Alex Gurn, PhD student
This summer we witnessed a rancorous debate over the United States’ economic policy that stemmed from the authorization of the federal debt ceiling. In brief, if the U.S. Department of Treasury doesn’t collect enough revenues to pay for the federal government’s budget, it can borrow money to cover the budget deficit only if authorized by the Congress. The Treasury has no authority to take on debt beyond this specific limit, or debt ceiling, set by Congress. Increases to the debt ceiling have been passed many times before, typically without any fanfare. This year, however, raising the debt ceiling became contested territory as Republicans used the issue to force a debate over national debt and seek cuts in government spending.
On one side of this debate, Tea Partiers and their fellow Republicans aimed to address the country’s debt problems by proposing deep cuts to government funding of programs, in particular Medicare, Medicaid, and Social Security, which primarily serve the poor and middle classes. At the same time, they fought hard to protect tax cuts for the wealthiest Americans, those making over $250,000 per year. On the other side of the debate, Democrats initially called for a ‘clean’ increase to the debt ceiling, thus raising the limit without cutting spending. Later, the White House and many Democrats pushed for moderate increases in taxes for the rich, in order to raise federal revenues, alongside cuts in future spending. A political standoff ensued.
In the end, the United States did not default on its debt. At the final hour, a complicated deal was reached that would raise the debt ceiling and cut trillions of dollars in federal expenditures over the next decade, while leaving untouched the question of tax loopholes for the rich. By most accounts, the Republicans won this battle.
Yet after the dust settles from this debate, real Americans will begin to deal with the consequences of the cuts. To be fair, some Americans will be faced with graver consequences than others. According to a new analysis by the PEW Research Center, “the median wealth of white households is 20 times that of black households and 18 times that of Hispanic households,” which represents the largest racial disparities in family wealth since the government began releasing such data. In 2009, the median African-American household had $5,667 in assets; the median white household had $113,149. This racial gap is approximately double the size of wealth ratios witnessed during the two decades prior to the Great Recession that officially ended in 2009. Although most American families have experienced declines in wealth, the recession has affected people of color much more so than whites. Between 2005 and 2009, the median white household’s wealth fell by 16%. Among Latinos, that figure jumps to a 66% drop and among African-Americans, 53%, during the same period.
The United States boasts the world’s most powerful economy, but it also exhibits sharp socio-economic disparities that are more typical of third world countries. According to data from the Luxembourg Income Study (LIS), the U.S. has the highest level of inequality in any advanced industrialized nation (see Brandolini & Smeeding, 2007). And as the PEW research shows, the deep divide between the rich and the poor has grown even deeper in this decade. In a contradictory twist, while so many Americans have sunk into or stand on the brink of poverty, corporations have enjoyed record profits and consumer spending on luxury goods like Louboutin shoes and Mercedes-Benz cars is on the rise.
At a time of great economic insecurity, big budget cuts to federal entitlement programs threaten to create even greater instability for those living at the bottom of the pyramid. U.S. legislators should pay attention to the results of a recent study by the Centre for Economic Policy Research that examines the connection between budget cuts and social unrest in Europe from 1919-2009. The authors found “a clear positive correlation” between fiscal austerity and social instability. Cuts to government spending are closely associated with widespread demonstrations, strikes, and criminal activity such as riots and assassination attempts. While the study does not prove causal links between budgets cuts and social unrest, it may help to historically contextualize the riots that took place last week in England, and warrant caution in the U.S. Over the past year, the UK has adopted economic austerity measures that many Republicans dream of. At the moment, crime rates in the U.S. have actually decreased since the recent recession. Whether that trend will continue after next year’s government spending cuts remains to be seen.
For now, it is unclear exactly how these cuts will affect public education in the U.S., but some legislators and advocates are concerned about what the deal spells for schools. The Congress has not yet decided how the budget cuts will be specifically divvied, only the overall cap in expenditures. In an interview with the Associated Press, U.S. Representative George Miller said that spending cuts imposed by the deal will "make life much more difficult for" public schools. Although most funding for public education comes from state and local sources, federal cuts could significantly impact the Head Start program and educational initiatives for students with disabilities, among others. What’s more, these reductions in federal dollars follow behind sharp cuts in state funding. Schools that have already been forced to slash budgets will be made to once again tighten their belts next year.
Yet, the consequences for public education go beyond direct equations of school district spending. A child’s readiness to learn in school is significantly influenced by a number of out-of-school factors, such as low birth weight, lack of adequate medical and dental care, persistent hunger, socially and physically toxic environments, and emotional stressors, writes . Growing up in poverty, and all the complications that it entails, puts significant strain on youth and their opportunities to learn. The total picture of students’ lives, their physical, social, emotional well-being, matters a great deal inside the classroom walls. As the depth and length of poverty increases, and as the social safety net available to children living in poverty is eroded, the pressures on schools and teachers mount and their capacity to teach is compromised. While it is possible for committed schools and educators to alleviate the harsh affects of poverty by extending learning beyond the traditional school day (e.g. preschool, after school, summer camp), these sorts of interventions require more resources, not less.
As the United States grapples with the realities of our economic downturn, we must honestly pose the question: how can the wealthiest country in history allow so much poverty to exist? And just who benefits and loses from such persistent disparities?