Money where his mouth is

There are times when I find Barack Obama to be a bit too pragmatic and centrist. But taking his first five weeks and placing them in context, what becomes clear is just how bold his actions have been — especially when compared with his most recent Democratic predecessor.

Not only has Obama pushed the massive stimulus package through Congress and announced a major shift in international strategy — though it is less aggressive than his campaign promised — he also has reversed a large number of Bush parting gifts, banning torture and making it clear that he believes global warming is a serious threat.

It is his budget, however, that offers the greatest example of course reversal — a shift to the left that we have not witnessed from the federal government since at least the 1960s.

In unveiling the 134-page volume that outlines his spending priorities, Obama acknowledged that his proposal would “add to our deficits in the short term to provide immediate relief to families and get our economy moving.” But he argued that the economic crisis should not be used as an excuse to delay costly investments intended to modernize the nation’s economy, enhance its workforce and, ultimately, reduce government spending.

“What I won’t do is sacrifice investments that will make America stronger, more competitive and more prosperous in the 21st century — investments that have been neglected for too long,” Obama said. Citing the need to “break free” from foreign oil, reduce “crushing health-care costs,” and improve public education, Obama said: “These investments must be America’s priorities, and that’s what they will be when I sign this budget into law.”

With its immense scope and bold prescriptions, Obama’s agenda seeks to foster a redistribution of wealth, with the government working to narrow the growing gap between rich and poor. It is likely to spark fierce political battles on an array of fronts, from social spending to energy policy to taxes.

Alice M. Rivlin, a Brookings Institution economist who served as former president Bill Clinton’s budget director, called the plan “gutsy and quite good.”

“It has a strong flavor of the Obama philosophy, which is tilting the playing field away from upper income and toward the rest of America,” she said.

Consider these elements:

It calls on lawmakers to enact major new programs across the government, including one that would establish a national infrastructure bank to prioritize federal investments and another that would set new mandates on employers to enroll millions of workers for the first time in voluntary retirement savings accounts.

The budget seeks approval of a cap-and-trade program to curb U.S. greenhouse gas emissions by 14 percent by 2020. The program, similar to one used to slash emissions that cause acid rain, would auction permits to companies that emit greenhouse gases and allow them to trade those allowances.

The administration is counting on the program to produce a big new stream of revenue, amounting to $646 billion over the next decade. About $15 billion a year would be set aside to pay for “clean energy technologies” while the rest would go toward making Obama’s signature “Making Work Pay” tax credit permanent. The tax credit, worth as much as $800 a year to low- and middle-income workers, was enacted in the stimulus package.

In what the president called an “historic commitment to comprehensive health care reform,” the budget proposes to create a $634 billion reserve fund that lawmakers could use to finance a major expansion of health coverage for the uninsured.

The fund would include savings from proposed efficiencies in Medicare and Medicaid, the federal health programs for the elderly and the poor, as well as $318 billion in new taxes on families in the highest income brackets, who would see new limits on the value of the tax breaks from itemized deductions.

That proposal is a fraction of the new taxes Obama proposes to heap on the nation’s highest earners. Individuals who earn more than $200,000 a year and families who make more than $250,000 would also lose the tax cuts enacted during the Bush administration, meaning their top income tax rate would rise to 39.6 percent from 35 percent, their investment income would be taxed at 20 percent rather than 15 percent and their deductions for mortgage interest, state and local taxes and charitable contributions would be reduced.

If Obama’s tax plan is approved, a family making $500,000 a year would see its annual tax bill rise to nearly $132,000 from about $120,000, a 10 percent increase, said Clint Stretch, managing principal of tax policy at Deloitte Tax.

Hedge fund managers would take an even bigger hit. Much of their multimillion-dollar earnings would be taxed as regular income rather than capital gains, causing their tax rate to rise from 15 percent to as much as 39.6 percent. Oil and gas companies would be asked to pay an extra $31 billion over the next 10 years through an excise tax on offshore production in the Gulf of Mexico as well as new fees for drilling on federal land. Corporations that operate overseas could expect to pay $210 billion more over the next 10 years as a result of new limits on their ability to defer taxation on foreign earnings.

The context, however, tells the story:

President Obama’s first budget — with its eye-popping $1.75 trillion deficit, a health-care fund of more than $600 billion, a $150 billion energy package and proposals to tax wealthy Americans even beyond what he talked about during his campaign — underscores the breadth of his aspiration to reverse three decades of conservative governance and use his presidency to rapidly transform the country.

But in adopting a program of such size, cost and complexity, Obama has far exceeded what other politicians might have done. As a result, he is now gambling with his own future and the success of his presidency.

William A. Galston of the Brookings Institution cited three parallels to Obama’s far-reaching program: Franklin D. Roosevelt’s 1932 New Deal blueprint, Lyndon B. Johnson’s 1965 Great Society agenda, and Ronald Reagan’s 1981 call to dramatically limit the size and power of government, which set the framework for public policy debate ever since.

“A consequence of the economic events of the last two years has been to blow up that framework,” Galston said. “It has lost substantial public credibility. President Obama now has his chance to make his case for a fundamentally different approach.”

I’ve written about a lot of budgets over the years. And while they can seem dry and unimportant beyond their impact on taxes, the fact is that budgets are blueprints for policy. It is, as former-N.J. Gov. Christie Whitman said during a budget address more than a decade ago, the place where philosphy becomes concrete action. It is government putting its money where its mouth is.

In this case, Obama’s has offered some progressive proposals and rhetoric, mixed in with some odd centrist and even conservative language. But now that it is time for him to attach a price tag to those things he believes to be most important, it is clear what his real commitments are: the environment, health care and the working and middle classes.

Author: hankkalet

Hank Kalet is a poet and freelance journalist. He is the economic needs reporter for NJ Spotlight, teaches journalism at Rutgers University and writing at Middlesex County College and Brookdale Community College. He writes a semi-monthly column for the Progressive Populist. He is a lifelong fan of the New York Mets and New York Knicks, drinks too much coffee and attends as many Bruce Springsteen concerts as his meager finances will allow. He lives in South Brunswick with his wife Annie. View all posts by hankkalet