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Leslie Dunbar, 212-558-5438, ldunbar@nul.org

Drawn from Social Security, Medicare and Payroll Taxes, Tax Cuts Prove More Harmful than Helpful to Assisting Americans Most Impacted by Economic Downturn

Washington, D.C. The National Urban League Institute for Opportunity and Equality bemoaned tax cuts that began prior to the events of September 11 as the largest single policy contributing to the $4 trillion reduction in the budget surplus that stood at $5.6 trillion when President Bush assumed office.

The League recognizes that the surplus has been further depressed by a decrease in tax income because of the rapid economic slowdown, but not because of increased spending on the economic safety net as in past recessions.

Equally disheartening, the League holds, is the size of the tax cuts means that the Bush Administration will have to use the Social Security and Medicare Trust Fund surpluses to fund the tax cuts.

According to Dr. William Spriggs, Director of the National Urban League Institute for Opportunity and Equality, in August 2001, the Congressional Budget Office's mid-fiscal year budget outlook clearly revealed that the large tax cuts for wealthy individuals and corporations passed earlier that year were partially paid for by funds from the Social Security and Medicare surplus.

The new budget numbers illustrate that not only has the general budget surplus disappeared, but also the Social Security and Medicare surpluses have been depleted by $1.1 trillion.

"This shows that the deficit is not simply the result of the rapid economic slowdown that occurred after Sept. 11," Dr. Spriggs noted. "And, today's Congressional Budget Office numbers further reveal that there is no relief in sight as the cumulative costs of the long-term provisions of last year's tax cut will not disappear when the Budget Office projects the economy to recover from the current recession and return to normal growth rates."

"Despite this dire economic outlook, the Administration and Congress have called for additional tax cuts for wealthy individuals and corporations, which will deepen the long-term problem."

Spriggs deemed the Administration's approach to creating an economic stimulus plan harmful to all Americans because it imperils important public investment programs that form the bedrock of American economic and retirement security.

"However," Spriggs said, "this strategy is especially harmful to African Americans and other minorities.

"First, minorities comprise a disproportionate share of lower income workers, and their payroll taxes - the current source of funding for the income tax cuts - unfairly subsidized the income tax cut which did not benefit them.

"Second, if the budget is brought into balance by cutting discretionary spending, then minorities will be disproportionately harmed by cuts to important public investment programs like job training, health, and education."

In addition to agreed upon support for extending unemployment benefits, and helping unemployment workers pay for health insurance, Spriggs went on to highlight the following measures the League prescribes for inclusion in a fair and successful economic recovery package for American workers:

- Relax the time limits on receiving TANF benefits, at least during the months of an official recession. Far from lacking common sense, it is cruel to run a program that demands its recipients find a job when employers have shed almost 700 thousand jobs in the last three months. This is a broad based recession. Jobs are being lost in all sectors of the economy, from manufacturing to services. We cannot simply train workers to move them to the right sector. We must provide a real solution for families that are facing ruin.

- Support Senator Kerry's efforts to extend the state-level TANF contingency fund now, but also to add waiving charging states interest if they need to borrow to fill their contingency funds, especially in those states that are hardest hit by this economic downturn. This will avoid delays in processing new claims.

- Take up the charge President Bush says he is willing to support, and restore full access to the safety net for legal immigrants. Drops in their demand would hurt the economy, as much as a drop in the consumption of any others.

- Ease access to Food Stamps, for example by supporting Senator Harkin's efforts to re-authorize the Food Stamp program. We must have a way to get help in the hands of families right away. Restrictions on receiving food stamps, like asset tests on the ownership of an automobile, will needlessly add to further delays. Action must be taken now.


The Urban League is the nation's oldest and largest community-based movement devoted to empowering African Americans to enter the economic and social mainstream. The National Urban League, headquartered in New York City, spearheads the nonprofit, nonpartisan movement, while Urban League affiliates operate in more than 100 cities in 34 states and the District of Columbia. More information is available at www.nul.org.