As President Obama and Congressional leaders meet for the first time tomorrow to begin negotiations about avoiding the fiscal cliff — the combination of spending cuts and tax increases that will go into effect in 2013 if Congress does not act to avert them — Goodwill Industries International is monitoring the developments to see how key workforce programs and other services that support people we serve fare in the proposed solutions.
As previously reported, the automatic spending cuts threaten to drastically reduce key resources that support the efforts of local Goodwill® agencies in communities across the United States to help people who face employment challenges find jobs and advance in careers.
Here are two specific components we’re watching:
The tax rate cuts first passed under President Bush and extended by President Obama are set to expire on January 1, 2013. The president reiterated his campaign pledge for a “balanced approach” to solving the cliff and to retain the tax rate cuts for those earning less than $250,000, but allowing tax rates to rise for those earning above that amount. On this point, there is intense disagreement as Republicans on Congress urge that tax cuts be extended for all earners.
Republicans have said that additional revenues are on the table, but only through reforming the tax code and limiting deductions for the wealthiest earners. Both sides have said they want some kind of tax reform, but the White House has said that capping deductions alone won’t bring in nearly the amount of revenue needed to achieve significant deficit reduction.
In addition, both sides agree that there must be a “patch” for the Alternative Minimum Tax (AMT), a punishing tax meant to apply to the wealthiest earners, but which increasingly has come to threaten middle-class earners. Congress has raised the earnings threshold for the AMT annually and needs to again for 2013.
An array of options to reduce spending in order to achieve deficit reduction is before Congress and the Obama administration. The default option is the sequester, a nine-year, $1.2 trillion dollar cut to both the defense and non-defense discretionary budget, which would spare programs important to Goodwill, like Social Security, Medicaid, TANF, SNAP, Pell Grants, the EITC and Child Tax Credit, and programs for veterans. Medicare cuts are limited to 2 percent. The first installment would occur in 2013, a $109 billion cut, with additional cuts each year until 2021.
Alternately, Congress and the White House could agree to smaller cuts to defense and non-defense spending, and include reforms to programs like Social Security and Medicaid that cut benefits for people who rely on them. The White House has put reforms to Social Security, Medicare and Medicaid on the table before, but at this point there seems to be no indication that they are inclined to go that direction now. There are a myriad of options available, and no one can tell what the president and Congress are likely to agree to on the spending side.
For Goodwill and the people we help get and keep good jobs, these questions are critical as key job training and income support programs could be in the crosshairs. We will keep you posted on the latest developments as events unfold.