What will the “Fiscal Cliff” Mean for Ending Homelessness?

written by Steve Berg
June 14, 2012

Originally only in the wonky DC-based policy blogs, but increasingly also in the mainstream media, the phrase “fiscal cliff” has been appearing. It describes a number of simultaneous events scheduled for the beginning of 2013 that together would disrupt the federal budget, cutting federal spending and raising taxes in an unprecedented and clumsy manner. What does it mean, in general and for homelessness in particular? This blog will attempt to answer that question.

To start, with the way things usually go in the mainstream media, you can virtually count on the phrase “fiscal cliff” soon being abbreviated by writers, so I’ll get that over with by coining the word “FisCliff” right here. FisCliff consists of at least the following, all happening around the beginning of next year:

  •     Domestic and military spending for nonexempt discretionary programs is cut across the board under the “sequestration” provision of the Budget Control Act;
  •     Emergency unemployment insurance for long-term unemployed people expires;
  •     The “Bush tax cuts” (since extended under President Obama) expire;
  •     The Alternative Minimum Tax is applied to households with lower incomes than those who must pay it currently;
  •     Monthly payroll taxes go back up to their usual levels;
  •     Miscellaneous other tax breaks worth $65 billion per year expire;
  •     Temporary increases in Medicare payments to doctors expire; and
  •     The limit on the federal debt is reached again, as it was last summer, requiring another expansion.

All of this adds up to $483 billion in revenue increases and spending cuts in one year. This is big-time deficit reduction, but done in a way that’s not necessarily very intelligent. The most relevant example is that sequestration cuts high-priority, extremely effective programs (like homelessness programs!) by exactly the same percentage as lower-priority, inefficient programs.

Probably the biggest single negative impact on homelessness, however, is likely to be the impact on a fragile economy. Economists largely agree that raising taxes and reducing spending that much in one year would make joblessness substantially worse – people would have less money to spend, so businesses would have fewer customers and would lay people off. High unemployment over the past several years has sent millions of people to shelters. More unemployment means more bad news for homeless assistance systems.

As noted before, spending cuts under sequestration would negatively impact homelessness programs.  The exact impact is still unclear because Congress has not yet passed final fiscal year 2013 spending levels, but we believe a likely estimate is that about 150,000 people would be homeless instead of housed, just from the impact on the Emergency Solutions Grant (ESG) and the Continuum of Care (CoC) programs. The large antipoverty entitlement programs like SSI, TANF, and SNAP are exempt, as are all VA programs for veterans – there is still an open question, to be resolved by the White House, whether the HUD rent vouchers under the HUD-VASH program are exempt.  Otherwise, all HUD programs are subject to the across-the-board cuts of sequestration.

One thing to remember about FisCliff is that the word “cliff” probably implies a suddenness of impact that will not be evident. Tax cuts and spending increases would go into effect over time. HUD’s Homeless Assistance programs are one example. Reductions in ESG would take place when contracts for 2013 are signed, which occurs in different places over the course of the year. For the CoC programs, the impact would not be felt until the 2013 awards are distributed in early 2014.

In other words, if Congress meets after the election, in a so-called “lame duck session,” and can’t pass a reasonable alternative to FisCliff by January 1, they should keep working!

And what will a “reasonable alternative” look like? For those concerned about homelessness and similar issues, key criteria are:

  •     First, do no harm to the economy, particularly employment at the low end of the job market. With HPRP running out, the fight to end homelessness will get a lot harder if joblessness gets worse.
  •     Protect the poorest Americans. So far, the biggest antipoverty programs are exempt from sequestration, with the notable and unfortunate exception of HUD housing programs.
  •     Resist further cuts to non-defense discretionary (NDD) spending. This is actually the focus of a new national “coalition of coalitions” that had its first meeting last week – for more information click here. This coalition is circulating an organizational sign-on letter, and the Alliance encourages you to join by next Friday, June 22.
  •     Prioritize what works.  Across-the-board cuts almost always represent bad, lazy policymaking. Congress has the ability to figure out which programs really work, and it is irresponsible to act otherwise.

As you can see, FisCliff would greatly harm our efforts to end homelessness, so we must educate Congress on these impacts. As a result, advocates from across the country will educate their Members of Congress about these very issues during Capitol Hill Day 2012, held in conjunction with the Alliance’s annual National Conference on Ending Homelessness in July in Washington, DC. For more information or to get involved in Capitol Hill Day, contact Kate Seif.