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Across-the-board spending cuts do not make children or the economy healthier

May 23, 2017

The difficult realities and constraints facing the U.S. federal budget, coupled with the evident value of investing in children and families, raise a complex question for the Trump Administration and Congress: how should we determine our nation’s spending priorities?

Today the Trump Administration will present its fiscal year 2018 budget, which is their first chance to propose changes to mandatory spending. Reportedly, the Trump administration will propose more than $1 trillion in cuts to programs such as: Medicaid, Social Security Disability Insurance (SSDI), the Children’s Health Insurance Program (CHIP), and the Supplemental Nutrition Assistance Program (SNAP, formerly known as “food stamps”). Early reports suggest that these cuts would be achieved by tightening eligibility requirements.

Given the many challenges that our federal budget currently presents, exploring thoughtful and evidence-based policy options to make federal entitlement programs more effective and restrain growth in mandatory spending would be a worthwhile endeavor. In fact, according to the latest Congressional Budget Office (CBO) projections, federal spending will grow faster than revenues in coming years, putting the federal debt on a path to reach 89 percent of gross domestic product by 2027 and 150 percent by 2047.

However, the scale and focus of the Trump Administration’s proposed cuts to mandatory spending are striking. Careful entitlement reform proposals do not start with across-the-board cuts with details to be hashed out later. Moreover, the President’s budget appears to focus its cuts on programs essential to the social safety net. These programs invest in children’s and families’ health (CHIP and Medicaid), help stem the tide of recession and hunger (SNAP), and provide economic security for those Americans who become unable to work (SSDI).

The proposed cuts would diminish these programs’ long-run public benefits and could weaken the economy for years and decades to come. Eliminating valuable long-term public investments in the economy and individual health constitutes a kind of “deferred maintenance” for the country as a whole; while these cuts would reduce deficits in the short run, they would leave children, families, and the economy in a weaker position down the road.

Fortunately, bipartisan consensus exists for making sober reforms to federal entitlement programs, improving program efficiency and effectiveness. Yet care is warranted in all thoughtful policy discussions of entitlement reform, especially when the lives and livelihoods of children and families are at stake.

Guided by recent economic research, Hamilton Project policy proposals have suggested evidenced-based reforms to key areas of entitlement spending—disability insurance, foods stamps, health care, and the safety net—where the Trump administration will recommend cuts.

Hamilton Project proposals for reforming entitlement programs

Social Security Disability Insurance (SSDI)

Supplemental Nutrition Assistance Program (SNAP)

  • Strengthening SNAP for a More Food-Secure, Healthy America” by Diane Whitmore Schanzenbach, which outlines a plan to provide incentive payments for healthier food purchases, while improving the program’s ability to reach low-income working families by increasing the earned income deduction and better accounting for variation in cost of living and spikes in unemployment.
  • Modernizing SNAP Benefits” by James Ziliak, which proposes to modernize the SNAP program with a time adjustment factor and geographic price adjustments, thereby better targeting the program to those most in need.

Health Care

  • Correcting Signals for Innovation in Health Care” by Nicholas Bagley, Amitabh Chandra, and Austin Frakt, which proposes a set of reforms to address medical technology’s role in driving health-care spending growth. The reforms would encourage medical technology developers to pursue high-value innovations by replacing the tax exclusion for employer-sponsored health insurance with a tax credit that phases out as income rises, and by giving Medicare the authority to decline to cover inefficient technologies.
  • Strengthening Risk Protection through Private Long-Term Care Insurance” by Wesley Yin, which aims to strengthen the long-term care insurance market by introducing a voluntary subsidy program, LTC Advantage, to help individuals purchase long-term care insurance, a shared-risk-corridor program to help insurers manage financial risks, and a menu of policy options to boost access and demand for the proposed LTC Advantage program.
  • Transitioning to Bundled Payments in Medicare” by Michael Chernew and Dana Goldman, which also proposes a solution to Medicare cost growth that entails transitioning away from the fee for service system to a global payment model, in which provider systems are paid a fixed fee for a full episode of care, to incentivize efficiency and quality.

Temporary Assistance to Needy Families (TANF)


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