President Obama's first budget proposal steers the nation in a new direction and aggressively pursues a fairer tax system, health care reform and an assault on global warming. It also offers some hard truths. The federal deficit is going to grow to uncomfortable levels until the economy recovers, and fundamental change is not free.
The president's 10-year budget is a welcome departure from the Republican economic policies embodied by the Reagan era. It reaffirms government's role in public life, and it starts peeling away tax breaks for the rich and for special interests. It also is more transparent about the costs of war and the tough economic choices ahead than the budget documents produced in recent years by the Bush administration. The annual deficit, fueled in part by President Bush's policies and the recession, would be the largest in relative terms since World War II. But Obama forecasts it would be cut by more than half in four years as the war costs drop, tax revenue from the wealthy and industry rise, and the economy recovers. The president makes a persuasive argument that large deficits now are the necessary price for preventing economic collapse and focusing on long-term goals.
Obama walks a political tightrope as he tackles the economic inequality that has expanded in recent years and embraces more progressive tax policy. Tax increases would apply to roughly the top 5 percent of taxpayers, or those making more than $250,000 a year. The Bush tax cuts would expire after 2010 for them, and there would be fewer deductions for the most affluent and higher taxes on hedge fund and private equity partners. But Obama can counter Republican complaints about tax increases by pointing out that 95 percent of taxpayers would see tax cuts or no increases.
That will be far from the only fight over the president's budget plan. He also would cut payments to big farmers, subsidies to private banks that make college loans and payments to private Medicare Advantage plans that cost the government more than the traditional Medicare program. Those are changes that should have been made long ago — and each break has a powerful lobby that will fight hard to keep them.
To his credit, Obama also is pursuing key campaign promises even in the face of the deep recession. His budget sets aside $634 billion — half from the taxes on the wealthy and half from health care savings, including eliminating the Medicare Advantage subsidies — as a down payment on health care reform. He sticks to concepts such as making health care available and affordable and leaves the details to Congress for now. That's a smart move, given the way the complicated Clinton health care initiative imploded in the early 1990s.
This is a budget plan that sets ambitious goals and offers reasonable clarity about the costs. There are legitimate concerns about the size of the deficits, the optimism in the estimated timing and strength of the economic recovery and a number of other details. But Obama's first budget is consistent with his campaign themes, and it is a bold blueprint for a brighter future.