Letting the 1% Off Easy: Populism and Pain in Obama's Budget
Photo Credit: Official White House photo by Pete Souza
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This piece originally appeared at the blogof the Institute for Policy Studies.
Mitt Romney said it this way:
I'm not concerned about the very poor. We have a safety net there. If it needs a repair, I'll fix it. I'm not concerned about the very rich, they are fine....I'm concerned about the very heart of America.
President Barack Obama said it this way:
We can restore an economy where everybody gets a fair shot, everybody does their fair share, everybody plays by the same set of rules -- from Washington to Wall Street to Main Street. That’s the America we believe in.
Both want to appeal to a hurting middle-class electorate. Only one has a populist message with appeal and effect. He most likely will win re-election in 2012.
Obama's $3.8 trillion 2013 budget proposal, with its 10-year outlook, is by design a populist campaign tool. Though not politically viable now, his newly released budget is critically important in this election year both for the values it reflects, the vision it promotes and the potential it promises.
Obama's budget has a populist tone, appeals to the middle class, and has some good proposals, both on investment and revenue-raising. But it also reflects the strict spending caps mandated this past summer by the Budget Control Act and hits some struggling families hard. It doesn't go nearly far enough in revenue-raising. For instance, it does't propose a tax on financial transactions that would curb Wall Street's worst speculation or propose significant corporate tax reform that would actually raise needed funds. And, by reducing non-security discretionary spending from its current 3.1 percent of GDP to a 50-year low of 1.7 percent over the next decade, a lot of pain will set in when the populism starts to wears off.
Let's start with the good. Among the good proposals on investment side:
- The extension of the payroll tax cut and unemployment benefits through the end of 2012.
- School modernization and plans to retain teachers and first responders.
- Project Rebuild which helps to match unemployed in distressed communities with those communities' infrastructure needs.
- A small business tax credit that incentivizes new hiring.
- Increased child care funding.
- Improvements in Earned Income Tax Credit and Child Tax Credit .
- Tax incentives for manufacturers that keep and create jobs here in the United States.
- A National Infrastructure Bank that would fund projects that increase sustainable transportation and infrastructure investment.
- A total of $850 million in Race to the Top education proposals intended to improve the quality of education from early childhood through higher education.
- Efforts to make college more affordable through sustaining Pell grant funding, keeping interest on student loans from increasing, and reining in tuition hikes.
- A 7 percent increasing in new biomedical research grants.
- Support for a more sustainable economy through goals of increasing electric car production, doubling the share of "clean energy" electricity sources, and reducing the energy consumed by buildings by 20 percent by 2020.
And, among good proposals on the revenue side:
- Support sustainable energy and environment innovations by eliminating 12 tax breaks to the oil, gas, and coal industries by $41 billion over the next 10 years.
- Spend $487 billion less on the military over the coming decade.
- Make the " Buffet Rule " law, ensuring that millionaires pay a 30 percent tax rate on un-earned income.
- Let the Bush Era tax cuts for families making over $250,000 a year expire.
On to the bad. Here are some aspects of Obama's proposed budget that aren't as good as they might first seem: