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Reductions in programs that provide benefits to individuals often produce large offsetting increases and decreases in spending by other programs. These offsets have important, differential effects on federal and state budgets as well as on the individuals affected. This report, prepared at the request of the Senate Budget Committee, estimates these interaction effects for two general options to achieve spending reductions: an across-the-board benefit reduction and an eligibility restriction. In keeping with the Congressional Budget Office's (CBO) mandate to provide objective and impartial analysis, this study contains no recommendations.

Reuben Snipper, of CBO's Human Resources and Community Development Division, prepared the paper under the supervision of Paul B. Ginsburg and Nancy M. Gordon. The author wishes to acknowledge the technical and critical contributions of many people, particularly Roger Hitchner, Charles Seagrave, Thomas Buchberger, Paul Cullinan, Daniel Koretz, Ben Steffen, Howard Levine, Patricia Ruggles, and Bruce Vavrichek. Patricia H. Johnston edited the manuscript. Reba Williams typed the many drafts and prepared the paper for publication.
 

Alice M. Rivlin
Director
May 1982
 
 

SUMMARY

CHAPTER I. INTRODUCTION

CHAPTER II. HOW THE PROGRAMS INTERACT

• Mechanisms of Program Interactions
• Multiple Participation in Interacting Programs

CHAPTER III. EFFECTS OF PROGRAM CHANGES ON GOVERNMENT SPENDING AND HOUSEHOLD BENEFITS

• Benefit Reduction
• Eligibility Reduction
• Current Proposals

APPENDIX A. PROGRAMS PROVIDING BENEFITS TO INDIVIDUALS

APPENDIX B. DATA SOURCES AND METHODOLOGY FOR ESTIMATES
 

TABLES
1.	PERCENT OF HOUSEHOLDS RECEIVING BENEFITS FROM AFDC THAT PARTICIPATE IN PROGRAMS THAT INTERACT WITH AFDC
2.	PERCENT OF HOUSEHOLDS RECEIVING BENEFITS FROM SOCIAL SECURITY THAT PARTICIPATE IN PROGRAMS THAT INTERACT WITH SOCIAL SECURITY
3.	PERCENT OF HOUSEHOLDS RECEIVING UNEMPLOYMENT INSURANCE THAT PARTICIPATE IN PROGRAMS THAT INTERACT WITH UNEMPLOYMENT INSURANCE
4.	ESTIMATED BUDGETARY EFFECTS OF 20 PERCENT REDUCTION IN AFDC BENEFITS IN FISCAL YEAR 1983, BY INTERACTING PROGRAM
5.	ESTIMATED BUDGETARY EFFECTS OF 20 PERCENT REDUCTION IN SOCIAL SECURITY BENEFITS IN FISCAL YEAR 1983, BY INTERACTING PROGRAM
6.	ESTIMATED BUDGETARY EFFECTS OF 20 PERCENT REDUCTION IN UNEMPLOYMENT INSURANCE IN FISCAL YEAR 1983, BY INTERACTING PROGRAM
7.	ESTIMATED BUDGETARY EFFECTS OF CHANGING ELIGIBILITY REQUIREMENTS TO ACHIEVE A 20 PERCENT REDUCTION IN AFDC OUTLAYS IN FISCAL YEAR 1983, BY INTERACTING PROGRAM
8.	ESTIMATED BUDGETARY EFFECTS OF CHANGING ELIGIBILITY REQUIREMENTS TO ACHIEVE A 20 PERCENT REDUCTION IN SOCIAL SECURITY OUTLAYS IN FISCAL YEAR 1983, BY INTERACTING PROGRAM
9.	ESTIMATED BUDGETARY EFFECTS OF CHANGING ELIGIBILITY REQUIREMENTS TO ACHIEVE A 20 PERCENT REDUCTION IN UNEMPLOYMENT INSURANCE OUTLAYS IN FISCAL YEAR 1983, BY INTERACTING PROGRAM
A-1.	OVERVIEW OF THE MAJOR PROGRAMS PROVIDING BENEFITS TO INDIVIDUALS, FISCAL YEAR 1981

 

Last year's budget decisions reduced substantially federal spending in fiscal year 1982 for programs that provide benefits to individuals. For fiscal year 1983, the Administration has proposed more large cuts for such programs. A reduction in one of these programs often results in increases or decreases in benefits provided by other programs, making the net impact on the budget, and on the affected individuals, significantly different from the initial effect of the cut program.

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