Steve Suppan
Institute for Agriculture and Trade Policy
Ssuppan@iatp.org

Now that economic recession in the United States has been officially recognized, there are few defenders of the optimistic state and federal government income projections that were used in 2000-2001 to justify tax cuts that largely benefit the wealthy. One analyst noted, "[t]he way for these selective tax cuts was cleared not just with forecasts that made no allowance for contingencies, but with creative accounting worthy of Enron."¹ (Enron, the most generous corporate campaign contributor to then Governor and now President George W. Bush, is the subject of a federal criminal inquiry for massive and possibly fraudulent accounting practices.) With the disappearance of projected budget surpluses have come calls for budget cutbacks that will disproportionately affect already under-funded social programs. The national government can rely on deficit spending to fund its budget deficits, including a massive military build-up for the "war on terrorism." However, the U.S. states, which are main providers of social welfare services, are prevented by their constitutions from borrowing to fund programs. This prohibition against state borrowing means that social program budgets will likely be cut. Once again, the U.S. government has failed to give priority to fulfilling World Social Summit on Development (WSSD) commitments.

As Social Watch notes in its WSSD+5 review, it has been difficult to measure progress on the commitment to eradicate poverty because "[I]nformation on poverty levels and current national plans is frequently outdated and insufficient, which makes evaluation of advances and setbacks very difficult."² Technical capacity for data collection and interpretation limits the ability of some governments to evaluate the effects of their policies. However, in the United States, technical capacity is less of a limitation than are outdated statistical definitions of poverty that impede analysis, and hence realistic policy formulation, to reduce poverty and related social problems.

In September 2001, the U.S. Census Bureau announced that from a sample survey of 50,000 U.S. households, it had determined that the "poverty rate in 2000 had dropped to 11.3 percent [of the U.S. population] ... not statistically different from the record low of 11.1 percent set in 1973."³ The poverty threshold for a family of four was set at U.S.$17,603.⁴ Supporters of 1996 U.S. "welfare to work" legislation, which reduced the number of government food and cash assistance recipients, greeted the Census announcement as proof that "welfare to work" programs reduced poverty. However, federal poverty thresholds are calculated according to a food budget-based formula that has not substantially changed since 1965, despite various initiatives in the U.S. Congress to revise the statistical profiling of poverty.⁵ As one critic of the U.S. official definition of poverty noted, "[w]hile the price of food has actually gone down over the past fifty years, poor families now have to spend larger portions of their budget on housing and child care."⁶ Official poverty indicators underestimate these costs as a portion of average household income.

The inadequacy of federal poverty thresholds to reflect the after tax income required to pay for basic needs can be measured by the disparity between government unemployment insurance payment levels and the income required to pay basic costs for food, housing, health care, child care, transportation, heat and other basic necessities. For example, one study determined that current federal unemployment insurance "replaced only 33% of an average worker’s lost earning."⁷ The same study calculated that the basic monthly budget for two parents with two children under the age of twelve in the town of St. Cloud, Minnesota in 2001 was U.S. $2,674. In annual terms that would be $32,088 after tax income, about $14,485 above the federal poverty threshold for such a family. A May 2001 study by the Congressional Budget Office determined that the average annual after tax income for the bottom fifth of U.S. households in 1997 was $10,800. For the middle fifth, it was $37,200, just $5,112 above what was calculated to meet basic needs in 2001.⁹

The U.S. Congress has an abundant analytic and statistical basis for changing federal poverty definitions and federal unemployment insurance levels. The Congress also has reports of the increasing incidence of hunger and homelessness that have resulted from rising unemployment, two decades of wage stagnation for the bottom fifth of the U.S. population,¹⁰ and inadequate federal food and cash assistance programs. A 27-city survey by the United States Conferences of Mayors reported in December 2001 that requests for emergency food assistance had increased 23 percent and that requests for emergency shelter had increased 13 percent between October 2000 and October 2001. The survey estimates that 14 percent of requests by families for emergency food assistance were not met.¹¹

Commenting on the belief that getting a job would remove the need for government welfare support measures, the survey reported that "[T]hirty-seven percent of the adults requesting assistance were employed ... Low paying jobs lead the list of causes of hunger identified by city officials."¹² One hundred percent of the city officials interviewed expect increased requests for emergency food and shelter in 2002.¹³ The coincidence of rising emergency needs and the drop in charitable donations not directed to help the victims of the September 11^th attacks in New York and Washington, DC, caused one policy analyst to state, "[t]his is an unprecedented convergence of calamities."¹⁴

The five-year lifetime limit on cash assistance to poor families and individuals mandated in the 1996 legislation was approved in the midst of macroeconomic prosperity. Now, in the words of a NEW YORK TIMES, headline, "As Welfare Comes to an End, So Do the Jobs." These were the jobs that were to have enabled poor people to depend no longer on government assistance.¹⁵ The recession has been particularly harsh on women with children. From October 2001 to November 2001, the unemployment rate of female heads of households went from 6.9 percent to 8.3 percent, a 20 percent increase.¹⁶ Children in these households form a large part of the 7 percent of U.S. children that receive federal food and cash assistance. According to outdated federal poverty standards, about 16 percent of children are poor.¹⁷ Critics of that legislation and the increasing privatization of social assistance services predicted that increasing numbers of U.S. residents would have to rely on a weakened support network when the United States went into economic recession. With the arrival of the recession and the resulting loss of minimum wage jobs, the critics, unfortunately, have been proven right.

According to a report by Second Harvest, the largest emergency food assistance network in the United States, 45 percent of the 23 million emergency food recipients it served last year "had to choose between buying food and paying for utilities or heat."¹⁸ In addition to the aforementioned increase in use of non-governmental food assistance programs, participation in the government’s Food Stamp Program (FSP) increased 8 percent from October 2000 to October 2001. Food stamps are government-funded vouchers to pay for basic foods. According to former USDA official Rod Leonard, "The Food Stamp Program is probably the most sensitive barometer of economic conditions that we have, and it’s always the poor working class that feels that [economic recession] immediately." Due to tougher FSP eligibility requirements, there had been a drop of 40 percent or more in FSP participation in five U.S. states since the 1996 welfare legislation.¹⁹ Many former FSP participants now get mostly church-based food assistance.

Low household income was the chief reason that 39 million U.S. residents could not pay for health care insurance in 2000, according to U.S. Census Bureau data. In 1991, 14.1 percent of U.S. citizens had no health care insurance at any point in the year. After nine years of unprecedented economic expansion in the United States, in 2000 14 percent lacked insurance.²⁰ Legislation to extend health care insurance to more U.S. residents is deadlocked in Congressional budget debates.

President George W. Bush’s first budget address called for a U.S.$1.6 trillion tax cut that was greeted by loud applause.²¹ Some of the applause came from those who sought tax cuts for their corporate clients. However, critics also feared that the Bush tax cut would repeat the result of President Ronald Reagan’s 1981 tax plan making "it structurally impossible to find money for domestic social programs," in the words of Reagan’s budget director.²² In June, Congress approved a U.S. $1.35 trillion tax cut over 10 years, just four months before the government recognized that United States had been in an economic recession since March 2001. There is now a national debate about the implementation of the tax cut. The results of this debate will affect the policies and budget for fulfilling WSSD commitments.²³

Against the evidence of leading economic indicators that pointed to a deepening recession before September 11^th, apologists for U.S. economic policy, such as Federal Reserve Chairman Alan Greenspan and former Treasury Secretary Robert Rubin, argued that the economic consequences of the September 11^th attacks interrupted a burgeoning recovery from the current recession.²⁴ Budget constraints, partly resulting from the economic impact of the September 11^th attacks, are being used to justify a continuation or even cutting of already inadequate food and cash assistance programs.²⁵ Yet some advocates of cutbacks in assistance to the poor, argue that a $202 billion program of tax reductions and tax subsidies for upper income individuals and corporations will help the United States to recover from the September 11^th attacks.²⁶

An economic stimulus bill approved by the House of Representatives will send 41 percent of the $202 billion to the top one percent of U.S. income earners and 6 percent to the bottom 60 percent.²⁷ The bill includes a provision, sought by lobbyists for 15 years, to repeal the Alternative Minimum Tax (AMT) for corporations. According to an analysis by Public Citizen, if the bill is approved by the Senate and signed into law by President George Bush, sixteen companies will receive about $7.5 billion in tax rebates. From 1992 to 2002, those companies spent a mere $45.7 million to influence legislation.²⁸

U.S. Foreign Policy Impacts on Social Welfare ²⁹

The pugnacious unilateralism on major foreign policy questions of the Bush Administration’s first nine months in office, e.g. on global warming, changed to a tactically necessary U.S. multilateralism following the September 11^th attacks. In recognition of the need for United Nations support for the "war on terrorism", the U.S. Congress voted shortly after September 11^th to pay "$582 million in back dues, long owed the UN."³⁰ Whether U.S. "a la carte multilateralism," in the words of the State Department’s Richard Haass,³¹ will support UN programs to meet WSSD commitments cannot be predicted with confidence.

Prior to September 11^th, shifts in public attitudes on foreign aid indicated a better political climate for increasing U.S. foreign aid. Opinion polls in 2001 on U.S. public attitudes on foreign aid show that "overwhelming majorities" support "efforts to alleviate hunger and poverty -- much more so than for foreign aid overall."³² In 1995, 64 percent of those polled favored foreign aid cuts. But in 2001, only 40 percent supported such cuts (the margin of polling error was +/-3.5-4 percent).³³ In 2001, when pollsters asked respondents to estimate "how much of the federal budget was devoted to foreign aid, the median estimate was 20 % of the budget -- 20 times the actual amount, which was just under 1 %. Only 5% of respondents estimated an amount of 1% or less."³⁴ To date there has been no political leadership to turn this popular support for foreign aid into budget allocations.

The May 10, 2001 announcement of the Global Development Alliance (GDA), the U.S. Agency for International Development’s (USAID) "new business model," signals a limited role for official U.S. development aid. GDA is limited to coordinating, facilitating and networking with private sector and "third sector" (NGOs, unions, churches, etc.) to fulfill USAID’s foreign assistance mandate. The GDA Secretariat was officially launched on November 26, 2001 as a "technical resource unit which catalyzes and supports alliance creation and operation."³⁵ Sample alliances include The Global Alliance for Vaccines and Immunization, Chocolate/Coffee Production and Distribution Alliances, U.S.-Asia Environmental Partnership, Public-Private Agricultural Research Programs (e.g. Monsanto Company and the Kenyan Agricultural Research Institute), and TechnoServe Alliances for Rural Economic Growth (e.g. Cargill’s assistance to "develop competitive oilseed businesses in southern Africa"). Because of the heterogeneity and private/public character of many GDA programs, GDA results, like those of past USAID "partnership" programs, will be difficult for SOCIAL WATCH to verify and analyze in terms of meeting WSSD commitments.

1 | Paul Krugman, "Our Wretched States," THE NEW YORK TIMES, 11 January 2001.

2 | SOCIAL WATCH, "World Social Summit: Ten Benchmark Issues," COOPERATION SOUTH, United Nations Development Programme (No. 2, 2000), 107.

3 | "Poverty: 2000 Highlights," U.S. CENSUS BUREAU (20 September 2000) at http://www.census.gov/hhes/poverty/

4 | "Poverty 2000," U.S. CENSUS BUREAU (20 September 2000) at http://www.census.gov/hhes/poverty/threshld/thresh00.html/

5 | Gordon Fisher, "The Development and History of U.S. Poverty Thresholds -- A Brief Overview (Winter 1997) at http://aspe.hhs.gov/poverty/papers/hptgssiv.htm/

6 | Laura Maggi, "The Poor Count," THE AMERICAN PROSPECT (February 14, 2000) at http://www.prospect.org/print/V11/7/devil2.html/

7 | Heather Boushey and Jeffrey Wenger, ";Coming up short: Current unemployment benefits fail to meet basic family needs," ECONOMIC POLICY INSTITUTE, Issue Brief #169 (October 31, 2001), 1.

8 | Ibid., 3.

9 | Isaac Shapiro et al., "Pathbreaking CBO Study Shows Dramatic Increases in Income Disparities in 1980s and 1990s: An Analysis of the CBO Data," CENTER ON BUDGET AND POLICY PRIORITIES (May 31, 2001) at http://www.cbpp.org/5-31-01tax.htm/, 3.

10 | Ibid., 1

11 | Eugene T. Lowe et al., "A Status Report on Hunger and Homelessness in America’s Cities 2001," THE UNITED STATES CONFERENCE OF MAYORS (December 2001) at http://usmayors.org, i.

12 | Ibid., ii.

13 | Ibid., iii and 100.

14 | Pam Belluck, "New Wave of the Homeless Floods Cities’ Shelters," THE NEW YORK TIMES, December 18, 2001.

15 | Nina Bernstein, "As Welfare Comes to an End, So Do the Jobs," THE NEW YORK TIMES, December 17, 2001.

16 | "The Economic Stimulus Package Must Include Unemployment Insurance for Low-Wage Working Women," NATIONAL WOMEN'S LAW CENTER (revised, December 2001) at http://www.nwlc.org/

17 | Peter Edelman, "A Fairness Agenda for the Bush Era," THE NATION, 23 April 2001.

18 | Douglas O’Brien and Halley Torres Aldeen, "Hunger in America 2001," SECOND HARVEST

19 | "Food Stamp participation shoots up since last year," NUTRITION WEEK, 7 January 2002.

20 | "The 39 Million Who Mustn’t Get Sick," THE WALL STREET JOURNAL, December 27, 2001.

21 | "Bush’s Bogus Budget," THE NATION (19 March 2001), 3.

22 | Edelman, "A Fairness Agenda for the Bush Era," 17.

23 | "Coalition Joins Call For Delaying Additional Tax Cuts for the Wealthy to Meet Urgent National Priorities," NATIONAL WOMEN’S LAW CENTER, Press release (16 January 2002) at http://www.nwlc.org/

24 | Christian E. Weller and Laura Singleton, "Prosperity wasn’t just around the corner: Signs indicating weakening economic performance before September 11 attacks," ECONOMIC POLICY INSTITUTE, Issue Brief #166 (October 4, 2001) at http://www.epinet.org/Issuebriefs/ib166.html/

25 | Marc Cohen, "City’s Poor Don’t Need More Belt-Tightening," NEWSDAY, October 12, 2001.

26 | "Latest GOP Corporate Tax-Giveaway 'Compromise' Looks Almost Identical to Original Bloated Plan," CITIZENS FOR TAX JUSTICE (December 18, 2001) at http://www.ctj.org.

27 | "The Wealth Concentration Act," Citizens for Tax Justice in MULTINATIONAL MONITOR (November 2001), 25.

28 | Nancy Watzman, "The Corporate Tax Break Feeding Frenzy," MULTINATIONAL MONITOR (November 2001), 24-26.

29 | For information on the claims of U.S. trade policy to foster social development, see documents at http://www.wtowatch.org/

30 | John G. Ruggi, "The UN: Bush’s Newest Ally?"; (31 December 2001), 18.

31 | Ibid. 20.

32 | "Executive Summary: Americans on Foreign Aid and World Hunger: A Study of U.S. Public Attitudes," Program on International Policy Attitudes (University of Maryland -- College Park; 2 February 2001), 2.

33 | "Findings: Americans on Foreign Aid and World Hunger: A Study of U.S. Public Attitudes," Program on International Policy Attitudes (2001), 1.

34 | "Introduction: Americans on Foreign Aid and World Hunger: A Study of U.S. Public Attitudes," Program on International Policy Attitudes (2001), 1.

35 | "USAID’s Global Development Alliance," United States Agency for International Development at http://www.usaid.gov/gda/index.html/ To propose an "alliance idea" to USAID, contact Jillian Inmon at jinmon@usaid.gov or by fax at 1-202-216-3181.