In the Red ~ Another Deficit Budget

Senior's Matter - Vancouver, by Stan Webb

More Debt, More Spending, More Taxes

On Monday, February 1, 2010 ~ President Obama offered up a $3.834 trillion budget that increased funding in some areas, and cuts to others, subject to Congressional and House approval, of course.

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Seniors & Pensioners

• A distribution of $250 each to Social Security recipients because no cost-of-living adjustment is planned this year. Although inflation is negligible, older Americans still face rising costs such as health care.

• Currently seriously disabled veterans who are retired from the services cannot receive both their disability payments from VA and their military pension. The budget proposes ending that practice and allow them to receive both concurrently.

• Nutrition programs like Meals on Wheels would receive $828 million, an increase of $8 million. That adds up to about 219 million meals delivered to homes or community settings for 2.4 million older Americans.

Families

• Middle-class families taking care of older relatives (or children) also would see their tax breaks increase by $900 to $2,100.

• Families earning less than $85,000 would get more help under the saver’s credit. Their retirement savings would get a 50 percent federal match, up to $1,000.

• COBRA, a program that is designed to help unemployed workers have extended unemployment benefits; provided that they pay to continue their health insurance coverage. Without the extension the aid runs out later this month.

• The Low Income Home Energy Assistance Program would increase from $5.1 billion in 2010 to $5.3 billion in 2011 and include $2 billion for a new policy to increase aid when energy costs spike or large numbers of families are in poverty.

• States would receive an extra $25.5 billion for Medicaid, the federal health program that assists low-income Americans, including those who are older or have disabilities. Obama had sought to do that as part of his reform plan to expand access to health care by adding moderate-income families to the Medicaid rolls. States have been asking for more money because the recession has made more people eligible for Medicaid just as state revenues have dropped.

• Approximately $102.5 million would be set aside to help the middle generations, those caught between caring for kids and older parents. The money would beef up respite care for family members caring for older relatives. This would allow the caregivers a bit of a break from duty. About 200,000 caregivers would get help if this passes Congress. And older Americans also would get more help with transportation, adult day care and other assistance designed to let them stay in their own homes.

Health Care

• Several small pieces of Obama’s health care reform measure are embedded in the budget.

• A fee would be charged to drugmakers for generic drugs—similar to what the federal government already does for name-brand pharmaceuticals. The money would be used to speed up the process of getting new drugs approved by the Food and Drug Administration.

Housing

• HUD - U.S. Department of Housing and Urban Development cuts include a program for housing for low-income older Americans. This would drop from $825 million this year to $274 million next year. HUD plans to reform the housing program for the elderly, which pays for new construction of housing for older low-income residents and for rental assistance. Current project residents would not see cuts, but new construction would not get money ~ at least until after those reforms are in place.

Retirement Savings

• Saving for retirement would get a lot easier for the 50 percent of workers who have no workplace retirement savings program now. Under the auto-IRA proposal, small businesses would get increased tax credits to administer new IRAs for their workers where retirement savings is automatically deducted from paychecks. Workers would be enrolled unless they proactively opted out. It is estimated that tens of millions of workers without pensions would benefit from the automatic IRAs. There is also an effort to make it easier for companies that have 401(k)s to adopt automatic enrollment, which is a particularly effective way to increase saving among low-income and minority workers. Automatic enrollment increases participation in 401(k) plans from 70 percent to about 90 percent.

• The budget provides for increased transparency of 401(k)s so that savers have more information about fees and so that conflicts of interest with pension advisers are reduced. The White House also would make it easier to turn 401(k) assets into annuities that provide lifetime payments.

The budget also increases spending on preventing and detecting fraud in Medicare, Medicaid and the Children’s Health Insurance Program. That effort, the Health Care Fraud Prevention and Enforcement Action Team, will scout for improper payments and loopholes.

As you have read here, the White House's blueprint, now before Congress, would spend $1.6 trillion more than it raises for the budget year that begins Oct. 1. The plan would limit increases in some areas of domestic spending, raise taxes on wealthy Americans, pump $100 billion into infrastructure projects like road building to revive the still-lagging economy and give small businesses tax incentives to hire employees.

“It’s time to hold Washington to the same standards families and businesses hold themselves,” Obama said Monday morning. “It’s time to save what we can, spend what we must, and live within our means once again.” Obama said his budget priorities reflect the “building blocks of the middle class.

“Americans are willing to work hard, and, in return, they expect to be able to find a good job, afford a home, send their children to world-class schools, receive high-quality and affordable health care, and enjoy retirement security in their later years,” he said.

Obama had hoped to have a health care reform measure by now, but after stumbling near the finish line last month, the bill is on hold in Congress. Still, Obama’s budget chips away at reform, by proposing more funding for state Medicaid programs and beefing up other programs that bring down health care costs or expand accessibility.

Obama said the nation had started the decade with a surplus but now faces $12 trillion in debt. He blamed the Medicare prescription drug expansion and the tax cut programs from 2001 and 2003 for the $7.5 trillion debt he inherited. The recession added an additional $3 trillion, and Obama’s stimulus plan last year added $1 trillion. His budget rolls back the tax breaks for families earning more than $250,000. The budget also aims to improve retirement saving through new workplace IRAs, savings tax credits and transparency requirements for retirement plans.

The White House’s three-year spending freeze, announced in the president’s State of the Union address last week, was applied to some programs but not others.

It does not affect Social Security and Medicare benefits. The Social Security Administration would in fact get an 8 percent increase for its administrative costs, intended to make service faster, especially for new retirement and disability applicants. And Social Security recipients would get $250 each to offset the lack of a cost-of-living increase this year.

As you read this you will have seen that the programs that were shielded from the freeze or even received increases were balanced out by cuts elsewhere.

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Label: Budget and Money Matters