Just going from the press coverage, of course. I haven’t read the actual FY 2010 federal budget the administration presented to Congress. (Have you ever tried to read a federal budget? Even in outline form, they’re large. And arcane. The legislators themselves don’t usually bother. They have staff lobbyists for that sort of thing…)
Anyway, I’m going to tackle this one in bullet-point format, starting with the largest category:
Good Things About Obama’s Budget
- It creates a “cap-and-trade” system to limit greenhouse gas (e.g., CO2) emissions. Cutting these is an absolutely indispensable step to mitigating climate change. I used to be skeptical about cap-and-trade—figuring if you let companies pay to pollute, and sell off unused permits to other polluters, then you’ve more effectively put a floor under pollution than a ceiling on it. But I’ve studied this recently, and the fact is that cap-and-trade really worked in the ’90s to reduce CFCs, creating a very effective profit incentive for companies to innovate and reduce emissions without forcing everyone to hit the same targets at the same time. It’s the sort of approach that even “free market” devotees should celebrate. And there’s every indication that a similar approach would work for greenhouse gases. Better yet, Obama’s plan avoids one of the mistakes made in the ’90s, namely that the government simply gave away the initial round of permits, rather than auctioning them off. If the program doubles as a source of public revenue, all the better.
- It ends the Bush-era tax cuts for the wealthiest taxpayers (i.e., households earning over $250k, as promised), effective in 2011. In times like these, it’s crucial that those who have benefited the most from our system, and can best afford the cost of sustaining it, pony up to do so. The increase isn’t drastic or onerous—IMHO the tax system could actually afford to be considerably more progressive, as it was in the ’40s, ’50s, and ’60s and is today in most other Western countries—but it is important nonetheless. We’ve spent thirty years letting the rich off the hook based on the argument that they’d invest in ways that would improve the standard of living for everyone, and it obviously didn’t work. (And House Republican “leader” John Boehner is lying, BTW, when he warns that the increases will create a burden “especially on small businesses”—in fact, the percentage of small businesses that will be affected is even lower than for individuals, less than two percent. Besides, anyone who nets more than $250k from a business and hasn’t incorporated it to separate personal property from business liabilities really needs to buy a clue. [H/T to “Rip and Read” for the link.])
- It invests heavily in renewable energy sources, and cuts subsidies to gas and oil companies. This is pretty much a no-brainer—simultaneously helping limit pollution and climate change, create jobs in new industries, save money by making future energy costs more predictable, and reduce our need for involvement in the politically volatile regions that dominate fossil fuel production. The only players who could possibly oppose it are those heavily invested in the current energy economy—e.g., the kind of people running the last administration.
- Drug companies will have to increase the rebate they pay on drugs sold to Medicaid patients (from 15 to 21%); cuts subsidies to insurers for Medicare managed-care plans and imposes competitive bidding; and trims some other expenses in both programs. It’s about time Big Pharma and insurance companies started paying back for the free ride they got under Bush’s “Medicare Prescription Drug Plan.”
- It devotes over $600 billion (over ten years) to comprehensive health care reform. Obviously a single-payer plan would be best, but whatever ultimately emerges as politically viable is still a win-win—cutting costs for both individuals and businesses, and increasing access to care for ordinary citizens. (John Boehner may claim that “everyone agrees that all Americans deserve access to affordable health care”… but for the GOP that’s only ever meant “whatever health care they can afford.”)
- It cuts direct subsidy payments to farms making over $500k a year. Corporate agriculture is already running roughshod over America’s farming communities; it doesn’t need public funds to help it along.
- It gets private banks out of the student loan business (an area where they always had a free, federally guaranteed revenue source, and yet where in recent months they’ve not been making necessary loans), instead handling this crucial aspect of college funding directly.
- It increases funding for Pell Grants, and links future grant levels to inflation… another important step in Obama’s plan to make higher education a reality for as many Americans as possible.
- It reduces taxes for the vast majority of Americans (individuals under $75k, households under $150k), at a time when many people desperately need it… and does so by reducing withholding, a method far more likely to result in spending (and thus broader economic stimuls) than the lump-sum checks mailed out last year.
- It takes an open and transparent approach to projecting expenditures, using a “current policy” baseline rather than a “current law” baseline to include foreseeable expenses (e.g., in Iraq, or for disaster relief) even if they haven’t been passed into law yet. This is a far more honest and realistic approach (and one argued for by conservative think-tanks like the Heritage Foundation in times past, though some are decrying it now), and allows for a clearer understanding of exactly where and how his proposals increase and/or decrease specific revenues and expenditures.
Ambivalent Things About Obama’s Budget
- It caps deductions for higher-income taxpayers (versus their marginal tax bracket) on charitable contributions and home mortgage interest, limiting them to the 28% rate most Americans get. It fits into the economic justice argument outlined above, making the system just a little bit more progressive, and of course it also generates needed revenue… but on the other hand many organizations in the nonprofit sector are worried that reduced deductions might negatively impact philanthropic contributions at a time when the beneficiaries thereof are already hurting.
- It barely levels off defense spending. Actual cuts would be far better, of course… but at least it’s asking the Pentagon to start tightening its belt, both through the drawdown in Iraq and through closer scrutiny of weapons programs (which increased 15% in just the law two years under Bush) and defense contracts (among which the GAO reports hat cost overruns average 26%). Steps like these are, needless to say, long overdue.
Bad Things About Obama’s Budget
- It’s damned expensive. It projects a deficit of $1.75 trillion for FY 2010 (out of $3.6 trillion overall), which is nothing to take lightly. Obviously deficit spending is intrinsic to Keynesian stimulus. Still, the built-in assumption is that we can support that massive debt because America’s credit will remain good with the rest of the world (most notably China), meaning that they’ll continue to lend to Uncle Sam in confidence that our economy will, in fact, rebound. Obviously this assumption has always held true before, as it’s in everyone’s mutual interest to accept it… but still, good faith and past precedent will only get us so far in times like these.
- 2012 is really too late to start implementing the carbon cap-and-trade system. The climate crisis now is severe enough that we just don’t have that kind of time to waste, and most of the industrialized world is already ahead of us on this. This needs to be done yesterday. (Of course, the U.S. Chamber of Commerce still complains that Obama’s pushing the idea “too fast.”)
- It bases some of its projections on somewhat optimistic assumptions about the length of the current recession and subsequent levels of GDP growth, compared to the consensus of private forecasters. It’s hardly the first administration to do this kind of thing—the practice has been endemic dating back at least to Reagan—but at the very least it creates a smaller margin for error and a greater chance of disappointment.
Now, obviously it’s a tricky balancing act to try to invest in forward-looking infrastructure when the nation is facing a major economic crisis. Or to try to stimulate the economy when we’re already burdened with record-setting deficits. Or to try to impose fiscal discipline when we have ongoing military engagements in multiple overseas combat zones. Any president would be challenged to try to split the difference on even one of these pairs of issues, let alone all of them at once.
Still and all, Obama’s putting forward a yeoman effort to balance all of these tensions… and to focus on his promised priorities of energy, health care, and education, priorities with which it’s hard to disagree. Virtually everyone (allies and opponents alike) acknowledges that this budget, and the policies and principles it embodies, represent a serious paradigm shift, the most dramatic ideological transformation in at least a generation. And the Center for a Responsible Federal Budget (part of the genuinely nonpartisan New America Foundation), while not without some reservations, weighs in [pdf] as generally “pleased” with the budget’s assumptions, goals, and policies.
What emerges from the meat grinder of Congress in the weeks and months ahead… now, that may be another matter entirely. Some Republicans, like House minority whip Eric Cantor, may be amenable to cooperation, but others will undoubtedly be less reasonable and more obstructionist. Obama knows this, of course, and presumably also knows this is the time to spend his heard-earned political capital to get things done. His remarks from Saturday have already been widely quoted:
“I know these steps won’t sit well with the special interests and the lobbyists who are invested in the old way of doing business, and I know they’re gearing up for a fight as we speak. My message to them is this: So am I.”
Let’s hope he lives up to that promise. A fight it may be, but it’s a fight he can and should win.