[Pen-l] summary of Obama budget proposal

[Jim Devine <jdevine03@xxxxxxxxx>]

from today's SLATE:
All of the widely-sold U.S. newspapers lead > with President Obama's
decision to put some money in a piggy bank. In the budget proposal
that will be released today, Obama will announce that he wants to
start his promised overhaul of America's health care system by
creating a $634 billion reserve fund over the next 10 years that will
be paid for by increasing taxes on the wealthy and cutting government
spending.<

Simply putting money into a fund would encourage the recession to get
worse (all else constant). Where does this money go?

>At the center of the plan is a call to gradually reduce the value of itemized deductions that those in the highest tax brackets can take for things like mortgage interest and charitable contributions. <

I can imagine some stuck-pig squealing. But if the rest of us can
handle state and local tax hikes and service cut-backs, I'm sure that
the rich can deal with it. After all, don't they receive their exalted
incomes because they're tougher than the rest of us? (They claim to be
"risk-takers," "entrepreneurial," etc.) So they should be able to take
a little belt-tightening.

> Separately, Obama will also propose to extend his tax cuts for most Americans and pay for them with the revenue he would get from polluting industries. These two proposals, combined with Obama's stated goal of rolling back some of the Bush administration's tax cuts, add up to "a pronounced move to redistribute wealth by reimposing a larger share of the tax burden on corporations and the most affluent taxpayers," declares the New York Times.<

They mean redistributing income. To what extent does this effort
reverse the on-going programs which progressively redistribute income
to the wealthy?

> USA Today calls the $634 billion reserve fund "a big step toward extending health coverage to 46 million uninsured and subsidizing premiums for others who have insurance." But the administration made it clear it was just the first step, and most papers cite an administration official who characterized it as a "very substantial down payment" on Obama's health care goal. The plan contains few details on how the money would be used. "Rather, the president's proposal to raise revenue is intended to signal his seriousness about moving the talks forward on Capitol Hill," notes the Los Angeles Times. The Washington Post points out that this "strategy is largely intended to avoid the mistakes of the Clinton administration [led by Hillary], which crafted an extensive proposal in secret for many months before delivering the finished product to lawmakers, who quickly rejected it." The proposal to raise taxes is expected to create a huge ruckus in Congress, and one of the key questions will be "whether a change to the deductions formula would discourage charitable giving among the wealthy," says the Wall Street Journal.<

Of course, charitable giving is way down anyway, because of the
recession. BTW, does anyone know, how has U.S. charitable giving been
trending, relative to GDP and/or the incomes of the rich? The way in
which the Bushies were handing out money to their rich friends may
have been so great that there was little point for them to look for
ways to avoid taxes via charitable giving. (Of course, a lot of that
"giving" isn't really giving, since it involves large fundraiser
cocktail parties and the like. I'd bet that corporations that
advertise the monetary amount of their "good deeds" also include the
advertising costs as part of the total.)

> The proposal to raise taxes on the wealthiest Americans involves reducing the value of tax deductions by about 20 percent for families making more than $250,000 a year or thereabouts. For those of us who aren't used to getting big deductions, the NYT does the best job of explaining the logic behind it and what it means. The way the tax law is written, those in a higher tax bracket get a bigger deduction in their tax liability. So, for example, someone in the 35 percent bracket gets a bigger reduction for having $10,000 in itemized deductions than someone who is in the 28 percent bracket, which the White House says is unfair. Republicans obviously oppose this move, saying that it would hit many small businesses.

> The change in itemized deductions would provide about half of the money for the reserve fund. Where's the rest coming from? The biggest chunk would come from a proposal to cut payments the government makes to insurance companies that provide care for those in Medicare under what is known as Medicare Advantage. Obama also wants to cut costs by reducing the amount that Medicare pays hospitals with high re-admission rates, a move that is part of a broad plan to improve care. In addition, wealthier Medicare beneficiaries would be asked to pay more to receive the program's prescription-drug coverage.<

Why not get rid of the disastrous prescription-drug program altogether?

>In the 10-year budget Obama will release tomorrow, he will also note that he wants to pay to extend the tax cuts for low and middle-income Americans with some of the billions the government will get from the "cap and trade" program that has been a centerpiece of the president's platform. The program would basically require companies to buy permits if they want to exceed limits on pollution emissions. "Cap-and-trade is code for increasing taxes and killing American jobs," said House Republican Leader John Boehner, "and that's the last thing we need to do during these troubled economic times." The program wouldn't be instituted until 2012, at which point the administration expects the recession to be over.<

What about killing American lungs? doesn't that count? Oh, I forgot
that Boehner is a GOPster hack.

> The WP is all over Obama's budget and dedicates three separate front-page stories to the issue. In one blunt piece, the WP declares that the president's budget not only assumes that lawmakers can resolve some issues that have been plaguing them for years but also "relies on a few well-worn budget tricks." In his big speech before Congress, Obama said his administration "already identified $2 trillion in savings," but the truth is that about half of those are really tax increases.<

So? Giving special tax breaks is a program, too. The government (or
more likely lobbyists) push for a tax break promising that it will
provide benefits. If it doesn't do so (or does not provide benefits
that people in general want), cutting the special tax break is clearly
not providing benefits and should be abolished.

> And much of the rest "comes from measuring Obama's plans against an unrealistic scenario in which the Iraq war continues to suck up $170 billion a year forever," details the Post. Although everyone says that Obama has successfully eschewed some common budget tricks that previous administrations were fond of, the plan isn't quite free of what the paper calls "budgetary maneuvers."<

> Considering the numbers he's starting out with, many are saying that Obama's goal of halving the deficit by the end of his first term isn't very ambitious. <

Should Obama _want_ an ambitious deficit-cutting program? wouldn't
that encourage a recession or a continuation of the current one?

> The Congressional Budget Office recently said the deficit could be cut in half by 2013 simply by winding down the Iraq war and allowing some tax cuts to expire. Not everyone agrees. In an analysis piece inside, the LAT says that halving the deficit won't be an easy task and may end up costing Obama dearly. Some of the methods Obama said he will use to follow through "have fallen short in the past" and, perhaps more importantly, "Congress is not ready to mend its free-spending ways." The huge spending bill that the House passed yesterday increases expenditures by 8 percent and is full of earmarks from both sides of the aisle.

> What is undoubtedly ambitious is Obama's agenda, which "amounts to a long work order for a legislature that has seen its productivity sag in recent years," notes the Post. The young president is basically asking Congress to pass one huge piece of legislation about once a month. Many Democrats are getting nervous that the huge expectations Obama is creating could result in a big defeat in the 2010 midterm elections if it turns out they can't follow through.<

-- 
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.
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