Forget the porcelain-toothed politicians and marble monuments; for all practical purposes, the District of Columbia is a welfare state, a client of the federal government that receives more federal aid per citizen than any state in the union. Year after year, the District’s chronic crisis persists: Twenty-five percent of its population receives Medicaid, one-third of its children live off welfare, and thousands of its residents rely on food stamps for their next meal. Which means that in the current war over the federal budget, the District is perilously exposed.
But while the eyes of the District are focused on the wounds inflicted by the D.C. financial control board and the District’s overseers in Congress, it is the federal budget cutters which represent a much larger menace. Like a Stealth fighter plane, the emerging federal budget will drop a bomb—seemingly out of nowhere—crippling the District in massive ways. The dollars will be bigger, the population more vulnerable, and the collateral effects more widespread than any imagined by the control board. D.C. stands to lose the most federal money per capita nationwide.
The Republicans want a 30-percent across-the-board reduction in domestic appropriations—Medicare, Medicaid, welfare, and the like—programs that are the lifeblood of the District. At most, President Clinton wants to cut about half as much and has said so with a veto. But even a compromise agreement would hit the heavily supported District where it counts.
Local recipients of Medicaid—the national health care program for the poor and disabled—lead the list of losers. The Republicans want to convert Medicaid, which profoundly effects the quality of life of about 140,000 Washingtonians—to block grants, eliminating any entitlements. The District, like other states that administer Medicaid dollars, will be forced to either ration a capped amount of care to its beneficiaries (so-called managed care) or cut the number of people eligible for support.
“The notion that we can solve this problem through managed care is a pipe dream,” says Paul Offner, D.C. commissioner of health care finance. Under the Republican proposal, or “worst case scenario,” D.C. would lose nearly a billion Medicaid dollars over the next seven years, according to Offner. By the year 2002, D.C. would have to cut more than 16,000 people from Medicaid or almost 12 percent of its current Medicaid population.
Medicaid’s twin, Medicare—the health care program for the nation’s elderly—will be on the critical list as well. D.C. would lose about $4 billion in Medicare funding by 2002. Unlike Medicaid, Medicare pays beneficiaries and providers directly. D.C.’s Medicare population is about half the size of its Medicaid population and generally better off financially. The average D.C. Medicare beneficiary would pay about $3,000 more in premiums and copayments over the next seven years. People who could not afford the Medicare increases would then become eligible for Medicaid assistance, further swelling the demands on Medicaid.
Given that many District residents are hanging on by the thinnest of margins, the further you go down the list of proposed federal cuts, the more sobering the reading. The loss of millions of dollars to welfare recipients in the District will quicken the District’s fall.
Bailus Walker, a D.C. health policy analyst and Howard University researcher, points out that the social, economic, and health impacts of the federal budget comprise a heavily intertwined system. “You can’t make changes to one without impacting the others,” he says, but federal budget cutters want to tinker with all three of them at once.
The list of punishing cuts in entitlements seems endless. Like any number of dysfunctional urban areas, the District depends on the federal government to play an instrumental role in the day-to-day lives of its residents. And aid to disabled and poverty-stricken children, education and nutrition programs, support for public health and the environment, as well as energy and housing assistance in the District will all take a ferocious beating.
Many critics of the Republican budget priorities suggest that what’s under way is not a shrinking of the safety net, but a push off a cliff, leaving many people in D.C. without food or a house to cook it in. The District’s supply of quality housing would be in jeopardy because funds for public-housing modernization have been targeted. About 1,200 of D.C.’s homeless would be denied assistance to get back on their feet. Rental assistance would be cut off to about 675 poor, elderly, and disabled households. And District residents would lose $4.2 million in utility assistance, a loss of 14,500 households. Even metro fares would likely reflect shifting federal funding priorities, with a 5-percent hike likely if the cuts in transportation funding go through.
The income half of the equation is also in for some political engineering, and the District will see less money as a result. The Republicans also want to change the tax structure, reducing levies and making things especially hard on the District because of its already limited tax base. Changes to individual capital gains taxes could cost the District $171 million over the next seven years, according to an analysis by the Institute on Taxation and Economic Policy. The new plan would tax only half of capital gains income and give nearly 70 percent of the overall tax cut to American families earning $200,000 or more a year, according to an analysis by Citizens for Tax Justice. For working families in Washington, cuts to the Earned Income Tax Credit would raise individual taxes by $238 in 1996.
While the District has its share of the entitled rich, many of its residents find themselves in a low-income category that seems threatened with federal extinction. The combination of tax, income, and health benefit changes would exacerbate income inequity, according to a November analysis by the Office of Management and Budget (OMB). Families earning under $50,000 a year would pay more, while families earning more than $100,000 would pay less. And families earning less than $30,000 would be hurt the most, OMB reports. More and more families and children would also move across the poverty line, according to OMB’s analysis, while direct aid would be simultaneously cut.
There are other menaces to D.C.’s stability buried elsewhere in the budget. D.C. would see the highest relative level of job losses linked to the budget reductions, according to an analysis by the WEFA Group, largely because of the high level of vulnerability of the District’s government and service industries. The report also points out that the District would have to deal with signficant reductions in overall federal government employment, further eroding its tax base.
Health finance commissioner Offner says that the feds and the District are entering new territory, so it’s difficult to know what to expect. “These cuts would be on a totally different order of magnitude,” he says, adding that the control board has proposed “nothing that Draconian.”
Congressional debate about the 1996 District budget continues to preoccupy local leaders. But even if they win that battle, it will be a Pyrrhic victory: The war over federal funding will have much more lasting implications.