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Fiscal Cliff: What it means for Montanans

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Posted: Friday, November 30, 2012 7:00 am

To battle the burgeoning national debt, Congress created the Budget Control Act in 2011. If, by this year’s end, Congress can’t find a way to staunch the debt flow, American will fall off the “fiscal cliff” on Dec. 31, at midnight.  

 So, if the nation goes tumbling over the fiscal cliff, what exactly does that mean for you?

It’s a grab bag of broad cuts, expiring tax cuts and concessions that affect everyone from veterans to preschoolers.

For parents, a lot could change if Congress does not reach a fiscal deal by the year’s end. For many federally funded programs, automatic 8.2 percent cuts would be applied to yearly budgets.

The child tax credit, for example, that doubled from $500 to $1,000 per child under 17-years-old during the Bush-era tax would be cut back down.

  If the nation is pushed off the fiscal cliff, the maximum credit for one child will be $500.

While that broad-stroke cut would hurt American families nationwide, cuts made at the local level offer a glimpse of what’s at stake in the Gallatin Valley.

Jane Arntzen Schumacher, the executive director of Child Care Connections in Montana said she hopes a deal is reached before the end of the year because an 8.2 percent cut in government funding would hurt Montana families.

“For us, it would be big,” she said. “It would be about $262,000 lost for us.”

Child Care Connections works to pair affordable daycare providers with families in Park, Meagher and Gallatin counties. The group also offers a bevy of childcare scholarships for low-income families and parents of kids with special needs.  

Arntzen Schumacher said since her office processes scholarships from the state to the families, the $262,000 is just the amount she estimates that would no longer be available to parents.

The actual Child Care Connections office-operating budget would be an 8.2 percent cut on top of the lost daycare scholarships.  

“In addition to the cuts in the scholarship funding for families, Child Care Connections would also see the 8.2 percent cut to our funding — about $26,000,” Arntzen Schumacher said.  “We are definitely concerned about that cut, but are more concerned about the impact to our local families that are currently receiving scholarships.”

Schools would take a hit in lesser-known ways, as well. Programs like Head Start, an early development program for kids aged three to five, would be de-funded at the same 8.2 percent rate. Head Start serves low-income families. The classroom preschool education is free for qualifying families.

Superintendent of Belgrade Schools Candy Lubanksy wondered how the school district would absorb the preschool students funneled to the district from a diminished Head Start program.

“If sequestration takes effect, take a Head Start will take a big hit,” she said.

Then there are the more obscure provisions of the law that would affect even more Montanans. USA Today reported that one of the cuts set to expire at the end of December has been buoying the Crow tribe in southern Montana through the coalmine on the reservation.

The Westmoreland Coal Co. gets $2.26 from the IRS for every ton of coal it mines off the Crow reservation. The mine supports the community through taxes royalties and jobs. Without the tax cut, tribal leaders said they worry the mine, and the 100 high-paying jobs it provides, would close.

Another hit at the local and nationwide level are the expiring Bush Era tax cuts from 2001 and 2003. The loss of those tax cuts will deliver a punch in the gut to Americans Montana State University Economics Professor Gregory Gilpin said.

“That decrease in consumer pay is going to affect people,” he said. “Republicans want Bush era tax cuts to remain. Obama wants them, except for families making more than $250,000.”

The wealthy being taxed at the same rate as lower and middle income Americans is the problem, Gilpan said.

“The wealthy have been paying at the same 15 percent rate as everyone else,” he said. “It really sticks in people’s mind when Warren Buffet’s secretary is paying the same tax rate he is.”

While democrats and republicans have shown partisan antics arguing about the fiscal cliff, both President Barack Obama and Republic House Speaker John Boehner said they want to keep taxes at the same lower rate.

Obama said the wealthiest echelons of Americans, those earning more than $250,000, should be taxed at a higher rate. Boehner and the Republicans disagreed, hoping instead to close existing tax loopholes to make up the revenue.

While the broad cuts might not nick any one group too badly, they will automatically kick in unless a deal isn’t reached by the year’s end. But Gilpin said the pre-cliff panic and the name of the crisis itself is over-the-top sensationalism.  

“These are broad, shallow cuts across a 10-year time span,” he said. “The term ‘fiscal cliff’ is a bit of an overstatement. Ben Bernanke coined that term to urge Congress to act.”

Overstatement or not, most just want some kind of a deal, and soon.

© 2015 The Belgrade News. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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