Last week, It’s Your Money looked at the new work requirements for people who get the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF), and how the myth behind that policy will affect millions of Americans.
This week, we’ll take a look at some other outcomes from the Debt Ceiling deal and how they will affect American consumers.
Just a refresher: Two weeks ago, Congress agreed to suspend the $31.4 trillion U.S. borrowing limit until January 2025. Aside from keeping U.S. politics from crashing the global economy, the May 31 deal, signed by President Joe Biden June 3, saved millions of Americans from losing benefits that help them keep their households afloat. It’s called, apparently without irony, the Fiscal Responsibility Act of 2023. In reality, it’s a politics-driven deal that will mostly hurt Americans who need help the most without really saving much money. Sorry for the spoiler.
With that in mind, let’s take a look at the winners and losers.
Veterans: Winners
Veterans, and to some extent homeless people and those just gaining out of foster care, are about the only true winners out of the debt ceiling deal, aside from wealthy Americans and politicians.
Of the 19.2 million veterans in the U.S., the majority receive some kind of government benefit. More than 40% who served in the past two decades and 25% of veterans overall also get some form of disability benefit.
A debt ceiling default could have delayed $12 billion in veterans benefits, $13 billion in additional military and civilian retirement benefits, and $4 billion in military salaries, all due June 1.
One big win for veterans was that Department of Veterans Affairs health care programs will get a boost. The act increased spending on VA programs by 6.6% this year and next for medical and mental health care, homeless programs, education and more.
The deal specifically includes $20.3 billion to cover the first year’s funding of the PACT Act, which was passed last year. The fund is required by the law, but House Republicans earlier this year said they only wanted $5 billion for it in the new budget, while Biden wanted $20.3 billion. The debt ceiling act includes the Biden number.
The new law increases care and benefits to veterans exposed to toxic chemicals including those from burn pits, Agent Orange, and others. It increases the number of health conditions believed to be exposed to the chemicals and authorizes $280 billion over 10 years to cover costs. Nearly 600,000 veterans have already submitted claims under the act.
Another win for veterans is that they will be exempt from extension of Supplemental Nutrition Assistance Program work requirements. The debt ceiling deal raised the work requirement age for “able-bodied” people without children from 49 to 54. To continue to get SNAP benefits after three months, people from 18 through 54 are required to work 20 hours a week.
More than a million (about 7%) of veterans use SNAP to help pay for food for themselves and their families. As with non-veteran families, many more who qualify don’t enroll in SNAP, for reasons that range from not realizing they are eligible, to wanting to avoid the stigma of “being on food stamps.” In 2022, 1 in 9 veterans experienced food insecurity (a period of not having the money to adequately feed the household).
Hunger in the military isn’t limited to veterans. About 30,000 active-duty military families are enrolled in SNAP, and 1 in 4 of all active-duty military families report experiencing food insecurity.
Lower-rank military families have low salaries, but the fact that they get military housing often keeps them from qualifying for SNAP and other benefits. Military spouses also have high rates of unemployment, largely because of constant moves, lack of adequate child care and not having money for additional transportation.
The work requirement exemptions for veterans also apply to people who are homeless and people 18 to 24 who have aged out of the foster care system.
The Congressional Budget Office estimates that the work requirement exemption will allow about 78,000, or 0.2% this year, to continue to get SNAP benefits after three months. It will also increase federal spending by $2.1 billion over the next decade, despite the fact that the purported aim of those who opposed increasing the debt ceiling was to save money.
For more on the issue, check out last week’s It’s Your Money].
Social Security, Medicare, Medicaid recipients: Winners
This is only a win for nearly 100 million Americans because it wasn’t a loss. There was a threat that Social Security and Medicare payments would be delayed, cut or temporarily eliminated by a debt ceiling default or even by a deal.
Social Security benefits are paid to about 67 million Americans a month. The money comes from a trust that working Americans pay into their entire career. The Social Security Administration estimates that more than 40% of recipients rely on their monthly benefit for at least 50% of their living expenses, and another 15%, particularly among the oldest recipients, rely on it for 90% or more of their living expenses.
Still, Republicans have been going after it for years, and threatened to use the debt ceiling kerfuffle to get what they wanted. Proposals included, among other things, making Social Security and Medicare come up for renewal every five years, raising the retirement age to 70 or drastically reducing monthly benefits. If no deal had been reached, benefits may have stopped for an unknown period of time.
It’s confounding that, when 79% of Americans want Social Security left alone, guys who rely on votes to keep their jobs continue to trash-talk the program.
Same goes for Medicare, which another 67 million Americans receive. Medicare is the health insurance program for people who are retired, and who also paid into it during their working lives. Reduction and other proposals that would diminish benefits were also on the chopping block during the debt deal talks.
Some Republicans also proposed adding work requirements to Medicaid, an idea that caught fire during the Trump administration and has been implemented by some states, most of which have discarded it when it didn’t work.
Medicaid is health insurance for about 85 million people who have a disability or are below the poverty line and are elderly, have children or are pregnant. Many of its beneficiaries are children or people too vulnerable to live on their own or take care of themselves.
The work requirement would’ve been for beneficiaries between 18 and 55 who don’t have children. They would have had to work 20 hours a week, or train in an approved career program.
The pitch by those who propose work requirements in exchange for government benefits is that it will force lazy people who are leeching off the government to earn their benefit.
The truth is that most people who receive Medicaid (as well as SNAP and TANF), work if they can, but those who can’t usually have barriers to employment.
The proposal would’ve saved the federal government an estimated $109 billion over the next decade as 600,000 people would’ve been dropped by the program and another 900,000 would lose state benefits that are paid through the federal government. States that have tried work requirements for Medicaid have learned that people who are dropped because they don’t meet the requirements are plunged further into poverty. They also found that the red tape required often entangles people who don’t qualify for the requirements and it’s difficult for the agencies that oversee the benefit to deal with.
American taxpayers: Losers [unless they’re rich]
Imagine you lived in a house where one of the income-earners makes substantially more than the other one, but the lower earner is expected to pay most of the bills, including those that support the kids. If they don’t pay them, food, heat, and other basic necessities for themselves and the kids go away or are reduced. Meanwhile, the person who makes the most money is driving around in a luxury car, eating at fancy restaurants and living in a zoned-off bubble that has plenty of heat and snacks. It has insulated walls, so when the kids are crying because they’re hungry or cold, he doesn’t have to listen. He’d rather flush his money down the toilet than feed those hungry kids.
I know that’s a simplistic metaphor, but it’s basically how we do things in America.
Don’t worry, high earners, the bubble didn’t burst, or even lose a little air. Proposals to end the meaty tax cuts you got in the “tax reform” Act of 2017 (on top of all the cuts and loopholes you already get) never got traction in the debt ceiling talks.
And in another win for you, but at the expense of most American taxpayers, the Internal Revenue Service took a hit in the debt ceiling deal. The IRS is slated to get $80 million over the next decade to bring its software up to date, add to its decimated staff and, because of being brought into the 21st century, more efficiently enforce the tax code. Enforcement as it is largely focused on lower-income Americans because they’re easier to audit than wealthy people. Those audits are largely focused on people who make errors with the earned income tax credit, child tax credit, or other things that require a form and are easy to automate enforcement with. The more money someone has, the more complicated their taxes are and the IRS doesn’t have the bandwidth to go after people who cheat.
The new systems and staff are aimed at enforcing the tax code for wealthier Americans. That enforcement, though, would add an estimated $200 billion to the country’s revenue in the next decade.
Still, despite the fact it will add more money to the budget than any of the punitive attacks on lower-income Americans, Congressional Republicans just don’t like it.
The debt ceiling deal was their chance to go after it, and they did. The deal shifts $10 billion away from the IRS next year, and $10 billion more in 2025.
Fossil fuels: Winners; Renewable energy: Losers
The deal makes changes to the National Environmental Policy Act, a creaky old piece of legislation that people on all sides agreed needed an update.
The debt ceiling deal streamlines the review process for energy production projects, which can take years. That’s good in that many renewable energy projects can move forward faster. But the real beneficiary is fossil fuels. You know, that dirty climate-killing stuff we’re trying to get rid of before we fry the Earth and everything on it.
In fact, were you worried that West Virginia Sen. Joe Manchin’s pet project, the $6.6 billion Mountain Valley Pipeline, would continue to wallow in court because it’s going to be a climate buster as well as wreak havoc on the environment on its 300-mile path through three states? You can breathe easy (only metaphorically, not physically). The bill fast-tracks that project.
For those of you too young to have gone to school when civics was taught, that’s called a pork barrel provision – one member of Congress getting a project in his district added to a general appropriations bill.
If you’re keeping score, that’s a win for fossil fuels, and a win for Joe Manchin. It’s also a win for his corporate bankrollers – he was the top Senate recipient of money from natural gas transmissions and distribution companies, and oil and gas companies, in the last election cycle, according to Open Secrets, which tracks political contributions.
You may have already chalked one up in the loss column for the environment, but in case you haven’t, here’s some more on that one.
The country’s electrical grid must be updated to accommodate clean energy, and a proposal to put that in the deal didn’t make it, which will continue to slow down renewable energy no matter how much fast-tracking the law allows.
Another issue with fast-tracking environmental review is that it will make it even more difficult for marginalized communities that have been left out of the discussion to participate. They tend to be the ones most negatively impacted by energy projects.
And, finally, American pocketbooks lose again, since creation of more renewable energy will lower consumer energy bills in the long run.
Students: Winners, no, wait, losers
College students who’ve paused their college loans since 2020 under COVID-19 legislation will have to start paying again at the end of August. That may not seem like a win because the deadline had been on the table, but was not official before the debt ceiling deal codified it. But it could’ve been worse.
Republicans negotiating the debt ceiling deal also wanted to get rid of Biden’s student debt forgiveness plan but weren’t successful.
The plan calls for forgiving up to $10,000 in federal student loan debt for anyone who makes less than $125,000 a year and $20,000 for those who got Pell Grants, which go to low-income students to help pay for college. Overall, the plan will forgive $480 billion in federal student loans.
So, it’s a temporary win. But the Supreme Court heard arguments that the plan goes beyond Biden’s executive authority, and will announce its decision later this month.
It’s likely the court will through the plan out. Sorry kids! You lose. Time to start budgeting to pay those loans back in full.
The American people: Losers
Plutarch wrote something like, “Though boys may throw stones at frogs in sport, the frogs don’t die in sport, they die in earnest.”
False concern about federal spending has been used for decades to support mean-spirited and cravenly obtuse policies that often land with real pain on the people politicians are supposed to represent.
Mountains of research over the decades have consistently shown that the better off the people at the bottom of our financial pyramid are, the better everyone else does as well.
But even Americans who can pay their bills will feel the sting from the debt ceiling deal. A chronically inefficient IRS hurts almost everyone’s wallet. Increasing fossil fuel production and making it harder for renewable energy production – well, do I really have to explain why that’s not good?
How sad is it that, for a country that gives a lot of lip service to honoring the troops, that a “win” means we won’t snatch SNAP benefits away from aging veterans?
It’s easy to dismiss what happened over the past several weeks as “politics as usual.” But it’s not. It’s not a game. The more we understand the impact, the less stones we’re putting into the boys’ hands.