Inside Obama's budget

By Frank Moraes 

In his "Happy Hour Roundup" at The Plum Line the other night, Jonathan Bernstein provided links to three articles that argue in different ways that there is much to like in Obama's new budget. I've never argued otherwise, but I have been too focused on the entitlement cuts. Let's be clear though: Obama's offer of these cuts is very bad. Even if nothing happens in the next four years, Republicans will go on to accuse Democrats of intransigence: "Even that socialist Obama thought we needed to cut entitlements!"

Annie Lowrey over at the Economix blog argues that Obama's entire focus, not just his budgets, have been about reducing income inequality. She rightly notes that the ACA (Obamacare) will help the issue. Just on the face, giving people healthcare who didn't have it before makes them richer; it doesn't matter that you aren't giving them cash. But perhaps as important, it will make medical bankruptcies far less common. (Remember the big push by the feds to make bankruptcy harder because all of these spendthrifts were abusing the poor bankers? It was mostly bankruptcies because of our broken health-care system.)

She goes on to mention a number of good things that are in the new budget. It includes a rise in the minimum wage, universal preschool, and of course, slightly higher taxes for rich people. One thing that is in there really surprised me: the earned income tax credit (EITC). The budget would make it permanent. I thought it already was, especially since traditionally, that is one form of welfare conservatives agree with. Well, it is only in effect until 2017. That's a big deal. The idea that President Paul Ryan would end the program is very troubling.

In the great Wonkblog fashion, Brad Plumer presents the "Winners and Losers in the White House Budget." The winners (at least in terms of programs) are primarily the poor. As Lowrey points out, there is the EITC and the minimum wage. But in addition, although Medicare is cut, Medicaid is not. To some extent, this defines Obama's economic policies. I can see that he truly does care about the poor. It is when you move up the income ladder to the middle class, that he thinks things are fine. But they aren't fine. And helping the middle class thrive is really important to all of the classes.

I disagree with Plumer on his biggest loser, "Wealthy taxpayers and the finance industry." The amount of money that he is talking about taking from them is very small. An argument can certainly be made that hedge fund managers and others who use the carried interest loophole are losers. But I would counter that taxing someone 15 percentage points more who makes many millions of dollars per year does not qualify as a loser. Regardless, the vast majority of the rich will see little change at all. People like Mitt Romney and Warren Buffett will still get to pay less than 15% in taxes on their income. And, of course, there is not a peep about taxing financial transactions. (If you don't know why that is, just look at Obama's Wall Street pals.)

Matt Yglesias does something different: he contrasts the Obama budget with the Paul Ryan budget. It ain't pretty. He makes three points. First, Ryan balances the entire budget on the backs of the poorer classes; Obama avoids this primarily by taxing the rich. Second, Ryan balances the budget without hurting today's seniors by screwing tomorrow's seniors; Obama, as we know, cuts entitlements marginally on everyone. And third, Ryan believes that all we have to do is destroy most of the government and that our economy will boom; Obama actually proposes a small amount of well targeted stimulus spending.

As usual, when you dig down into Obama's policies, they look a lot better. But that isn't what I have a problem with. I know that politics is the art of the possible. I know that in real life, I am not going to get policies that I am even close to being completely happy with. My problem is that my side doesn't even try to push for liberal policies. We can't talk about single-payer health care. We can't talk about raising the payroll tax cap. We can't talk about adding new tax brackets to make the filthy rich pay for all that they get from a stable country.

And then there is the whole question of how well our team is playing the game. Yesterday morning, Jonathan Chait wrote an article in which he argues that Obama wants a Grand Bargain in order to solidify his presidential legacy. The problem, he notes, is that the Republicans don't want to give him that. And hidden in his argument is my more fundamental argument that Obama really does want Chained-CPI. But the fact remains that the Republicans won't give him a deal because the optics are terrible. What would people say if the man they claimed was a socialist managed to actually improve the country? 

Afterword 

I'm not saying that Obama necessarily would have improved the country if he got what he wanted. But I don't think the Republicans have any idea of what they actually want to do. Whenever asked, they talk around the margins. Healthcare reform? Allow people to buy insurance across state lines! Yeah, that'll fix the whole problem.

(Cross-posted at Frankly Curious.)