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The Federal “Fiscal Cliff”: Implications for Children and Families in Illinois

Executive Summary

by David Lloyd

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(9 pages)

The portion of the federal budget that supports key investments in our children, families and communities is under siege. “Non-defense discretionary” spending, which Congress must approve each year, has taken the brunt of the $1.5 trillion in federal budget cuts that have already been enacted since 2010. This crucial part of our federal budget has been shrinking as a share of our economy and is scheduled to head even lower. The resulting cuts will be especially harmful to programs affecting children and families, including Head Start, child care assistance, special education, and child nutrition. Taken together, they represent a disinvestment in our future.

Aside from the budget cuts already enacted, another round of cuts is scheduled to be triggered on January 2. Under “sequestration,” there will be nearly $1 trillion in additional discretionary spending cuts, split evenly between defense and non-defense spending, in FY 2013 through 2021. Each year, total cuts under sequestration will be about $109 billion. In FY 2013, non-defense discretionary programs will suffer automatic cuts of 8.2 percent.

While deep and indiscriminate across-the-board cuts to crucial services should be avoided, some proposals to avert sequestration and the “fiscal cliff” could actually be worse. For example, it is possible that an agreement to avert sequestration could reduce (or even eliminate) the defense portion of the cuts and meet deficit-reduction targets through greater cuts to non-defense discretionary programs.

Additionally, many important mandatory programs such as Medicaid, the Children’s Health Insurance Program (CHIP), and the Supplemental Nutrition Assistance Program (SNAP) are exempt from sequestration. But these programs could be vulnerable in a plan to avoid sequestration. Indeed, proposals put forward by House leaders in the ongoing negotiations would cut non-defense discretionary programs more deeply than sequestration and would seek significant reductions in spending for mandatory programs.

To avoid the immediate harm of the across-the-board cuts this January and bring long-term deficits responsibly under control, members of Congress and President Obama must work together to replace sequestration with a balanced deficit-reduction plan. This plan should include both strategic spending restraints and significant additional revenues. It should also avoid increasing poverty and economic hardship, and protect investments in children and families.

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