Obama's Big Gamble
President Obama and his top aides looked at the profound economic challenges facing the nation and concluded that the biggest risk was in doing too little rather than too much.
In the ambitious, course-changing budget proposal released yesterday, and in his address to a joint session of Congress on Tuesday, Obama has argued that he inherited a federal government headed so profoundly in the wrong direction that nothing less than a dramatic U-turn was called for.
But much of today's coverage concludes that advocating more modest steps sure would have been less risky politically.
Dan Balz writes in The Washington Post: "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."
John Harwood writes in the New York Times: "Whatever else it is, President Obama's budget is a political gamble of the first order."
Maura Reynolds and Peter Nicholas write for Tribune: "It was the political equivalent of an 'all in' moment in a high-stakes poker game."
Balz writes that it was "the same instinct for the audacious" that put Obama in the White House. "The problems occurring now, however, will test him even beyond the trials he weathered as a candidate. Turning his large, complex and controversial proposals into legislative victories will require not just a bold vision but also leadership of a kind he has not yet been required to demonstrate."
In fact, Balz raises a lot of questions about whether it can -- or should -- get done.
"With his new budget, [Obama] indicated his belief that both short- and long-term economic problems must be dealt with now, rather than later. As he put it, this is a time to deal with the foundations of the house. But is now, with the economy in such a fragile state, the time to dig at its foundations?...
"Can Obama put together majority coalitions to pass universal health care or a new energy policy?...
"Can he win passage for a cap-and-trade energy plan that the budget says would produce more than $600 billion in revenue by 2019?...
"Even if willing, can Congress move as swiftly as Obama would like?...
"That the Reagan paradigm of conservative governance has taken a beating is indisputable. But is the country ready for government activism of the size and scope he has proposed?"
I might have asked some other questions, focusing more on the risks involved if Congress fails to make the dramatic U-turn Obama is calling for. Among them:
* Can the country afford only incremental change when so many of our current governmental approaches have proven so spectacularly inadequate?
* What is the cost of continuing to postpone action on health care, energy and education?
* Does this only look radical compared to the profound irresponsibility of the Bush administration to address critical challenges?
* Will the guardians of the status quo in Washington -- from both parties, and in the media -- succeed in stymieing his plans?
* Isn't this what Obama was elected to do? Turn things around dramatically?
* Isn't it precisely Obama's audacity that has led to his enormous popular support? Why would that change now? Would it be undermined if the media repeatedly referred to him as a gambler?
Here's Harwood looking at Obama's odds:
"In his ambition to put his own stamp on liberalism and to move domestic policy leftward, Mr. Obama has much going for him.
"The nation seems to be yearning for leadership, and his political standing is strong. In an era where taxpayers and markets are confronting bad numbers in the trillions, the price tags on some of his initiatives do not seem quite so breathtaking, and, in any case, good economic policy demands that the fiscal floodgates remain open for a while. Populist anger could render Republican arguments against taxing the rich less powerful.
"But Mr. Obama faces many constraints. He is asking Congress to take on a wide-ranging set of complicated issues all at once, after years during which it had trouble grappling directly with almost any of them. His own party remains seared by the last time it followed a new Democratic president on a course of tax increases and ambitious social engineering. Interest groups, while demonized by the White House, have hardly fled from Washington and are already mobilizing for battles that could have big winners and losers...
"Whether Mr. Obama has overreached or succeeded in putting the nation on a sharply different course will largely depend on the same political skills that delivered him the presidency.
"To translate the vision embedded in his budget into legislation he can sign into law will require assembling coalitions on Capitol Hill issue by issue, holding together his own party while peeling off Republicans here and there. To keep the pressure on Congress, he will have to keep public opinion on his side through what could be a long, deep recession and through necessary but unpopular steps like allocating hundreds of billions more taxpayer dollars to bailing out banks."
Steven Pearlstein writes in his Washington Post opinion column that Obama knows his agenda is unlikely to prevail "if he cannot change the way business is done in Washington.
"It's not simply a matter of toning down the partisan rhetoric, putting aside the reflexive ideology and getting people together at cocktail parties at the White House, though all of those are important. The bigger challenge is to get Americans and their representatives in Washington to take a broader view of their own self-interest -- to see that the benefits they'll get from finally balancing the budget or reforming health care or weaning the economy off its carbon addiction are so great that they will more than offset the sacrifices they might have to make in terms of paying higher taxes or losing a subsidy or accepting some increase in government regulation.
"Judging from the reaction to his budget on Capitol Hill and K Street yesterday, it would seem that Obama's got a long way to go."
Janet Hook writes in the Los Angeles Times: "The budget outline suggests that Obama is ready to start spending his political capital -- a recent Gallup poll found that 67% of Americans approved of the way he was handling the stimulus bill -- and risk making enemies in the pursuit of ambitious policy goals.
"The breadth of the budget has an advantage: Even if Obama achieves only part of his goals, that could leave a long record of accomplishment. But by proposing action on such a wide range of fronts, Obama also risks overloading the often cumbersome legislative machinery of Capitol Hill."
David Leonhardt writes in his New York Times column about yesterday's historical significance: "The budget that President Obama proposed on Thursday is nothing less than an attempt to end a three-decade era of economic policy dominated by the ideas of Ronald Reagan and his supporters....
"More than anything else, the proposals seek to reverse the rapid increase in economic inequality over the last 30 years. They do so first by rewriting the tax code and, over the longer term, by trying to solve some big causes of the middle-class income slowdown, like high medical costs and slowing educational gains....
"Over the last three decades, the pretax incomes of the wealthiest households have risen far more than they have for other households, while the tax rates for top earners have fallen more than they have for others, according to the Congressional Budget Office.....
"Before becoming Mr. Obama's top economic adviser, Lawrence H. Summers liked to tell a hypothetical story to distill the trend. The increase in inequality, Mr. Summers would say, meant that each family in the bottom 80 percent of the income distribution was effectively sending a $10,000 check, every year, to the top 1 percent of earners."
Jeanne Cummings of Politico waves the bloody shirt of class warfare, in a story titled: "Class Warfare Returns To Washington."
"Obama's creative juices seemed to run dry as he turned Thursday to his party's most predictable revenue enhancer: taxing the wealthy," she writes. "Obama defended his $1.3 trillion in tax hikes over 10 years with a little class warfare."
Her evidence? This quote from his remarks yesterday:
"'I know that this will not always sit well with the special interests and their lobbyists here in Washington, who think our budget and tax system is just fine as it is. No wonder — it works for them,' the president said. 'I work for the American people, and I'm determined to bring the change that the people voted for last November.'"
By contrast, Gerald Seib writes in the Wall Street Journal that Obama's tax increase on the wealthy "is the sort of thing that might set off a bit of class warfare -- except that, in this case, the class being hit includes an awful lot of Obama supporters....
"One of the intriguing surprises of the 2008 election was that a majority of the wealthiest Americans went against type to support the Democrat, Barack Obama, even though he told them, clearly and explicitly, that he would raise their taxes."
Another thing: In proposing to roll back the marginal federal tax rate for the wealthy to 39.6 percent -- what it was before the Bush tax cuts -- Obama is still not talking about really soaking the rich, at least not by historical standards. From 1944 to 1963, the marginal federal tax rate for the highest earners was 91 or 92 percent. As late as 1981 it was 70 percent. As late as 1986 it was 50 percent. Here are the numbers.
White House budget director Peter Orszag writes in his new blog(!): "One of the questions I received throughout the day today, as we released the Fiscal Year 2010 budget, is why we are proposing to raise taxes on high-income taxpayers during a recession. And the answer is simple: we're not....
"[T]he revenue increases for those with incomes of $250,000 or more a year would become effective January 1, 2011 – and not before."
Here's a little reaction from the editorial pages:
Paul Krugman writes in his New York Times opinion column: "President Obama's new budget represents a huge break, not just with the policies of the past eight years, but with policy trends over the past 30 years. If he can get anything like the plan he announced on Thursday through Congress, he will set America on a fundamentally new course.
The New York Times editorial board writes that "Obama's budget plan makes a bold and long overdue commitment to overhaul the dysfunctional and far-too-costly American health care system." And it "recognizes what most of Washington has been too scared or ideologically blind to admit: to recover from George W. Bush's reckless economic policies, taxes must go up."
The Washington Post editorial board asks: "Is the administration concentrating enough on the task at hand, which is helping to right the economy, or does it overreach in envisioning new taxes and programs?"
The USA Today editorial board writes: "A flood of red ink is unavoidable for a year or two to save the economy from collapse. This would produce the largest deficits in inflation-adjusted terms since World War II. But after that, the president had a chance to live up to his rhetoric and set ambitious targets for getting the budget on track. He failed."
The Wall Street Journal editorial board writes: "With yesterday's fiscal 2010 budget proposal, President Obama is attempting not merely to expand the role of the federal government but to put it in such a dominant position that its power can never be rolled back....
"Democrats will want to rush all of this into law this year while Mr. Obama retains his honeymoon aura and they can blame the recession on George W. Bush. But Americans are only beginning to understand the magnitude of Mr. Obama's ambitions, and how much of their own income will be required to fulfill them. Republicans have an obligation to insist on a long and considerable debate on all of this, lest Americans discover in a year or two that they live in a very different country."
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