(The Root) — Once the presidential election ended, the sex scandal involving former CIA Director David Petraeus soon emerged as the most heavily covered political story in America. But coming in a close second is the fiscal cliff, a story that will likely have much more direct impact on all of us than whom the CIA director did or did not have a relationship with.
After Congress reached a stalemate on the debt-ceiling crisis last year, members unable to agree on just how to solve the crisis essentially agreed to postpone the showdown for another year, resulting in the bipartisan Budget Control Act of 2011. In addition to creating a Joint Select Committee on Deficit Reduction, which the media dubbed a "super committee," the bill also called for a number of automatic economic triggers with severe consequences for the U.S. economy to go into effect after Dec. 31, 2012.
To be clear, no one intended the triggers to actually be set off, but instead hoped that the threat of them would spur Congress into bipartisan action in an effort to avoid tanking the U.S. economy, better known as taking America over a fiscal cliff. However, both sides are pessimistic right now about the likelihood of reaching a quick deal.
Below is a look at what is at stake for black America, both if the U.S. goes over the fiscal cliff and if lawmakers reach a compromise.
Scenario No. 1: No Compromise Reached, and America Heads Over Fiscal Cliff
Unemployment benefits: The federal extension of unemployment benefits will expire, meaning someone who may once have benefited from a combined 99 weeks of federal and state unemployment benefits will see that fall to 26. Black unemployment was 9.1 percent in 2008, reached a high of 15.7 percent in 2011 and currently stands at 14.3 percent, indicating that black Americans have been hit especially hard by the recession. Although blacks are less likely to receive unemployment benefits than other groups (pdf), unemployment benefits remain a lifeline for far too many African-American households.
Federal employees: Any funding shortfall affecting the federal government has an immediate impact on federal employees, both in terms of actual payment and hours worked, as well as employment status. Should America go over a fiscal cliff, federal employees nationwide will be affected in congressional offices, Social Security offices and elsewhere, at all levels.
According to a segment on NPR's "Tell Me More," only 15 percent of federal employees are based in the Washington, D.C., area, meaning that any economic impact felt by federal employees will have repercussions nationally. According to an analysis by the Huffington Post, 21 percent of the nation's employed black adults are employed by the federal government, so cutbacks or layoffs to the government sector have a disproportionate impact on our community.
The American Opportunity Tax Credit: The American Opportunity Tax Credit is set forth in the American Recovery and Reinvestment Act of 2009 (aka the stimulus). This tax credit helps provide relief for those pursuing their first four years of college. The full credit is not available for single people who begin earning $80,000 or more while receiving it (the hurdle is higher for joint filers). It also has a direct impact on how the tax credit for federal Pell Grants is executed.
More than 70 percent of black students receive need-based financial aid to attend college, compared with 40 percent of white students, meaning that black Americans are more likely to benefit from financial incentives to spur college attendance, making credits like this particularly crucial. If America goes over a fiscal cliff, the American Opportunity Tax Credit will expire.
The Child Tax Credit: At the moment the Child Tax Credit, a tax reimbursement that households can claim for each offspring, is $1,000 per child. This number will drop to $500 should America go over the fiscal cliff. As of 2009, black women made up 27 percent of female single heads of households, compared with just 7.8 percent for white women. While this tax credit affects all black families with children, with more than 70 percent of black children being born to single mothers, this tax credit's impact on black women in particular cannot be understated.
Marriage-penalty relief: Because of a quirk of tax law, couples, particularly low-income ones, have long ended up paying more in taxes upon marrying and filing jointly than they did while single. Marriage-penalty relief addressed this. It will expire if America goes over the fiscal cliff. Black Americans already have the lowest marriage rates of any demographic group. Reinstating a financial penalty for marriage is unlikely to change that.
Scenario No. 2: Compromise Reached and Fiscal Cliff Averted
Taxes: While the president has indicated that he is open to bipartisan compromise in regard to the fiscal cliff, he has also made it clear that he is unwilling to compromise on tax increases for those earning more than $250,000 annually. While the U.S. Census Bureau does not collect data on the number of households earning $250,000 a year, it calculated the number earning more than $200,000 as 3.8 million.
Census data reveal that while the median net worth for blacks is $4,995, for whites it is $110,729. Additionally, analysis has also found that African Americans make up around 1 percent of the so-called 1 percent, while whites make up more than 96 percent of them. This means that only a small proportion of black Americans will be affected by a tax increase on those making more than $250,000 a year.
Medicaid: While the president and Democratic leaders such as Nancy Pelosi have been adamant that any deal must include tax increases for those earning more than $250,000 a year, Republicans have been adamant that any compromise must also include cuts to so-called entitlement programs, among them Medicaid. Established in 1965 as part of an amendment to the Social Security Act, Medicaid provides government-funded coverage of medical services for low-income Americans.
In 2006 the Joint Center for Economic and Political Studies released a report titled "Medicaid: A Program With Special Significance for African Americans." Noting the extreme health disparities between black and white Americans, the report concluded, "African Americans have a particularly large stake in Medicaid." As of 2010, just over 20 percent of black Americans were uninsured, compared with 11.7 percent of white Americans. It appears that cuts to Medicaid would disproportionately affect African Americans.
Medicare: Medicare, a program providing medical care for those over 65 and some with disabilities, is also facing potentially steep cuts or changes because of fiscal-cliff negotiations. According to a 2005 report from the Kaiser Family Foundation, African Americans on Medicare are usually in worse health than their white counterparts, and two in three African Americans on Medicare have incomes of less than 150 percent of the poverty designation. Cuts would have a disproportionate impact on blacks.
Social Security: Despite protests from progressives, Social Security is another program from which Republican leaders have demanded cutbacks as part of a fiscal-cliff compromise. Any cuts would disproportionately affect black Americans because a higher proportion of them rely on Social Security.
According to the Center on Budget and Policy Priorities, Social Security represents 90 percent of income for 35 percent of elderly white beneficiaries, but it represents the same amount for 49 percent of black beneficiaries. Additionally, although black Americans made up just over 12 percent of the population in 2010, 23 percent of those claiming Social Security survivor benefits were African American.
Keli Goff is The Root’s special correspondent. Follow her on Twitter.