Kevin McCarthy’s proposed budget cuts would be 'felt most acutely' in red states: report

18 April 2023

U.S. Treasury Secretary Janet Yellen, along with countless economists, has been warning that the United States — and other countries as well — could face a major financial crisis if it defaults on its debt obligations. A default, according to Yellen, would be "completely devastating" for banks and the financial system in general.

But so far, Republicans and Democrats in Congress seem to be at an impasse when it comes to working out some type of agreement on the debt ceiling. President Joe Biden and Senate Majority Leader Chuck Schumer (D-New York) have maintained that cuts to Social Security and Medicare should not be on the table.

On Monday, April 17, House Speaker Kevin McCarthy (R-California) unveiled a proposed budget — one that, Reuters' Andy Sullivan reports, "would not scale back Social Security retirement benefits." But according to Reuters' analysis, McCarthy's budget would nonetheless have the most negative results in red states.

Sullivan, in an article published on April 17, explains, "McCarthy's plan, which he presented as a condition for raising the United States' $31.4 trillion debt ceiling, calls for cutting some agency budgets by 7 percent this year and capping their growth by 1 percent annually after that…. McCarthy only laid out broad contours on Monday, rather than unveiling finished legislation, which makes it difficult to determine the proposed cuts' precise toll. But a Reuters analysis of federal spending data indicates that his proposed domestic-spending caps could be felt most acutely in the states that backed Republican President Donald Trump in the 2020 presidential election."

According to Sullivan, those Trump-voting states "received roughly $172 billion in the last fiscal year for highway construction, housing, public health and other purposes, amounting to $1196 per person" — while the "25 states plus the District of Columbia that backed Democrat Joe Biden received $205 billion, or $1079 per person."

"The amounts vary dramatically from state to state," Sullivan notes. "In the 2022 fiscal year, heavily Democratic California received $760 per capita, while deeply Republican Alaska got $6423 per resident. Much of that money is distributed through formulas that take factors like poverty into account."

Sullivan continues, "As a result, federal aid does not play as big a role in relatively wealthy, Democratic-leaning states like New Jersey that are more able to raise their own taxes to fund safety-net programs, said Marcia Howard, executive director of Federal Funds Information for States."

Read Reuters' full report at this link.

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