Congress gives billions of dollars in tax breaks but tells the poor ‘hard luck’

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Not only did Congress give zillionaires billions of dollars in tax breaks, they also told the people at the bottom of the economic ladder, ‘tough luck’, said the AFL-CIO trade union federation.

It reports that with unemployment at nearly 10 per cent and 19 million Americans currently living in ‘deep poverty’ (below half the poverty line), federal funds for the Temporary Assistance For Needy Families (TANF) programme, the federal programme that replaced welfare, have entirely dried up for the first time since 1996.

That leaves states, whose budgets are already overburdened, with an average of 15 per cent less federal funding for the coming year to help an ever-increasing number of needy families.

TANF provides a lifeline for families and workers who have exhausted all of their unemployment benefits.

According to a new report by the Centre for Budget and Policy Priorities, (CBPP) the lack of funds means more homeless families will go without shelter, fewer low-wage workers will receive help with child care expenses, and fewer families involved with the child welfare system will receive preventive services.

Congress passed legislation that will end funding for the TANF Contingency Fund in 2011.

Congress also failed to reauthorise an emergency fund for a subsidised job programme that would have allowed states to provide emergency help to needy families and place low-income people in subsidised jobs.

Without additional federal funding, states will now have a much harder time meeting the increased demand for assistance at a time when unemployment remains high and poverty continues to climb, say the report’s authors Liz Schott and LaDonna Pavetti.

In fact, several states are considering cutting the already-low amount of assistance they provide to very poor families with children, tightening eligibility rules so as to reduce or eliminate benefits for some groups of needy families with children, and cutting other services, such as child care, that are funded in part or in whole with state or federal TANF dollars.

Schott and Pavetti say: ‘This is not what Congress intended when it reformed the welfare system in 1996.

‘Helping welfare recipients find work in this economy requires more help from the federal government, not less.’

Their press statement said: ‘With unemployment high and millions of families in need, for the first time since 1996 when President Clinton and Congress created the Temporary Assistance for Needy Families (TANF) block grant as part of welfare reform, no additional TANF funds are available from the federal government to help states respond to the large increases in the number of impoverished families as a result of a recession.

‘Consequently, with the need for emergency and temporary assistance (including help finding work) at their highest levels in decades, more low-income parents will go without jobs, more homeless families will go without shelter, fewer low-wage workers will receive help with child care expenses, and fewer families involved with the child welfare system will receive preventive services.

‘The federal cut-off in recession-related help to states is due to two factors.

‘First, legislation was recently enacted that will essentially end funding for fiscal year 2011 for the TANF Contingency Fund, which was specifically created in welfare reform to help states respond to increased need during hard economic times.

‘Second, Congress failed to extend the TANF Emergency Fund, which was created in the 2009 Recovery Act to help families weather the current downturn, but which expired on September 30.

‘Aggravating these problems, the 17 states that have received Supplemental Grants every year since TANF was created (most of them relatively poor states) will see those grants cut by 33 per cent this year, unless Congress provides additional funding to restore them to their original level.

‘Due to these factors, states will have an average of 15 per cent less federal TANF funding in fiscal year 2011 to help low-income families with children than they had on average in each of fiscal years 2009 and 2010, even though unemployment remains extremely high and record numbers of families are unable to meet basic needs such as housing and food.

‘The economic context in which these TANF cuts have come is striking: unemployment stands at 9.8 per cent and is expected to remain roughly at or near this level for the foreseeable future.

‘There is only one job opening for every four to five people looking for work; more than 40 per cent of the 15 million unemployed Americans have been looking for work for more than half a year, one of the highest such percentages in the last 60 years.

‘The number of people in deep poverty (with incomes below half the poverty line) reached a record 19 million in 2009, up 2 million from 2008; and the number of families who were homeless and spent some time in a shelter increased by 30 percent between 2007 and 2009.

‘These TANF reductions come as states face large budget gaps.

‘States closed $125 billion in shortfalls for fiscal year 2011 (which began July 1 in most states), and a number of states are already facing mid-year shortfalls; budget gaps for 2012 are likely to be even larger.

‘In developing their 2011 budgets, a number of states counted on an extension of the TANF Emergency Fund, as the House of Representatives had twice passed such an extension.

‘Moreover, states that receive Supplemental Grants, which Congress has always fully funded, counted on these funds continuing fully in 2011.

‘Now that states will receive less funding than they anticipated, some of them are already considering substantial cuts to programs for low-income families with children, including services to families at risk of entering the child welfare system, child care subsidies for working parents, and services to help address substance abuse, caring for a disabled child, and other challenges.

‘All states except Wyoming (which did not receive funding from the Supplemental Grants, Contingency Fund, or Emergency Fund) will experience some reduction in federal TANF funding this fiscal year, although some states will be hit harder than others.

‘Some 28 states will experience a funding decline of 15 per cent or greater, and four of these states will be subject to a reduction of 20 per cent or greater.

‘Among the states hit hardest are those that have faced higher-than-average unemployment rates and significant state budget shortfalls.

‘For example:

• ‘South Carolina and Oregon will both receive 16 per cent less in federal TANF funding in 2011 than in 2009 and 2010.

‘Oregon is facing an unemployment rate of 10.6 per cent and had a biennial budget gap equal to 34 per cent of its 2009-2011 budget.

‘South Carolina has an unemployment rate of 11.0 per cent and had a budget gap equal to 25.6 per cent of its 2011 budget.

• ‘Nevada, which is facing 14.4 per cent unemployment and had a 2011 budget gap equal to 54 per cent of its budget, will receive 17 per cent less in federal TANF funding in 2011 than its average annual level for 2009 and 2010.’

The authors noted: ‘In addition to cuts in TANF funding, states face cuts in the child support matching funds they receive from the federal government.

‘The Deficit Reduction Act of 2005 (DRA) reduced federal child support funding by 20 per cent by eliminating long-standing incentive payments that states had earned and then reinvested in their child support programmes based on their performance rates.

‘The 2009 Recovery Act suspended this DRA provision for 2009 and 2010, providing states with $1 billion that helped prevent cutbacks in state child support programs.

‘Those funds, however, expired on September 30, and the new TANF extension law does not continue them.

‘As a result, states will receive an estimated $670 million less in federal child support funding in 2011 than in 2010.’