I generally do not like to write diaries that are based entirely on somebody else's work but I'm making an exception. I was just over at Jared Bernstein's blog "On The Economy." I realize this may not be a "must read" on everybody's checklist and this is such a strong point that I want to make sure it gets out. Details below the orange croissant.
In a post titled "I Just Solved the Sequester!", Jared writes about a new paper about tax entitlement reform from his colleagues at the Center on Budget and Policy Priorities. Kudos to that entire organization, by the way. They do fantastic work.
I've often heard tax expenditures referred to as "spending via the tax code." Jared is, I think, only half-joking with the title of his blog post. Because if we eliminate tax expenditures, we simultaneously reduce spending and increase tax revenue. Of course Republicans would never go for this because that would require them to be reasonable. But this isn't the part that really struck a nerve.
Here is a quote from the blog post which is in turn a quote from the CBPP paper:
Child care provides an example of why tax expenditures generally are the equivalent of spending programs… Many low- or moderate-income people receive a subsidy, provided through a spending program, to help cover their child care costs. Many people with higher incomes similarly receive a subsidy that reduces their child care costs, but they receive it in the form of a tax credit. The child-care spending programs that serve lower-income families are not open-ended entitlement programs; they serve only as many people as their capped funding allows, and only about one in six eligible low-income working families receives this assistance. By contrast, the child care subsidies for higher-income families operate as an open-ended entitlement provided through the tax code, and all families eligible for the tax credit can get it. The current structure, in which child care subsidies are constrained for lower-income families but unlimited for higher-income families, makes little sense. (It would also make little sense to target the child care subsidy for low-income parents for deficit reduction while leaving the child care subsidy for higher-income parents untouched because the former is delivered through a “spending” program and the latter is delivered through the tax code.)
Think about that for a minute. If the sequester goes through, it puts at risk the subsidy millions of low-to-moderate income families rely on to provide care for their children while they are out working. But it won't touch the tax credit that better-off families receive to help them pay for child care. Seems fundamentally unfair, right? Probably because it is.
And what happens to these low-income families that can no longer afford child care? Do they quit their jobs and stay home with the children? How do they care for their children if other government programs designed to aid the poor have had their budgets slashed thanks to the sequester? It's going to be a nightmare full of homeless families with hungry children and no place to go.
I had never thought about it in quite that way before. I think the example they use really drives home the point about how the sequester is going to unfairly target the families that really need the government the most.