Wonkbook: Washington reacts to the budget
Today's sunrise marked the first dawn after the release of Barack Obama's proposed budget for 2012. Look closely, and you'll see the changes: Children no longer hold their parent's hand as they walk down the street. Cars drive backwards. All drinks are carbonated. Every television station is live streaming Twitter -- and everyone is watching. And the debt? Totally repaid.
Or not. The budget was not terribly well received. Republicans and many deficit hawks were loudly horrified at the proposal's modest cuts and its decision to sidestep entitlements. They wanted the Fiscal Commission -- or something close to it -- and they didn't get it. Democrats were less distressed, but far from pleased: The cuts that were included in the budget are painful for them, many wanted to see more aggressive action on tax expenditures and military spending, and the much-touted investments made in the document are scattershot. The Atlantic's Derek Thompson summed the reaction up well: "The same way a spork makes a incomplete fork and an ineffectual spoon, this compromise budget provides for both incomplete investment and ineffectual deficit reduction." And so it has found few friends.
But it's worth remembering that this is the White House's opening bid in a negotiation that's just getting started. They have made a decision -- perhaps savvy, perhaps not -- to leave it to the Republicans to take the first step on entitlements and tax reform. The Republicans, due to their criticism of this budget, now have to offer something more far-reaching in their proposal. If they come up with a plan people like and some votes for it, the White House can join with them in negotiations and eventually sign onto a grand compromise. This budget will be largely forgotten. If they come up with a plan people hate that clearly can't get the votes, the White House can attempt a replay of the mid-1990s and hammer them with it.
This budget doesn't lead on long-term deficit reduction. But that's not necessarily because the White House is uninterested in that discussion. Note the section laying out the White House's interest and position on Social Security reform. Rather, they're keeping their options open until Congress makes the first move. This is a strategy that frustrates Washington -- think back to the bipartisan criticism of the leeway the administration gave Congress during health-care reform and the stimulus -- but it's tended to be how the White House approaches major reforms.
Read Obama's official budget request here: http://bit.ly/aEariq
Lori Montgomery summarizes: "President Obama submitted a budget blueprint for fiscal 2012 on Monday full of surgical cuts and cautious trade-offs to lawmakers clamoring for bold action to reduce government spending and control a budget deficit expected to rise to a record $1.6 trillion this year. The $3.7 trillion plan proposes to trim or terminate more than 200 federal programs, striking areas long favored by Democrats to make room for increases aimed at boosting the economy. The new priorities include spending on education, energy and medical research, and a push to bring high-speed Internet to virtually every American...His budget calls for $1.6 trillion in fresh revenue over the next decade, primarily through higher levies on businesses and the wealthy."
Check out the Post's run-down to see which departments gain and lose: http://wapo.st/hR2G7X
Annie Lowrey explains what the budget would look like if the US made as much as a typical household: "The Obama budget throws around some very big numbers, a dizzying array of billions and trillions, and they are difficult to parse and compare. So let's cut them down to a useful, human, household size. Next year, the government plans to take in $2.63 trillion—and to spend $3.73 trillion. For our purposes, let's use $60,000 as the government's income and $85,000 as its expenses. Where does all of that spending go?"
The business community is skeptical, report Jia Lynn Yang and Michael Fletcher: The fiscal 2012 budget outlines more than $200 billion in higher taxes for oil and gas companies, banks and multinational firms - ideas that have been offered in the past and vehemently opposed by industry. It does not detail a core part of Obama's effort to win the trust of big business: an overhaul of the corporate tax code that would lower the overall rate that firms pay. 'I'm just extremely disappointed,' said Caroline Harris, chief tax counsel for the U.S. Chamber of Commerce. 'I certainly did not expect to see a full plan. But I did think some good-faith effort would have gone a long way with the business community.'"
The GOP wants $61 billion more in cuts: http://wapo.st/fqYCEx
The budget strikes a good balance, writes Robert Greenstein of the Center for Budget and Policy Priorities: "Given current fiscal and political circumstances, the budget strikes a tough but generally sound overall balance among the need for fiscal restraint, the need to avoid large immediate cuts while the economy is still weak, the need to protect effective high-priority programs (especially those that represent effective long-term investments), and the need to avoid inflicting serious harm on the poorest and most vulnerable members of our society...The Administration was on sound footing in not offering, in the budget, various controversial proposals for long-term deficit reduction that policymakers could consider more constructively as part of future deficit-reduction negotiations."
The budget does not go nearly far enough, writes Maya MacGuineas of the Committee for a Responsible Federal Budget: "It is encouraging that the Administration identifies some areas for real savings. However, the total level of savings is far short of what is needed and too many heroic assumptions are used to achieve them. This budget fails to meet the Administration's own fiscal target, it fails to tackle the largest problems areas of the budget, and it fails to bring the debt down to an acceptable level. While we can certainly appreciate the difficult political environment in which the budget is introduced, the glaring omission of any significant entitlement reforms and the excessive use of 'fill-in-the-blank' budgeting does not help to advance the conversation."
Good start, but more needed, says Senate Budget Committee Chairman Kent Conrad: "The President’s budget gets it about right in the first year. Even as it moves to cut spending, it continues investments in the critical areas of education, energy, and infrastructure. These investments will help strengthen the economic recovery, create jobs, and build the foundation for long-term economic growth. But we need a much more robust package of deficit and debt reduction over the medium- and long-term. It is not enough to focus primarily on cutting the non-security discretionary part of the budget, which accounts for just 12 percent of spending this year. Instead, we need a comprehensive long-term debt reduction plan, in the size and scope of what was proposed by the President’s Fiscal Commission. It must include spending cuts, entitlement changes, and tax reform that simplifies the tax code, lowers rates, and raises more revenue."
Obama's budget represents a failure of leadership, writes House budget chair Paul Ryan: "Failing to heed the warnings of economists and the demands of the American people, the President’s budget accelerates our country down the path to bankruptcy. Far from ‘living within its means,’ the President’s budget puts the government on track to nearly double in size since the day he took office - a direct result of his party’s reckless spending spree. His budget destroys jobs by imposing a $1.6 trillion tax hike, adding $13 trillion to the national debt and fueling uncertainty in the private sector. We cannot tax, spend and borrow our way to prosperity. Where the President has fallen short, Republicans will work to chart a new course - advancing a path to prosperity by cutting spending, keeping taxes low, reforming government, and rising to meet the challenges of our time.”
The budget is a window into what the federal government really does these days, and what it really does these days is insure people, writes Ezra Klein: "Two of every five dollars goes to Social Security, Medicare or Medicaid, all of which provide some form of insurance. A bit more than a buck goes to the military. Then there’s a $1.50 or so for assorted other programs -- education, infrastructure, environmental protection, farm subsidies, etc. Some of that, like unemployment checks and food stamps, is also best understood insurance spending. And then there’s another 40 cents of debt repayment. Calvin Coolidge once said that the business of America is business. Well, the business of the American government is insurance. Literally. If you look at how the federal government spends our money, it’s an insurance conglomerate protected by a large, standing army."
The changes from last year's budget are cosmetic, writes Douglas Holtz-Eakin of the American Action Forum: http://bit.ly/fVvshM
The Obama administration is finished with stimulus, writes Paul Krugman: "The important thing, I think, is that he has effectively given up on the idea that the government can do anything to create jobs in a depressed economy. In effect, although without saying so explicitly, the Obama administration has accepted the Republican claim that stimulus failed, and should never be tried again."
The budget doesn't do nearly enough on long-term deficits, writes Howard Gleckman: "Mostly due to one-off responses to the Great Recession, such as TARP and the stimulus, all spending as a share of Gross Domestic Product ballooned in 2009-10. While spending will slowly fall over the next couple of years--thanks to an improving economy, the merciful end to various government bailouts, and President Obama’s proposed spending freeze for some domestic programs, overall outlays would settle in at about 23 percent of GDP through the end of the decade according to Obama’s fiscal plan. That’s too high, especially since most costs of the aging Baby Boomers won’t have kicked in yet."
The budget is passive aggressive -- but in a good way, writes Jonathan Chait: "People support most actual programs, but they think foreign aid constitutes a huge part of the budget and you can generate mass savings by eliminating waste and bureaucracy. They've believed those things for a long time. What's more, I actually see the administration's budget gambit as a subtle attempt to change peoples' minds. The administration is loudly publicizing the fact that it's cutting programs it thinks are necessary. The message, sometimes made explicit, is that the budget actually does not contain a lot of waste. It's filled with programs that have survived many previous rounds of belt-tightening for a reason. If you want to cut the budget, you have to cut useful and necessary things. I don't think this will have a big effect. But I do think Obama is trying, in a passive-aggressive way, to do what liberals have demanded. He's explaining to the public that the free-ride view of budget cutting -- we can cut our way out of the deficit by eliminating waste and spending that only benefits foreigners -- is wrong."
Grammy-validated interlude: Arcade Fire plays "No Cars Go" at Glastonbury.
Still to come: Noam Scheiber profiles Tim Geithner; Obama's "doc fix" plan faces criticism; the budget includes more funding for education; the White House is defending its cuts to heating aid; and the 8-bit The Great Gatsby video game.
Noam Scheiber profiles Treasury Secretary Tim Geithner: "Geithner is the lone remaining member of the president’s original economic team and arguably the administration’s second-most valued official. Indeed, that the White House was willing to let him face down Issa is only the latest sign of a rather remarkable transformation. (Issa ultimately blinked.) Geithner owns the economic portfolio with China and has been tasked with confronting Republicans over the nation’s debt limit. He has taken the lead on corporate tax reform and overhauling Fannie Mae and Freddie Mac. With his former lieutenant, Gene Sperling, now running the National Economic Council, Geithner will no longer form part of the multiheaded 'war cabinet' that included Sperling’s predecessor, Larry Summers. He is set to play the first-among-equals role of a traditional treasury secretary."
The budget includes a cut to the mortgage deduction for the rich: http://bit.ly/eNAFCa
Banks are still fighting the Fed's new debit card regulations, reports Justin Doom: "The Federal Reserve Board’s proposed caps on debit-card transaction fees have drawn 'broad and deep opposition' from U.S. banks and payment networks and should be withdrawn, according to an industry panel. The Fed’s approach 'misinterprets and misapplies the Durbin amendment,' said a summary of a meeting between the Board of Governors and the Federal Advisory Council dated Feb. 4 and released today by the central bank...The Fed has proposed capping debit-card interchange fees charged to merchants at 12 cents for each transaction, replacing a formula that averages about 1 percent of the purchase price. Visa Inc. and MasterCard Inc., the world’s biggest payment networks, currently set interchange rates and pass the money to card-issuing banks."
Obama and the House GOP are working together to hurt the working poor, writes David Cay Johnston: http://bit.ly/dHY24R
We need to cut corporate tax rates more than Obama is willing to, writes Martin Feldstein: "The U.S. corporate tax rate is 35% at the federal level and 39% when the average state corporate tax is included. The average rate in the other industrial countries of the Organization for Economic Cooperation and Development (OECD) is just 25%. Only Japan has as high a rate. Eliminating every loophole in the taxation of domestic corporate profits identified by the administration's own Office of Management and Budget would raise less than $60 billion of extra revenue in 2011, enough to lower the combined federal-state corporate rate to 35%. The U.S rate would still be higher than in every other country but Japan, and a full 10 percentage points higher than the average in other industrial OECD countries."
The latest technological innovations don't bring a lot of new jobs with them, writes David Brooks: "For example, imagine a man we’ll call Sam, who was born in 1900 and died in 1974. Sam entered a world of iceboxes, horse-drawn buggies and, commonly, outhouses. He died in a world of air-conditioning, Chevy Camaros and Moon landings. His life was defined by dramatic material changes, and Sam worked feverishly hard to build a company that sold brake systems... Sam’s grandson, Jared, was born in 1978... He loves Facebook, YouTube, Wikipedia and his iPhone apps. But many of these things are produced outside the conventional monetized economy. Most of the products are produced by people working for free. They cost nothing to consume. They don’t even create many jobs."
Seems-like-a-joke-but-isn't interlude: The Great Gatbsy NES game.
Obama's plan for paying for a Medicare "doc fix" is facing criticism, report Mary Agnes Carey and Christopher Weaver: "Critics quickly pounced on President Barack Obama’s proposal to head off scheduled cuts in Medicare payments to doctors, saying his funding method would cause serious problems. In his fiscal 2012 budget plan released Monday, Obama proposed a two-year, $54 billion solution to stop the payment cuts, which otherwise would go into effect Jan. 1. To finance what insiders call the 'doc fix,' the president would reduce waste, fraud and abuse and draw on savings from a variety of sources, including the states, drug makers - even power wheelchair retailers...Some state officials complained about the impact on Medicaid, the state-federal health program for the poor and disabled."
The budget cuts HHS for the first time in history: http://nyti.ms/gt832H
States need relief from health care reform's Medicaid provisions, writes Peter Suderman: "To consider what the expansion of Medicaid under ObamaCare might do to the states, take a look at Massachusetts and Tennessee. In 2006, Massachusetts overhauled its entire health-care system, including a significant expansion of Medicaid. This expansion is costing the state far more than expected. Gov. Deval Patrick approved a record-setting $9.6 billion to cover its share of Medicaid costs last July. It wasn't enough. He's already gone back to the legislature twice, adding almost $600 million in additional funds...Between 1994 and 2004, [Tennessee] expanded its Medicaid program, called TennCare, to cover roughly one in four residents. The price tag reached a quarter of the state budget by 2004."
Passing a public option would save $47 billion easily, writes Jonathan Zasloff: http://bit.ly/fJ8CV2
The budget raises spending on schools, report Sam Dillon and Tamar Lewin: "President Obama proposed a 2012 Department of Education budget on Monday that would, if approved, significantly increase federal spending for public schools, and maintain the maximum Pell grant -- the cornerstone financial-aid program -- at $5,550 per college student. Whether it will be possible to keep that Pell maximum remains uncertain, however, given that House Republicans have proposed cutting the maximum by about $845, or 15 percent, in their proposal to extend the current budget. The administration’s education proposal asks for $77.4 billion. That includes $48.8 billion for the portion of the education budget that does not include Pell grants, or an increase of about 4 percent above the 2010 budget. Congress has not yet enacted the 2011 budget."
The budget cuts aid for summer classes: http://nyti.ms/hiP6ZU
The budget maintains the pay freeze for federal workers, report Ed O'Keefe and Eric Yoder: "President Obama's proposed 2012 budget recommends a 1.6 percent pay increase for members of the military but keeps intact a two-year pay freeze for civilian federal employees. The government's civilian employees are 'patriots who work for the nation often at great personal sacrifice; they deserve our respect and gratitude,; Obama's budget document said, but the ongoing freeze 'reflects the shared sacrifices we must make.' Federal workers still will be eligible for bonuses, longevity-based raises or higher pay upon promotion. The freeze should save about $28 billion over the next five years by lowering the government's base compensation over the next two years, according to the White House."
It's in the GOP's best interest to embrace immigration reform, writes Harold Meyerson: http://wapo.st/f5XKMy
The GOP budget request includes millions in pet funding for John Boehner, reports Scott Lilly: "There are two things the leaders of the new majority in the House of Representatives have made clear since they began to assume the reins of power three months ago. They would: Cut spending, Eliminate earmarks. Those two frequently repeated objectives are being translated into legislation in a 359-page bill filed on the House floor Friday evening...The legislation added an estimated $450 million for a particular bit of defense spending that the Department of Defense did not ask for and does not want...with a big portion of the funds flowing to two cities in Ohio--Cincinnati, where Speaker of the House John Boehner (R-OH) grew up, and Dayton, the largest city in his congressional district."
Adorable animals suffering from sleep deprivation interlude: The world's tired-est puppy.
The White House is defending its heating aid cuts, reports Ben Geman: "The top White House budget official on Monday defended plans to slash billions of dollars in low-income heating and cooling aid in the fiscal 2012 budget proposal. President Obama has drawn fire from several Democrats over the White House proposal to cut $2.5 billion -- or roughly 50 percent -- from the Low Income Home Energy Assistance Program. But Jacob Lew, who heads the White House Office of Management and Budget, said the budget proposal that Obama is sending to Congress on Monday is packed with tough choices aimed at freezing discretionary spending. Lew, in a CNN interview, also said the proposed heating-aid cut reflects price trends."
The budget also includes new offshore drilling fees: http://bit.ly/fgYGS4
The EPA's watchdog group is protesting its proposed budget cuts, reports Stephen Power: "The Environmental Protection Agency’s in-house watchdog apparently thinks President Barack Obama’s spending blueprint for fiscal 2012 doesn’t give him enough money to do his job. A note accompanying Mr. Obama’s budget proposal, released Monday, says that EPA Inspector General Arthur A. Elkins Jr. has submitted comments setting forth [his] conclusion that this Budget’s request...would substantially inhibit the Inspector General from performing the duties of the office.'...The president’s proposal calls for giving Mr. Elkins $46 million next year - compared with $45 million that was enacted in 2010. Overall, Mr. Obama proposes to cut the EPA’s budget by 12%, to about $9 billion."
The GOP wants deeper EPA cuts than Obama is proposing: http://bit.ly/f4jngZ
The budget includes more money for nuclear energy, reports Andrew Restuccia: "President Obama’s fiscal year 2012 budget outlines a plan for reviving the country’s nuclear power industry, calling for $36 billion in government-backed loan guarantees for new nuclear reactors and setting aside more than $800 million for nuclear energy research. Obama has said that nuclear power is a key component of the country’s energy future. In his State of the Union speech last month, he outlined a plan to generate 80 percent of the country’s electricity from low-carbon sources including nuclear by 2035. But the prospect of reviving a U.S. nuclear energy industry faces significant obstacles. The country has not seen the completion of a new nuclear reactor for decades and projects have been hobbled by high costs."
Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams. Photo credit: Carolyn Kaster photo.
Posted by: lauren2010 | February 15, 2011 7:53 AM | Report abuse
Posted by: LACinDC1 | February 15, 2011 8:32 AM | Report abuse
Posted by: grooft | February 15, 2011 8:47 AM | Report abuse
Posted by: msoja | February 15, 2011 8:55 AM | Report abuse
Posted by: krazen1211 | February 15, 2011 9:37 AM | Report abuse
Posted by: JF11 | February 15, 2011 9:41 AM | Report abuse
Posted by: johnmarshall5446 | February 15, 2011 9:45 AM | Report abuse
Posted by: bampote | February 15, 2011 9:48 AM | Report abuse
Posted by: johnmarshall5446 | February 15, 2011 9:49 AM | Report abuse
Posted by: visionbrkr | February 15, 2011 10:00 AM | Report abuse
Posted by: johnmarshall5446 | February 15, 2011 10:08 AM | Report abuse
Posted by: visionbrkr | February 15, 2011 10:08 AM | Report abuse
Posted by: visionbrkr | February 15, 2011 10:23 AM | Report abuse
Posted by: lauren2010 | February 15, 2011 10:23 AM | Report abuse
Posted by: lauren2010 | February 15, 2011 10:33 AM | Report abuse
Posted by: lauren2010 | February 15, 2011 10:36 AM | Report abuse
Posted by: lauren2010 | February 15, 2011 10:39 AM | Report abuse
Posted by: johnmarshall5446 | February 15, 2011 10:39 AM | Report abuse
Posted by: lauren2010 | February 15, 2011 10:43 AM | Report abuse
Posted by: visionbrkr | February 15, 2011 10:45 AM | Report abuse
Posted by: lauren2010 | February 15, 2011 10:45 AM | Report abuse
Posted by: johnmarshall5446 | February 15, 2011 10:52 AM | Report abuse
Posted by: visionbrkr | February 15, 2011 10:54 AM | Report abuse
Posted by: lauren2010 | February 15, 2011 10:56 AM | Report abuse
Posted by: johnmarshall5446 | February 15, 2011 10:59 AM | Report abuse
Posted by: krazen1211 | February 15, 2011 11:03 AM | Report abuse
Posted by: lauren2010 | February 15, 2011 11:06 AM | Report abuse
Posted by: lauren2010 | February 15, 2011 11:09 AM | Report abuse
Posted by: krazen1211 | February 15, 2011 11:10 AM | Report abuse
Posted by: lauren2010 | February 15, 2011 11:11 AM | Report abuse
Posted by: krazen1211 | February 15, 2011 11:16 AM | Report abuse
Posted by: johnmarshall5446 | February 15, 2011 11:19 AM | Report abuse
Posted by: visionbrkr | February 15, 2011 11:24 AM | Report abuse
Posted by: johnmarshall5446 | February 15, 2011 11:26 AM | Report abuse
Posted by: krazen1211 | February 15, 2011 11:26 AM | Report abuse
Posted by: krazen1211 | February 15, 2011 11:32 AM | Report abuse
Posted by: sligowoman | February 15, 2011 11:37 AM | Report abuse
Posted by: visionbrkr | February 15, 2011 11:49 AM | Report abuse
Posted by: Patrick_M | February 15, 2011 1:07 PM | Report abuse
Posted by: johnmarshall5446 | February 15, 2011 1:34 PM | Report abuse
Posted by: lauren2010 | February 15, 2011 3:01 PM | Report abuse
Posted by: lauren2010 | February 15, 2011 3:20 PM | Report abuse
Posted by: lauren2010 | February 15, 2011 4:04 PM | Report abuse
Posted by: lauren2010 | February 15, 2011 4:17 PM | Report abuse
Posted by: lauren2010 | February 15, 2011 4:18 PM | Report abuse
Posted by: Patrick_M | February 15, 2011 4:22 PM | Report abuse
Posted by: lauren2010 | February 15, 2011 4:37 PM | Report abuse
Posted by: dbw1 | February 15, 2011 5:18 PM | Report abuse
Posted by: lauren2010 | February 15, 2011 5:35 PM | Report abuse
Posted by: Patrick_M | February 15, 2011 5:53 PM | Report abuse
Posted by: lauren2010 | February 15, 2011 6:13 PM | Report abuse
Posted by: johnmarshall5446 | February 15, 2011 6:24 PM | Report abuse
Posted by: krazen1211 | February 15, 2011 7:07 PM | Report abuse
Posted by: krazen1211 | February 15, 2011 7:13 PM | Report abuse
Posted by: krazen1211 | February 15, 2011 7:17 PM | Report abuse
Posted by: Patrick_M | February 15, 2011 7:29 PM | Report abuse
Posted by: lauren2010 | February 15, 2011 8:32 PM | Report abuse
Posted by: lauren2010 | February 15, 2011 8:39 PM | Report abuse