Duelling US Budgets Herald Showdown over Poverty

WASHINGTON  – U.S. President Barack Obama released a 3.9-trillion-dollar budget proposal for the coming fiscal year, shaping an ideological battle over the role of government in reducing poverty that will likely define the coming election year.

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In addition to conventional support for the economically vulnerable, such as extending unemployment insurance, Obama’s proposal, released Tuesday, seeks to expand tax credits for moderate- and low-income earners while replacing any revenue losses by closing tax loopholes on high-income earners.

“At a time when our deficits are falling at the fastest rate in 60 years,” Obama said, “we’ve got to decide if we’re going to keep squeezing the middle class, or if we’re going to continue to reduce the deficits responsibly, while taking steps to grow and strengthen the middle class.”

With a very conservative, Republican-dominated House of Representatives, it is unlikely that Congress will cooperate with the White House’s proposal. Indeed, Obama’s proposal is all the more striking in just how diametrically opposed it is to a recent Republican report on U.S. anti-poverty efforts, itself released on Monday.

As the 2014 election approaches, conservatives seem determined to reemphasise their opposition to welfare programmes. On Monday, Paul Ryan, a member of the House of Representatives and the Republicans’ lead budget expert, released a report criticising social safety net programmes stemming from the “War on Poverty,” a 1960s-era initiative designed to combat the effects of poverty.

Ryan suggests that key War on Poverty programmes have had the perverse impact of keeping poor people poor.

“The president’s budget is yet another disappointment, because it reinforces the status quo,” Ryan, the party’s vice-presidential candidate in 2012, said Tuesday. “It would demand that families pay more so Washington can spend more.”

Ryan also accused Obama of proposing a 1.8-trillion-dollar tax increase.

The White House says the budget calls for ending “inefficient and unfair tax breaks that benefit the wealthiest”. During his speech Tuesday, Obama supported “closing tax loopholes that right now only benefit the well-off and the well-connected.”

Obama’s budget does seek to expand certain tax credits, such as the Child Tax Credit and Earned Income Tax Credit (EITC), both of which give low-income workers a greater return on their tax refunds.

Under the proposal, the EITC’s maximum refund for childless workers would double to 1,000 dollars. The credit would also become available to young workers between the ages of 21 and 24 as well as older workers up to the full retirement age.

The proposal seeks to balance this expansion of the EITC by closing “tax loopholes” for high-income earners. As in previous years, the proposal also stipulates that millionaires must not pay less than 30 percent of their income, in order to prevent them from taking advantage of tax preferences that have allowed some high-income earners to pay less in taxes than middle-class workers.

While Ryan and fiscal conservatives have voiced their support for the EITC in the past, some conservative analysts are arguing against Obama’s proposal to make the EITC more accessible to younger workers and workers without children.

“[The EITC] is an effective measure that has encouraged work,” Rachel Sheffield, a policy analyst at the Heritage Foundation, a conservative think tank, told IPS.

“What the president is proposing is expanding the EITC to individuals who don’t have children, so single adults, and that’s problematic because it’s likely … to have marriage penalties. It would potentially reward fathers who don’t marry or support their children. When the person marries the subsidy would be eliminated.”