President Obama released his proposed budget today, mapping out how the White House would prefer to see the federal government operate through the fall of 2013.
The key word is “prefer,” because as every news account of the budget will tell you, the plan is dead on arrival in Congress. Republicans lambasted the proposal before the details were even released, and today Representative Paul Ryan, chair of the House Budget Committee, called the Obama budget “a recipe for a debt crisis and the decline of America.” So they’re not passing it.
The White House knows this, and designed the budget essentially as a political document to contrast with Republican priorities heading into the election. The plan moves away from deficit-cutting actions—the White House budget director, Jacob Lew, said yesterday on Meet the Press that “the time for austerity is not today”—and towards measures aimed at goosing the improving, but still weak economy.
Most notably, the White House wants the very wealthy to pay for much of these stimulative measures—hiring teachers, rebuilding infrastructure and boosting manufacturing. This is an obvious nod to the increasing national focus on income inequality, not to mention the anticipation of facing a multi-millionaire ex–Wall Streeter Mitt Romney in the fall.
Here are some highlights of the budget plan, which the White House is characterizing as a “New Foundation”:
The plan calls for a total federal budget of $3.8 trillion; the projected deficit for that time period is $901 billion.
There are $1.5 trillion in new taxes, mainly from allowing the Bush tax cuts to expire for those earning over $250,000 annually but also a total tax overhaul that closes loopholes and is billed as a “fair share” restructuring.
Obama also proposes taxing dividends of the wealthiest taxpayers as ordinary income, which would be subject to a 39.6 percent rate assuming the Bush tax cuts for top earners also expire. This is commonly known as the “Buffet Rule,” and replaces the current capital gains tax rate of 15 percent. This is a departure from the White House’s earlier position on dividends, which it wanted to increase taxes on, but only to 20 percent.
The budget calls for a ten-year, $61 billion “financial crisis responsibility fee” on the largest financial companies. According to the White House document, the fee would be levied “in order to compensate the American people for the extraordinary assistance they provided to Wall Street, as well as to discourage excessive risk-taking.” (This is not a new idea, and was first introduced by the White House in January 2010 amidst the outrage over excessive bonuses on Wall Street).
The budget includes notable education investments, including $5 billion to help schools attract and train high-quality teachers. It also calls for a program to train 2 million workers for high-demand industries via increased community college funding, which was the subject of Obama’s appearance at a northern Virginia community college this morning.
The national infrastructure bank, a part of Obama’s jobs plan in the fall, is naturally included, as is a 5 percent bump in research and development funding. There are billions of dollars in several areas meant to goose manufacturing, from a bigger transportation bill to increased funding to enforce trade rules.
That’s the good stuff. There are also some distressing items, most of them deep spending cuts—including some in Medicare and Medicaid. The Center for American Progress calls some of these cuts “painful.” The cuts are largely dictated by the debt ceiling deal struck in August, but the White House was a party to that deal, and in fact wanted it to be larger than it was.
Again, this budget will never pass—but it serves as a useful political tool for the White House and a starting point or negotiation in the Senate, whenever money for the next fiscal year is finally approved. If, of course, it is approved. I doubt Republicans would threaten a government shutdown in an election year, but I’ve learned never to underestimate what they might or might not do.