Let high-income tax cuts expire, redirect money to stimulate economy

The Center on Budget and Policy Priorities makes a strong case for letting $40 billion in Bush tax cuts for high-income households expire as scheduled at the end of this year. That $40 billion could instead be redirected to help stimulate the weak national economy.

According to the nonpartisan Congressional Budget Office (CBO), if this money were used for job-creation tax credits, continued federal aid to states and extended unemployment insurance benefits, it would create more jobs and generate more economic growth than simply extending the Bush tax cuts for the top income households in the nation (i.e., those with incomes over $250,000 a year). Why? Because higher income households are more likely to save this extended tax windfall than spend it. What the economy needs right now, however, is more consumer spending.

In fact, “CBO found extending the tax cuts for high-income households to be the worst of all options under consideration for preserving or creating jobs and boosting economic growth while the economic is weak,” the Center on Budget and Policy Priorities notes.

In the near term, the CBO found that some actions would create more economic growth and more jobs per dollar spent than extending the high-income tax cuts. For example:

• A temporary jobs tax credit (a temporary payroll reduction on new hires).
• Extending federal fiscal aid to states to help them avoid bigger and deeper spending cuts. (Congress in fact has recently taken this action, which may provide $430 million for health care and education in Minnesota.)
• Extended unemployment insurance benefits for the unemployed. This provides the greatest “bang for the buck,” as benefits paid out to the unemployed would undoubtedly be injected right back into the local economy in spending by the unemployed to meet basic living needs.

When Congress returns from its summer recess in September, expect a fierce debate over the future of the expiring tax cuts (along with whether or not Congress will extend tax credits targeted to low- and moderate-income working families, such as the Child Tax Credit and the Earned Income Tax Credit). Extending the tax cuts for high-income households is the worst option for spurring economic growth, and would add $1 trillion to the national debt over the next ten years. Congress should allow the Bush tax cuts to expire. In the short-term, Congress should redirect that money toward initiatives that will truly stimulate the economy and help struggling working families. Once the nation’s economy is on more solid footing, the resources can be used to make a dent in the nation’s deficit.

-Steve Francisco

Senate climate bill falls short on funds for consumer relief

In early November, the Senate climate change bill (the Clean Energy Jobs and American Power Act) made its way through the Senate Environment and Public Works Committee. Here at the Minnesota Budget Project, we asked Minnesotans to contact our own Senator Amy Klobuchar, who sits on this committee, to ask her to maintain and strengthen the low-income consumer relief provisions related to the cap and trade system. Unfortunately, there was a setback in terms of fully funding consumer relief, and we want to update you on what changes were made and where the bill is headed next.

While the House bill provided full relief for low-income consumers, committing 15 percent of the total emissions allowance value, the Senate version has decreased the overall amount of funds due to deficit reduction requirements. Although the bill still says it provides 15 percent for consumer relief, it is 15 percent of a smaller pot of money. In comparison to the House bill, the Senate bill actually ends up allotting 12.6 percent of the previous total allowance value according to the Center on Budget and Policy Priorities. For more information on the Senate climate bill you can read their full report on the latest markups.

Although the Senate may not be looking at the Clean Energy Jobs and American Power Act again until early 2010, now is the time to get involved.

The Minnesota Budget Project is hosting two events this week to bring people together to talk about why climate change is a concern for low-income communities and how proposed solutions can create new opportunities. These Convening on Climate Change events are free and will take place in Duluth on December 2nd, and Mankato on December 3rd. You can find the details and RSVP for these events online. 

Now is also a great time to contact your Senators or plan a visit for when they are home for the holiday break. We suggest the following simple talking points:

1. Provide full protection to low-income households and extend additional relief to moderate income households by increasing the allowance revenue dedicated to direct consumer relief. At a minimum, dedicate the same amount of revenue as the House bill did—using 15 percent of total allowance revenue.
2. Redirect allowances currently going to utilities, as needed, to fund direct consumer relief.
3. Provide additional funds for the Low-Income Home Energy Assistance Program (LIHEAP) to provide energy assistance to low-income consumers who face above-average cost burdens, risking utility shut-offs or other hardships.

Another reason to act now is because we expect discussion to heat up with the upcoming COP15 international conference on climate change taking place in Copenhagen in December. Find out more online at the COP15 website.

-Leah Gardner (with Julia Jackson, our intern working on climate change)

Senate releases bill to address climate change

Last week the U.S. Senate released their version of a bill to address climate change – the Clean Energy Jobs and American Power Act. The bill is an important step toward a cleaner, healthier and more economically vibrant place for all members of our society, addressing the serious problem of climate change and producing needed employment opportunities at the same time. Although much of the bill took the form of “placeholder language” – signaling a need for continued negotiations – the existing content suggests it will include critical provisions to mitigate cost burdens for low- and moderate-income households rising from expected energy price increases. At the same time, the bill includes important measures to target low-income people and people of color for new green job opportunities so that they are able reap the economic benefits of this legislation.

As negotiations continue, we know that Minnesota will play an important role in the debate – particularly given Senator Klobuchar’s leadership in the Environment and Public Works Committee. A diverse range of organizations recently delivered a sign-on letter to our Senators asking them to dedicate 15 percent of total allowance values for full, direct consumer relief for low- income households, as the House bill did, in addition to extending relief to moderate-income households. We also made the case for public investments in training and job creation programs to ensure that disadvantaged populations have access to well-paid employment opportunities.

We will continue to keep you informed as details emerge, but given that legislation has already passed through the House and is currently being crafted in the Senate now is a great time to get involved and weigh in on what will surely be a challenging debate. To learn more about our position or to share your own priorities and concerns, please contact me at 651-757-3063 or leah@mncn.org.

-Leah Gardner

Convening on climate change provides opportunities to act

Last week, the Minnesota Council of Nonprofits hosted a Convening on Climate Change to bring together a diverse range of nonprofits and other advocacy groups to talk about the impacts of climate change on low-income communities and people of color. This is an urgent conversation since there is pending federal legislation that could have both positive and negative impacts on Minnesota’s low-income families.

Over 50 people attended the convening, representing environmental groups working to reduce global warming, faith groups speaking up about climate-related social justice issues, labor and equal rights groups working for adequate access to green jobs, community groups working to oversee proper implementation of local investments in home weatherization, and a variety of low-income service providers concerned about provisions for adequate consumer relief to counter rising energy prices. Attendees got a chance to learn from one another about how climate change itself impacts low-income people disproportionately and the many ways that legislation may provide both opportunities and concerns for disadvantaged populations.

The convening, however, wasn’t just about learning…it was also about action.

Organizations in attendance had the chance to discuss and commit to a variety of action items that will allow us to work on this issue in a more collaborative spirit.

One important action that many groups committed to that day was to sign-on to a letter to Senator Klobuchar asking her to take the lead in shaping strong and fair climate legislation with low-income Minnesotans in mind.

It is not too late to add your organization to the list of those supporting strong and fair solutions to climate change! E-mail me by Monday, August 31st at leah@mncn.org if your organization can sign-on and strengthen our joint work on behalf of disadvantaged populations.

I’d also encourage you to call me at 651-757-3063 soon if you would like to discuss additional ways to get involved or learn more about this important issue. Remember, time is of the essence as we expect the U.S. Senate to take this issue up in September!

-Leah Gardner

Important climate change legislation clears first hurdle in Congress

We’ve been talking about climate change legislation on our blog for some time. Now we are seeing real movement on this issue at the federal level. The American Clean Energy and Security Act (H.R. 2454) took a huge step forward on June 26th when it passed the U.S. House of Representatives. This important climate legislation impacts low-income households in many ways, but perhaps most significantly in that it provides a starting point for addressing serious climate change issues – like pollution and extreme weather – that disproportionately effect vulnerable, low-income communities.

A major element of the legislation is that it institutes a cap-and-trade system which will set a limit on the amount of greenhouse gases that businesses are allowed to emit, creating emissions allowances. The bill uses revenues from the sale of 15 percent of the emissions allowances to directly reimburse lowest-income households for their increased expenses as prices for energy and energy-intensive goods are expected to rise.

This relief would be provided on a monthly basis to the lowest-income 20 percent of the population, or roughly those below 150 percent of the poverty line, through an existing mechanism known as an Electronic Benefit Transfer (EBT). A small amount of additional relief is provided through an expansion of the Earned Income Tax Credit (EITC) for low-income workers without children, a group that is difficult to reach through the EBT system. You can learn more about how low-income households would benefit from the bill in a new report from the Center for Budget and Policy Priorities, “How Low-Income Consumers Fare in the House Climate Bill.”

There are many elements of the current legislation that are strong positives for low-income communities. This act will make strides in cleaning up the air to create healthier low-income communities, and it will do so without harm to the budgets of the lowest-income households. It also provides for new economic opportunities such as green jobs and increased funds for weatherization programs.

There are many vocal opponents of this legislation, so it is important that the Minnesota members of Congress that voted for H.R. 2454 (Reps. Ellison, McCollum, Oberstar, Peterson and Walz) hear from low-income advocates thanking them for their support. Find out more about how to contact your representative and please call today.

However, as action on the bill shifts to the U.S. Senate, there are some elements of the bill that we believe can be improved:

• Consumer relief in the House bill phases out completely at 160 percent of the poverty line (about $35,000 for a family of four). We urge the Senate to extend relief to all moderate-income families.
• In the House bill, relief is provided based on what the Energy Department calculates as a household’s average reduction in purchasing power. Given the high heating costs in our state, some Minnesota families will face higher than average reduction in purchasing power if energy costs increase. Funds should be allocated to the existing Low-Income Home Energy Assistance Program (LIHEAP) which provides assistance to low-income consumers who face utility shut-offs or other hardships.

You can learn more about our position on how to improve the bill in the Senate by reading “American Clean Energy and Security Act: Impact on Low- and Moderate-Income Minnesotans.” The Senate is expected to take action on this bill in September.

-Leah Gardner

Governor’s budget would hit Minnesota families hard

The Governor’s budget proposal, released this afternoon, lists his top three priorities as enhancing our job climate, improving K-12 education and protecting state public safety programs. Unfortunately, many of his proposals will cut the ground out from beneath families struggling in this economy. While the Governor undoubtedly faced a huge challenge in coming up with solution to the $4.8 billion deficit for FY 2010-11, he made his task even more difficult by taking revenue increases off the table.

After a quick look at some of the documents, here are a few key points:

• Under the Governor’s budget, general fund spending for FY 2010-11 would be $750 million below spending in FY 2008-09.  That doesn’t sound like a big deal…but it is. Even though just about every economist will tell you that government spending is the surest bet for stimulating the state’s economy in a recession, the Governor would take us backwards.
• The Governor’s proposal to create jobs focuses exclusively on tax cuts/incentives for businesses, which he hopes will stimulate job creation. Meanwhile, he proposes $2.4 billion in permanent spending cuts, which we know will result in the loss of jobs in the public, for-profit and nonprofit sectors as services are severely reduced or eliminated. Research shows business tax cuts are not an effective way of providing stimulus.
• For families struggling in this economy, the Governor limits their options. His proposal includes moves like eliminating adult eligibility for MinnesotaCare and eliminating dental benefits, reducing funding for child care, cutting $50 million per year from the Renters’ Credit, reducing state support for higher education by more than $300 million next biennium, and much more. We’ll provide more in-depth analysis on his proposals in the coming days – and we’ll also connect you with the great analysis being done by others.

A few other major components of the Governor’s budget include:

• He assumes Minnesota will get $920 million in federal stimulus relief (this is just a placeholder amount for now).
• He reduces the FY 2010-11 deficit by $1.3 billion by shifting K-12 education payments into the future.
• He raises close to $1 billion upfront by selling bonds secured with our tobacco lawsuit revenues.

We will give the Governor credit for putting $250 million in the budget reserve to help resolve any current-biennium deficit that might arise in the next few months.

As an alternative to the Governor’s approach, earlier today, the Minnesota Budget Project joined with the Organizing Apprenticeship Project to recommend a set of Kitchen Table Principles for solving the budget deficit. These principles, developed through conversations with people from around the state over the last six weeks, reflect the values of ordinary Minnesotans who are concerned about the state’s future.

Of course, we encourage you to take a first-hand look at the Governor’s budget proposal. You can review his powerpoint, look over issue briefs and read the detailed proposals for each agency on the Minnesota Management and Budget website.

-Christina Wessel

Worried about low-income families? Start paying attention to climate-change!

For those of you working with, advocating for, or just plain concerned about low-income families, there is a new issue on the horizon that requires your immediate attention…climate-change.

And I don’t just mean worrying about how changes in the climate are impacting low-income communities, but how responses to climate-change will impact these families. At both the regional and federal level, policymakers are considering proposals that will place a cap on greenhouse-gas emissions. Which is great…there is an urgent need to fight global warming.

However, capping greenhouse gas emissions will inevitably impact the cost of energy, transportation, food, and other goods and services. And that will hit low-income families particularly hard since these items make up a larger share of their budget, and they have less flexibility to adapt to the changes in price. A national analysis found that a 15 percent reduction in greenhouse-gas emissions could cost the poorest fifth of Americans (those making about $13,000 a year) an average of $750 per household.

Don’t be discouraged – we can fight global warming without pushing low-income families deeper into poverty. But that means implementing a “cap-and-trade” system that auctions off greenhouse-gas allowances to utility companies in order to raise public revenues that can be used to offset impacts on low-income communities.

But that may not happen unless you get involved in this debate…immediately.

There is a lot happening right now. At the federal level, the Lieberman-Warner Climate Security Act of 2008 is being considered in the U.S. Senate. And Minnesota has joined several other states in our region to set up the Midwest Greenhouse Gas Reduction Accord, which expects to propose a cap-and-trade agreement by this November.

We’ll continue to keep you informed on this issue (I’ve blogged on this before), but it is important for those who are concerned about low-income folks to start talking to state and federal policymakers (as well as their friends in environmental communities) to ensure that any cap-and-trade system…

• auctions off allowances in order to raise public funds.
• uses a portion of the public funds raised to offset the impact of climate-change legislation on low-income families.
• uses mechanisms specifically designed to reach low-income families. 

If we sit on the sidelines and wait to be asked, chances are the agreements will be made and the money will be distributed without carefully considering the unique challenges climate-change legislation will present to low-income families.

-Christina Wessel