Impacts of the Gang of Six’s Budget Recommendations on Nonprofits

July 19, 2011; Source: Politico | President Obama is happy, many think, that the “Gang of Six” budget negotiators reconvened with Senator Tom Coburn (R-OK) returning to the negotiating table. The president praised their plan as “a very significant step” toward “the potential for bipartisan consensus” to avoid the nation’s fiscal self-immolation that would ensue with the failure to raise the budget cap. Both sides know that something has to happen, political brinksmanship before the Iowa caucuses to the contrary. 

But what would the Gang’s plan mean for nonprofits? Aiming at cutting the debt by $3.7 trillion over the next decade, the Gang proposes two stages of spending cuts. According to Politico, the first stage would be $500 billion in spending cuts from a variety of sources followed by a more comprehensive second stage combining additional “fast-track” spending and tax changes. Changes in Social Security would apparently constitute something like a third legislative track of sorts.  Politico says that the Gang “punts” the specifics on other future spending cuts within targeted amounts such as $70 billion out of Health, Education, Labor and Pensions, $65 billion out of Homeland Security and Government Affairs, $11 billion out of Agriculture, and $11 billion out of Commerce.

That’s the Gang’s plan? It’s hard to believe that’s all there is to it, so we looked for the text of the Gang’s, A Bipartisan Plan to Reduce Our Nation’s Deficits, and Politico had it right. The “punts” are actually to the Senate committees that have to find the areas to slice within their program bailiwicks. Was the Gang’s omission of the Senate Committee on Banking, Housing, and Urban Affairs intentional, protecting the fragile HUD budget that so many cities and nonprofits rely on through HOME, CDBG, and other programs? 

The important clause in the Gang’s report is this one: “Reform, not eliminate, tax expenditures for health, charitable giving, homeownership, and retirement, and retain support for low-income workers and families.”  There’s no other articulation in the five-page document from the Gang that we saw. In addition to all of the unspecified spending cuts that various committees will have to devise, it is this “reform” paragraph on tax expenditures for health, charitable giving, and homeownership that is a wild card in future budget negotiations.—Rick Cohen