Budget Danger Ahead

In Jewish communal boardrooms in New York and Washington, all eyes are focused on the ongoing Israeli-Palestinian conflict and the tricky matter of U.S.-Israeli relations in a changing era.

But in communities around the country, many Jewish leaders have another big worry: the impending federal budget train wreck, and a state and local ripple effect that could produce real pain for needy Americans — including many Jews.

Congress and the administration are not eager to call attention to the mounting crisis, especially not in a critical election year. But the numbers won’t get any better for being ignored; indeed, putting off the day of budgetary reckoning may make the eventual crunch that much worse.

And that has huge implications for almost every item on the Jewish communal agenda. Government bookkeepers are working hard to paper over the crisis; Enron’s accountants could learn a thing or two from the administration’s budget director and congressional appropriators.

Still, it’s getting harder to ignore facts that are coming together to create an economic critical mass.

Government revenues have been down for several years, thanks in large part to the recession, producing a return to big budget deficits. Even if the economic recovery gathers steam, the problem will continue, thanks to the huge, backloaded tax cuts demanded by the Bush administration and endorsed by Congress, with support from a significant number of Democrats.

The recent sharp declines in the stock market and the literal evaporation of trillions of dollars of wealth will add new pressure on the revenue side of the equation. At the same time, spending needs are soaring.

The ongoing war in Afghanistan carries a hefty price tag, but that’s nothing compared to the projected costs of an assault on Iraq. The Pentagon is already working on the necessary buildup, and their bookkeepers’ eyes are spinning in their sockets.

The cost of homeland security is going up by the day, and a nation that suddenly understands its vulnerability to 21st century fanatics won’t complain about the cost.

At the same time, the demand for government services is growing as layoffs spread. More people out of work means more demand for a wide range of services.

And there’s the 800-pound gorilla of the baby boomer retirement crisis looming just over the horizon, but already filling budget planners with dread.

Long-term economic predictions are risky, and they are riskier in this new age of market volatility. A very strong economic recovery could quickly diminish the impact of these problems.

But few economists say that’s likely to happen, and many predict things could get worse before they get better.

The next Congress will have no choice but to start facing up to the budgetary carnage it helped create, and ledgers that went from big surpluses to big deficits in only two years.

Pressure on what’s left of the budget after defense spending, entitlement programs and debt service will be fearsome, producing a mad scramble among lobbyists for different groups to preserve as much funding as possible for their clients.

The crunch means that new spending programs are unlikely. Many Jewish groups would like expanded child-care services to ease the pain of families who have lost welfare benefits, or expanded drug benefits for the elderly or more money for immigrant and refugee services. But with the budget in shambles, extra spending is not on the agenda.

The crunch will have a ripple effect. Already, dozens of states are facing their own budget shortfalls; the return of red ink in Washington means the federal government will not be able to ease the burden.

So local Jewish groups that get both federal and state money to provide services could face a double whammy or potentially a triple whammy. If the recent plunge in the stock market isn’t quickly reversed, many Jews will find themselves with less money to contribute to the charitable organizations that will be called on to pick up the slack when government funding declines.

The accelerating budget crisis will also heighten the debate over faith based services. The Bush administration, with strong support in the Republican House, wants to shift the burden of providing important services to charitable and religious groups, a move liberal Jewish groups and church-state watchdogs oppose.

The accelerating effort to slash government funding will add to the pressure for such programs.

Aid to Israel is unlikely to be in jeopardy in the short term, but a long-term budget catastrophe will inevitably generate strong pressure on the entire aid program.

Pro-Israel leaders, worried about the huge proportion of the aid program that goes to Israel, have fought successfully for a bigger foreign aid pie in the past few years; the impending budget crisis could reverse that trend.

But it’s the domestic impact of the impending budget emergency that scares Jewish groups — the impact on needy people, including many in our own community. That, as much as the fight to protect Israel, will define Jewish activism for the next few years.