem would also occur with billions of federal funds held in trusts and reserves, such as military retirement and civil service retirement system trust funds, the Abandon Mine Lands Fund, and funds held by the Pension Benefit Guarantee Corporation (PBGC) and the Federal Deposit Insurance Corporation (FDIC).

A balanced budget requirement in the U.S. Constitution would also trump other government guarantees and promises written into law, according to Kogan. This includes interest paid on the debt and guaranteed claims on bank deposits, loan defaults, or nuclear accidents. And it also means that program benefits held in reserves and insurance trusts funds for Medicaid, Medicare, unemployment benefits and veterans’ benefits would not count as revenues but would count as spending under a balanced budget requirement.

There is also a major problem with enforcement of a balanced budget amendment. For example, what happens when the budget is out of balance? Who has the power to impose balance? The president? If the president has unilateral power, can he impose spending cuts, raise taxes or reduce tax expenditures?

What is the role of the Supreme Court? Would the Supreme Court have legal standing to challenge Congress and the President to pass a balanced budget? Would the BBA just require the ‘adoption’ of a balanced budget and ignore any deficits that occur? If so, would this provide big incentives for adopting rosy assumptions for revenue estimates or when enacting legislation?

For these reasons and more, a BBA had some serious design flaws. It does not allow saved-up money to be spent as it defines “balance” as spending no more in a year than the revenues collected in that year. Imagine if if a family had to meet that standard. It would prohibit them from borrowing for college, health emergencies or to buy a home. For example, a frugal family that saved money into a college savings accounts (529) would not be able to use these savings under the BBA proposal because it would only be able to use the funds saved in that year.

Not only is a BBA fundamentally undemocratic,  it could lead to the Supreme Court having to adjudicate fiscal policy. This is precisely why the Constitution does not include fiscal policies; opening up the Constitution to insert fiscal policies would be unwise and dangerous.

Constitutional Convention of States Still a Dangerous Idea

This afternoon the West Virginia Senate approved Senate Concurrent Resolution (SCR) 10, a resolution calling for a convention of states to amend the U.S. Constitution. Under Article 5 of the U.S. Constitution, upon application of two-thirds of the states, Congress must convene a convention to amend the Constitution. While the U.S. Constitution has been amended 27 times, there has never been a convention of states to propose amendments (unless you count the original one in 1787 that went well beyond its mandate). Similar to constitutional amendments originated in Congress, it would take 38 states to ratify any amendments from a convention of states.

As we pointed out last year, this is a potentially dangerous proposal that could create more turmoil in the country and could jeopardize many of our most cherished freedoms and rights. While SCR 10 implies that states can and should limit the agenda of a convention to a “Single Issue,” it then proposes three separate (not to mention extremely vague) topics for proposed amendments, including (1) “fiscal restraints on the federal government”, (2) limiting the “power and jurisdiction of the federal government,” and (3) limiting the “terms of office for its officials and for members of Congress.”

Pushing aside the merits of the proposed amendments in SCR 10,  there is a broad legal consensus that it would be difficult to limit or control a convention of states even if states specify it is only for single purpose. As the Center on Budget and Policy Priorities highlights in a recent report:

A number of prominent legal experts have warned that states cannot control a constitutional convention or that calling one could open up the Constitution to significant and unpredictable changes.  For instance:

“I certainly would not want a constitutional convention.  Whoa!  Who knows what would come out of it?”a
Former Supreme Court Justice Antonin Scalia

“[T]here is no way to effectively limit or muzzle the actions of a Constitutional Convention. The Convention could make its own rules and set its own agenda. Congress might try to limit the Convention to one amendment or one issue, but there is no way to assure that the Convention would obey.  After a Convention is convened, it will be too late to stop the Convention if we don’t like its agenda.”b 
Former Supreme Court Chief Justice Warren Burger

“There is no enforceable mechanism to prevent a convention from reporting out wholesale changes to our Constitution and Bill of Rights.”c
Former Supreme Court Justice Arthur Goldberg

“First of all, we have developed orderly procedures over the past couple of centuries for resolving [some of the many] ambiguities [in the Constitution], but no comparable procedures for resolving [questions surrounding a convention]. Second, difficult interpretive questions about the Bill of Rights or the scope of the taxing power or the commerce power tend to arise one at a time, while questions surrounding the convention process would more or less need to be resolved all at once.  And third, the stakes in this case in this instance are vastly greater, because what you’re doing is putting the whole Constitution up for grabs.”d
Professor Laurence Tribe, Harvard Law School

“[S]tate legislators do not have the right to dictate the terms of constitutional debate.  On the contrary, they may be eliminated entirely if Congress decides that state conventions would be more appropriate vehicles for ratification.  The states have the last say on amendments, but the Constitution permits them to consider only those proposals that emerge from a national institution free to consider all possible responses to an alleged constitutional deficiency. . . Nobody thinks we are now in the midst of constitutional crisis. Why, then, should we put the work of the first convention in jeopardy?”e 
Professor Bruce Ackerman, Yale Law School

These thoughts where echoed in a recent editorial against a constitutional convention of states from USA Today saying “it would be impossible to control.”

More recently, the conservative Heritage Foundation said:

…there is little doubt that some states and scholars have been reluctant to propose an Article V convention, both because of the fear of a “runaway convention” in which the delegates deviate from the purposes for which the convention was sought by the requisite number of state legislatures and propose alternative, perhaps ill-advised amendments relating to other issues or because of the fear that the legal uncertainties surrounding any convention of the states would likely result in a series of time-consuming, lengthy lawsuits that could result in the entire endeavor being undone.“serve to diminish the liberties of the American people, or of some of the people.”

Other conservatives also believe that a convention of states would be a terrible move, including Jennifer Rubin with the Washington Post. Rubin says:

I sincerely doubt that a convention would limit the power of government. In theory, for example, people favor a balanced budget, but in reality, they soon would learn about all the cuts in store for them. Then they’d turn to expanding government to cater to passing fancies. Even if I am wrong, the risk alone is too great to encourage a massive constitutional rewrite. Once passed, a constitutional amendment is so difficult to repeal that it has been done only once.

Here is conservative David Davenport with the conservative Hoover Institution writing in Forbes Magazine:

It’s disappointing, however, when conservatives, who should be respectful of the Constitution and willing to do the hard, long political work of protecting it, instead offer the false hope of instant gratification by foolishly proposing a modern constitutional convention.

Here is conservative David Limbaugh (Rush Limbaugh’s younger brother) at Newsmax:

I understand the frustration conservatives feel about the federal government’s virtually unchecked growth over the past 75 years and how this is destroying our liberties and bankrupting our nation. But the Constitution isn’t the problem. Rewriting it isn’t the solution.Proponents of a constitutional convention might protest that their goals are far more modest than a new Constitution. Well, so were the framers’ plans when they met in Philadelphia to amend the Articles of Confederation. 

There has also been conservative opposition from Larry Greenley in The New American, A. Barton Hinkle in Reason Magazine, Gary Demar in Godfather Politics and from the National Association of Gun Rights.

The biggest difference between SCR 10 and what the State Senate passed last year with SCR 13  is its scope. In 2015, SCR 13 was squarely focused on calling a convention to propose a BBA or balance budget amendment (which could wreak our economy, to say the least) and it did not pass the House. According to some estimates, only seven more states need to pass a BBA Con Con before Congress would call a convention of states. With SCR 10, on the other hand, only five states so far have passed similar resolutions. The burning question is whether the calls for an Article 5 convention need to be identical  or similar in breadth and scope in order for Congress to call a convention of states.  Unfortunately, it is unclear how Congress would aggregate each of the state’s resolutions because many of them call for different proposed amendments.

West Virginia lawmakers in the House would be wise not to follow the action of the Senate today and should reject SCR 10. As Robert Greenstein with the Center on Budget and Policy Priorities carefully noted in the Washington Post:

Our country faces enough problems and division. We don’t need to add to them and inflame an already toxic political environment by placing at risk the constitutional structure that has served us well for more than two centuries — and heading into dangerous, unknown territory by convening a convention to rework the Constitution.

West Virginia is Risking the Future of the U.S. Constitution (Updated)

by Betty Rivard and Ted Boettner

West Virginia has been targeted by a number of conservative groups to adopt a resolution calling on Congress to convene a constitutional convention of the states, with the goal of adopting a balanced budget amendment (BBA). Opponents from across the full political spectrum are alarmed that a convention of the states can create turmoil in the country, jeopardize the U.S. Constitution, and divert the nation and the states from the critical issues that they need to resolve on an ongoing basis. It was reported today that Ohio Governor John Kasich will be in Charleston West Virginia this Thursday ( February 19) to promote a constitutional convention.

The focus on amendments to impose fiscal restraints on the federal government also puts the country and its economy at risk. Our state’s Senate Concurrent Resolution (SCR) 13, introduced today, seeks a constitutional convention to propose a balanced budget amendment under Article V of the U.S. Constitution. And SCR 21, calling for fiscal restraints and term limits, is on tomorrow’s agenda for the Senate Interstate Cooperation Committee. A companion resolution, HCR 47, with 60 sponsors, has been introduced in the House. These resolutions are based on model legislation from the American Legislative Exchange Council and others,  not a constituent-driven action. The House also has a bill,  H.B. 2424,  that  attempts to define the delegate process for the convention.

Blog BBA

To adopt a concurrent only require a simple majority vote in both the House and the Senate. Although pending concurrent resolutions have been referred to committees, neither a referral to committee nor a reading on the three consecutive days is required, so they can move very quickly. Sign-off by the governor is not required for a concurrent resolution to take effect, and the governor’s veto power does not apply.

Both the constitutional convention and the content of the resolutions and bill present serious risks to our government and our economy.  The legislature should prevent any resolution calling for a constitutional convention, or bill laying out a process to do so, from being adopted during the current legislative session.

Why is a constitutional convention a serious risk? What are some of the implications of these limits to federal power and, specifically, fiscal restraints?

Serious risks posed by a constitutional convention

The most critical risk is that the country and our state could be thrown into extreme turmoil due to the lack of legal agreement about what is involved in a convention of the states. While Article V of the U.S. Constitution provides for the option of amendment via a convention, there is no direction on how this option is to be implemented.

Despite reassurances from conservative groups, there is no consensus among legal scholars that either the states or Congress can control what happens once a convention is convened, even if states specify that it is only for a balanced budget amendment or other limited purpose. Convention delegates could consider any changes to the U.S. Constitution that they want to introduce. The only check and balance is the ratification by at least 38 states, via either their legislature or a convention, before an amendment is adopted. Some legal experts believe that even this ratification process could be open to change by the convention.

As the Center on Budget and Policy Priorities highlights in a recent report:

A number of prominent legal experts have warned that states cannot control a constitutional convention or that calling one could open up the Constitution to significant and unpredictable changes.  For instance:

“I certainly would not want a constitutional convention.  Whoa!  Who knows what would come out of it?”a
Supreme Court Justice Antonin Scalia

“[T]here is no way to effectively limit or muzzle the actions of a Constitutional Convention. The Convention could make its own rules and set its own agenda. Congress might try to limit the Convention to one amendment or one issue, but there is no way to assure that the Convention would obey.  After a Convention is convened, it will be too late to stop the Convention if we don’t like its agenda.”b 
Former Supreme Court Chief Justice Warren Burger

“There is no enforceable mechanism to prevent a convention from reporting out wholesale changes to our Constitution and Bill of Rights.”c
Former Supreme Court Justice Arthur Goldberg

“First of all, we have developed orderly procedures over the past couple of centuries for resolving [some of the many] ambiguities [in the Constitution], but no comparable procedures for resolving [questions surrounding a convention]. Second, difficult interpretive questions about the Bill of Rights or the scope of the taxing power or the commerce power tend to arise one at a time, while questions surrounding the convention process would more or less need to be resolved all at once.  And third, the stakes in this case in this instance are vastly greater, because what you’re doing is putting the whole Constitution up for grabs.”d
Professor Laurence Tribe, Harvard Law School

“[S]tate legislators do not have the right to dictate the terms of constitutional debate.  On the contrary, they may be eliminated entirely if Congress decides that state conventions would be more appropriate vehicles for ratification.  The states have the last say on amendments, but the Constitution permits them to consider only those proposals that emerge from a national institution free to consider all possible responses to an alleged constitutional deficiency. . . Nobody thinks we are now in the midst of constitutional crisis. Why, then, should we put the work of the first convention in jeopardy?”e 
Professor Bruce Ackerman, Yale Law School

Leaders across the political spectrum have expressed their concerns about a “runaway convention.” Many states have rescinded resolutions that were passed as early as the 1980s, although a number have replaced these with new resolutions in recent years. This earlier move for a convention was stopped just before reaching the required number of 34 states when some states realized the risk of signing on. South Dakota and Utah rejected the new call to action in 2014. 

While SCR 13 stipulates that only a balanced budget amendment would be considered during a proposed constitutional convention, this is not the case.

 Further Resolved, If the convention called by the Congress is not limited to considering a balanced budget amendment, then any delegates, representatives or participants from the State of West Virginia asked to participate in the convention are authorized to debate and vote only on a proposed amendment or amendments to the United States Constitution requiring that, in the absence of a national emergency, the total of all federal appropriations made by the Congress for any fiscal year may not exceed the total of all estimated federal revenues for that fiscal year, together with any related and appropriate fiscal restraints;

As the Center on Budget and Policy Priorities notes, this final clause (bolded above) “opens the door to any constitutional amendments that a convention might decide fit under this broad rubric, including placing a rigid ceiling on federal spending so that all (or virtually all) deficit reduction has to come from cutting federal programs such as Social Security or Medicare, with little or none coming from revenue-raising measures. Such a ceiling would reduce or eliminate any pressure to produce deficit-reduction packages that pair spending reductions with increased revenue from closing unproductive special-interest tax loopholes or from combating tax avoidance by powerful corporations.”

While H.B. 2424 attempts to lay out a detailed process for delegates and their duties and responsibilities for  a constitutional convention of the states, Article V is silent about how delegates are chosen and what these responsibilities may be. According to a recent study by the Congressional Research Service: 

Congress has traditionally laid claim to broad responsibilities in connection with a convention, including (1) receiving, judging, and recording state applications; (2) establishing procedures to summon a convention; (3) setting the amount of time allotted to its deliberations; (4) determining the number and selection process for its delegates; (5) setting internal convention procedures, including formulae for allocation of votes among the states; and (6) arranging for the formal transmission of any proposed amendments to the states.

Risks of amending the U.S. Constitution to establish new limits on federal powers

The fiscal restraints are in and of themselves a serious risk to the stability of the country. The core principle of most BBA proposals is that the federal government could only pay out what it takes in during the course of a year. This principle jeopardizes benefits to individuals, such as Social Security and Medicare, which depend on the use of a trust fund that carries over from one year to the next. We also know that in hard times the federal government may need to borrow in order to compensate for the revenue shortfalls for our states and our citizens.

Both states and families use controlled indebtedness in order to cover planned expenditures that they cannot afford with their yearly earnings. For example, our School Building Authority uses bonds in order to help build and repair schools. Many of our families have mortgages or student loans to pay for housing and higher education. The BBA would prevent the federal government from using these kinds of common sense fiscal tools.

A BBA, in particular, seems like a simple solution, and there is a lot of popular support for pursuing it. The best response to concerns about deficit spending is to demonstrate real leadership on fiscal policy at every level of government and to make these decisions in a thoughtful and balanced way instead of focusing on arbitrary ways to cut spending. As Robert C. Byrd said over two decades ago:  “I support a balanced budget, and I want to lower the federal deficits…But the answer must not be to perform a lobotomy on our nation’s most sacred principles of checks and balances and separation of powers . . . simply because we are frustrated.”

The leaders of our new legislative majority now have an opportunity to prove their ideas for improving the state’s economy. The fact is that, just like other states, we depend on federal funds in order to function. This is especially true for our aging population that relies heavily on Social Security, Medicare, and Medicaid. 

Oppose a Constitutional Convention of the States

Whatever your opinions are about a balanced budget amendment, we all agree that the U.S. Constitution is the backbone of our democracy and that any attempt to risk the foundation that it has provided for our country is misguided at best and disastrous at worst.

Whatever your opinions about a balanced budget amendment, perhaps we can at least agree that calling a constitutional convention for the first time in 227 years is misguided. Such a radical process would imperil the foundation of American democracy, our federal Constitution, which continues to serve us well today. – See more at: http://gbpi.org/reckless-budget-proposal-has-unintended-consequences#sthash.BDia57xB.dpuf
Whatever your opinions about a balanced budget amendment, perhaps we can at least agree that calling a constitutional convention for the first time in 227 years is misguided. Such a radical process would imperil the foundation of American democracy, our federal Constitution, which continues to serve us well today. – See more at: http://gbpi.org/reckless-budget-proposal-has-unintended-consequences#sthash.BDia57xB.dpuf

Rethinking the Federal Budget and Household Budget Analogy

Sometime this fall – probably in October – the federal government will reach its borrowing limit and we are likely to witness another fierce debate about federal debt and deficit spending. Often in these debates, pundits and others make the claim that since households have to balance their budgets, the federal government should do the same. While this makes for a popular political soundbite, the truth is most households are deficit spenders with debt loads just like the federal government. Just ask yourself if you, or anyone you know, can afford to buy a house or car, or go to college for that matter, without taking on debt.

While there are significant differences between the federal budget and the household budget, they both clearly rely heavily on deficit financing in order to function. For example, according to the U.S. Census Bureau, the median household debt in 2011 was $91,000 while median household income in that year was just $50,052. This means that median household debt is nearly twice as high as median income or about 180 percent of median household income. Conversely, federal debt held by the public as a share of the economy (GDP) in 2012 was 73 percent, according to the Congressional Budget Office. Looking a gross public debt this number jumps to 102 percent. 

Debt

Some might say that this is an unfair comparison because we are not including assets or looking at the net wealth of the households or government. After all, many households may have large mortgages and car loans but the also have equity in these assets. While this is true, how often do we look at the assets of the federal government when looking at its debt burden? Almost never. But we should.

Again, according to the U.S. Census Bureau, the median net worth of households in 2011 was $68,828. This number reflects the total value of market assets ( homes, vehicles, cash, savings plans, etc.) minus liabilities (shown above as secured debt) owned by household members.

Trying to figure out the net worth of the federal government is not an easy task. According to the US General Service Administration, the market value of federal government real property (building and structures) was $1.26 trillion in FY 2005. The federal government also has about $1.4 trillion in financial assets.

The federal government also owns a lot of minerals. According to the Institute for Energy Research, the total value of federal mineral holdings (oil, natural gas, and coal resources) is worth $150.5 trillion. According to the U.S. Department of Treasury, total U.S. debt in the first quarter of 2013 was $16.8 trillion. If we compare our federal mineral assets to this liability, this means federal assets are nine times higher than our national debt or that the federal government has a net worth of $138.7 trillion.

What all of this makes clear is that it is important to look not just at our national and household debt, but also at our net worth. Our assets and our liabilities. After all, this is the standard way accountants assess the financial position of businesses and non-profits. Why not apply the same principles to the federal government?

Budget Deficit Falls, But Jobs Deficit Stays The Same

Earlier this month, the Congressional Budget Office released its latest budget update. According to the CBO, the federal budget deficit is falling, and falling fast. The federal deficit is estimated to be $642 billion this year, its smallest amount since 2008. That will be about 4.0% of GDP, compared to 10.1% in 2009. Projected deficits have also shrunk dramatically , with the 10-year deficit  $600 billion smaller than the CBO’s February projection. While debt and deficits are falling in the short term, they began rising again in the long term, due to an aging population and health care costs.

What is the cause for the falling deficits? Revenues are rising as the economy slowly recovers. Also having an impact is the $2.3 trillion in deficit savings that have been legislated recently, including the sequester, most of which has been achieved through spending cuts.

So we have clearly done more than enough to stabilize and reduce the deficits and debt for the next decade. But are we doing too much? According to many economists we are, and all of this deficit reduction is slowing down the recovery. Both private sector and government economists estimate that the unemployment rate would probably be nearly a point lower, about 6.5 percent, and economic growth almost two points higher this year if we had not raised taxes and cut spending since 2011 in the name of deficit reduction.

While cutting spending and raising taxes has succeeded in shrinking the budget deficit, it has failed in reducing the jobs deficit. While the economy has been growing, it has been growing much slower than it needs to be to fully recover from the recession. The jobs deficit, or the number of jobs needed to get back to pre-recession employment levels, adjusting for population growth, stands at 9.8 million jobs. Even as the economy continues to add jobs, the pace is just enough to keep up with population growth, and the jobs deficit remains high.

With nearly 10 million jobs missing from the economy, and spending cuts and tax increases contributing to the problem, maybe it is time policymakers switch their deficit reduction targets from budgets to jobs.