Governmental Belt-tightening–Who is Getting Squeezed and at What Cost?

As the economic hangover of the recession continues, states struggle to balance their budgets in the face of declining revenue and the perception (real or imagined) that taxpayers are reluctant to see an increase in their taxes.  Because  this economic stormy weather has long ago depleted the rainy day funds of many states, many states have resorted to cutting services to balance their budget.  Because state governments provide many services to those who do not have the means to satisfy their basic needs on their own, many of these cuts have disproportionately affected the neediest among us.  And after years of such cuts, the impact is quite severe.

In The Nation, Greg Kaufmann discusses the effect of continuous budget cuts to the Temporary Aid to Needy Families (TANF) program.  Kaufmann notes that  Illinois provides TANF benefits—which is cash assistance—to just 13 of every 100 families with children in poverty, according to the Center on Budget and Policy Priorities (CBPP). Prior to welfare reform in 1996 the state helped nearly 87 of every 100 families with children in poverty. Further, the benefit level is only 28 percent of the federal poverty line, or roughly $4,800 annually for a family of three, similar to that in a majority of states.  So as the ranks of people living below the poverty line increase, the state is less able to help keep people above the poverty line.

The New York Times reports that years of budget tightening have caused Texas to cut funding to schools, resulting in cuts to all but the most essential aspects of school–no music classes, reduced bussing and janitorial services–and some of the most essential aspects of school, increasing class sizes as schools reduce the ranks of their teaching faculty.  In an economic future in which workers will need to rely ever more on their knowledge base and education, students will be at a disadvantage as their educational opportunities are stunted in overcrowded classrooms taught by teachers taking on second jobs to make ends meet themselves.

And in another report from The Nation, programs designed to help people secure that most basic of needs–shelter–are woefully underfunded, as county waitlists for Section 8 are flooded with thousands of applications for only a hundred openings.  The federal housing agency’s annual assessment finds that “worst-case housing needs” grew by 42 percent from 2001 to 2009, and nationwide there is a shortfall of nearly 3.5 million housing units for the poorest households.

What is most frustrating to those of us working to ensure that people’s basic needs are met is the growing evidence that governmental austerity is not the solution to the economic crisis, and may only serve to make matters worse.  As Eileen Appelbaum of the Center for Economic and Policy Research notes in US News and World Report, “Cutbacks in government spending at the federal as well as state and local levels are already hurting GDP growth. In the absence of federal revenue sharing with the states–the first time the federal government has not had such a program when unemployment is above 7 percent–state and local government expenditures have fallen for seven consecutive quarters.”

Moreover, the economic insecurity that accompanies governmental belt tightening trickles down to individuals’ belt-tightening, hitting charitable donations.   Researchers in the UK and the Netherlands determined that when people feel less secure about their economic resources, they give less.

This thesis appears to be borne out during the prolonged economic downturn.  In October 2010, the Journal of Philanthropy reported a sharp decline in charitable giving to America’s largest charities–indeed the largest decline since the journal began recording charitable giving.  The next year the picture was a bit brighter; however the slight rise in giving did not erase the devastating effects of the recession, the Journal of Philanthropy reported in October, 2011.

This belt tightening does not appear to improve the economy in the short term.  But it does seem likely to most directly and severely affect the lives of those with the greatest need.   Our national economic hangover will continue that much longer as we deal with the effects of a growing homeless population, whose children’s educational opportunities are stunted, most likely resulting in further extended dependence on public and private aid.  Thus, the need for individuals to step up and help fill the void is all the more important.  Consider making a donation to NDBN today.

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