When economists discuss “fiscal adjustment,” they typicallyframe it as an abstract and complex goal. But the issue is actually simple: Whowill bear the brunt ofmeasures to reduce the budget deficit? Either taxes have to go up forsome people, or spending must fall – or both. “Fiscal adjustment” is jargon;what austerity is always about is the distribution of income.
Much of Europe is already aware of this, of course. Nowit’s America’s turn. And current indications there suggest that the people mostdirectly in line for a fiscal squeeze are those who are least able to defendthemselves – relatively poor children. For example, the current budget sequester (that is, across-the-board spendingcuts) is already hurting programs like Head Start,which supports pre-school education.
The American comedian Jimmy Kimmel recently poked fun at his compatriots’ lack offiscal knowledge by asking pedestrians on Hollywood Boulevard what they thoughtof  “Obama’s decision to pardon the sequesterand send it to Portugal.” The segment is hilarious, but also sad, because the impact on some people’slives is very real. Around 70,000 children are likely to lose access to HeadStart on our current fiscal course.
And much larger cuts are in store for early-childhood nutritionprograms and health care. Perhaps most shocking are the dramatic cuts to theMedicaid health-insurance program that the House of Representatives’ Republicanmajority have embraced in their latest budget proposal. Paul Ryan, the chairmanof the House Budget Committee, proposes to balance the budget over the next 10 yearslargely by slashing the program. About half of all people covered by Medicaidare children.
Is it fair to force low-income children to bear the burdenof fiscal adjustment? According to data available on the economist EmmanuelSaez’s invaluable Web site, from 1993 to 2011, averagereal income for the bottom 99% of the population (by income) rose by 5.8%,while the top 1% experienced real income growth of 57.5%. The top 1% captured62% of all income growth over this period, partly owing to a sharp rise inreturns to higher education in recent decades. (On average, those with only ahigh school education or less have few good income prospects.)
This implies that, if anything, the tax system shouldbecome more progressive, with the proceeds invested in public goods that are not sufficientlyprovided by the private sector – things like early childhood education andpreventive health care to minimize educational disruption resulting from commonailments likechildhood asthma.
Think of it this way: In recent decades, some familieschose locations and occupations that seemed to offer a reasonable means ofsupport – and good prospects for their children. Many of these decisions turnedout badly, largely because information technology (computers and how they areused) eliminated many middle-class jobs. Increasing globalization of trade alsodid not help in this regard. In addition, as Till von Wachter of ColumbiaUniversity has documented, prolonged periods of unemployment for parents have a severe and lasting negative impact on their children.
Children whose families cannot provide a decent start inlife deserve help. But America has not provided it – a point recently made byJeb Bush, a leading contender for the Republican presidential nomination in2016. “In our country today,” Bush said in a speech to fellow conservatives, “if you’re born poor, ifyour parents didn’t go to college, if you don’t know your father, if Englishisn’t spoken at home, then the odds are stackedagainst you.”
Nor is America likely to provide such help in the future,given the coming budget cuts’ disproportionate impact on children at the lowerend of the income distribution.
America can easily afford to do better, of course. Its largebudget deficits reflect the impact of tax breaks that favor the wealthy andupper middle class; an unfunded expansion of Medicare coverage to includeprescription medicines; two foreign wars; and, most important, a banking systemthat was allowed to get out of control, inflicting massive disruption on thereal economy (and thus on tax revenue).
Today’s children did not play a role in any of these policymistakes. The preschoolers who are about to lose access to Head Start weren’teven born when they were made.
Imposing austerity on poor children is not just unfair; itis also bad economics. When economists, again with their dry jargon, talk abouta country’s “human capital,” what they really mean is the cognitive andphysical abilities of its people.
As I pointed out in recent Congressional testimony, poor education leads topoor job prospects, poor families, and back to poor education – if not with a detour throughincarceration, which makes it even harder to break the cycle. Unfortunately, noone in a position of power is likely to heed such arguments.
They should. When you travel to a foreign country for thefirst time, and you see neglected, ill-fed, and uneducated children, do youregard that country as likely to be one of the world’s great economic powersover the next half-century? Or do you worry for its future?