View Research by Author - Isabel V. Sawhill

Citation URL: http://www.urban.org/IsabelVSawhill

Two former directors of the Congressional Budget Office now at the Urban Institute join scholars from other organizations in a memo advising President Obama on how to balance the nation’s short- and long-term economic needs. To reduce escalating future deficits without endangering near-term recovery, the authors’ recommendations include action to stem the growth of Social Security and Medicare.

The authors of this paper—longtime federal budget and policy experts—were drawn together by a deep concern about the nation's long-term fiscal outlook. Despite diverse philosophies and political leanings, they found solid common ground and agree that unsustainable deficits in the federal budget threaten the health and vigor of the American economy and the first step toward establishing budget responsibility is to reform the budget decision process so that the major drivers of escalating deficits—Social Security, Medicare, and Medicaid—are no longer on autopilot. The paper provides specific policy recommendations and outlines the reasons action is critical.

The federal government is spending about $500 billion a year more than it is raising in taxes. If nothing is done, that gap will widen to around $700 billion annually by 2014 and accelerate rapidly thereafter. We present three ways to achieve balance over the next ten years. One option emphasizes spending cuts and leads to a smaller government. A second relies on tax increases and leads to bigger government. The third maintains government's current size, but makes it more effective, and contains a mix of spending reductions and tax increases, sufficient to achieve balance in ten years while preserving room for some high-priority new initiatives. We conclude that neither political party currently has a workable plan for reducing the long-term deficit, that both spending cuts and tax increases will be needed, and that stronger budget process rules would help members of Congress be more fiscally responsible. [© Brookings Institution]

This report provides a clear-eyed assessment of the federal budget outlook over the coming decade. It projects large and persistent deficits and discusses why they matter. The report suggests three ways to balance the budget while simultaneously making room for new priorities. One approach primarily involves spending cuts and smaller government, another relies more heavily on tax increases to support an activist government, and the third suggests a balanced mix of spending cuts and tax increases along with a reallocation of government priorities. All three are designed to restore fiscal sanity over the coming decade and help prepare for the baby boom's retirement. [© Brookings Institution]

[© Brookings Institution] Although the sweeping welfare reform law of 1996 has received widespread attention in the media and among policymakers, the development of the nation's work support system, which is a vital complement to the 1996 reforms, has received far less attention. The work support system is a series of programs that provide benefits to poor and low-income working families. In popular parlance, they are programs that "make work pay." The most important of these programs are the minimum wage, the Earned Income Tax Credit, the child tax credit, income supplement programs conducted by states, food stamps, health insurance, child support enforcement, and child care. A recent study by the Congressional Budget Office showed that numerous expansions of these programs since the mid-1980s have increased by a factor of more than eight the value of federal work support benefits now being paid to working families. Given the important role these programs play in maintaining work incentives, supplementing earned income so working families can provide a minimum living standard for their children, and helping families when unemployment hits, the maintenance and even expansion of these programs will be a major part of this year's welfare reauthorization debate in Congress. In this brief, we provide an overview of work support programs and examine the pros and cons of proposals to expand them.

[© Brookings Institution] How much and where to cut taxes was hotly debated during the 2000 presidential campaign. This debate is likely to continue as the 107th Congress considers the President's across-the-board tax cut proposal and alternatives to it. In this brief, we suggest a tax proposal that builds on one of President Bush's key ideas - an expanded tax credit for families with children - but modifies it in ways that might prove more acceptable to Democrats. Our analysis shows that it is possible to provide significant and broad-based tax relief to families with children in a way that is more progressive than the President's plan and that encourages work and marriage, thereby reducing the toll on the road to the middle class. The cost of the proposal is roughly $400 billion over 10 years, leaving room for other tax measures to be added to the package or for some portion of projected surpluses to be used for debt reduction. Whether this idea or others will find a receptive audience in the new Administration or the new Congress remains to be seen.

[© Brookings Institution] In this paper, we study the impact of proposed changes in work-support policy on low-income families. The incidence of poverty is found to be closely linked to a lack of work. Our analysis shows that, if all able-bodied family heads were to work full-time, the poverty rate would be cut in half. We therefore examine policies that have the potential to encourage and support full-time work among low-wage workers. Specifically, we focus on the minimum wage, the Earned Income Tax Credit, and child care subsidies. We use Census Bureau data to simulate expansions in these policies, focusing both on the initial distributional effects of those expansions and on the labor supply responses that they would elicit. We also estimate the costs of each program, and the work-generated offsets to these costs from higher tax revenues and reduced government benefits. Approximately one third of the population has an income that is less than twice its poverty threshold. We take this "bottom third" to represent the target group for the policies we simulate. We find that, if expansions in work-support policies are successful at bringing new workers into the workforce, the gains in income among the bottom third can exceed the amount spent by the government on those expansions.

[© Brookings Institution] This document offers a brief examination of the key policy issues surrounding the EITC and marriage penalties. The EITC is designed to support low income working families with children. It provides a subsidy (up to $3,816 in 1999) for families with children and low earnings. Current research shows that the EITC has been successful in raising the income of such families, increasing rewards/incentives to work among many low skill workers, and in stimulating greater work effort by single parents.

Isabel Sawhill discusses income distribution and the systems that produces such distributions in her article in The Public Interest. This piece is based in part on the book Getting Ahead: Economic and Social Mobility in America co-written with Daniel McMurrer.

Adapted in part from the "Opportunity in America" series of policy briefs, this volume focuses on social and economic mobility in the United States. Class or family background has a strong effect on individual success, the authors find. They examine the possible reasons for this relationship; how it has changed over the past century; and the role of the economy, the welfare system, and education in opening up opportunities for the less fortunate.

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