bottom up change

I’ve taken about a week-long break from Twitter.  It’s a fun and useful social media tool, but it’s also addictive and it can be a huge time waster.  As with anything, it’s best used in moderation.  Instead of tweeting, I’ve been thinking about how social media can be used more effectively in politics.  This is a big issue, and I’ve already tried to take a stab at it in one post about using Twitter to increase bipartisan discussions and debate.

One use of Twitter that I think might be very powerful one day is to create links of contact between public officials and their constituents.  Sen. Claire McCaskill (D-MO) @clairecmc is one of the public officials who uses Twitter better than most.  What is most common to see among Senators or Representatives is staffers basically tweeting the official’s agenda for the day.  But Sen. McCaskill tweets herself and often relays useful information to the public.  Here are a few of her recent tweets:

clairecmc: Just off phone with Gen Shinseki. Most don’t realize that large part of increase in discretionary spending in Pres budget is for veterans.11:28 AM Mar 27th from web

clairecmc: Once again, a large part of the INCREASE in DISCRETIONARY spending in the President’s budget is finally about keeping our word to veterans.12:44 PM Mar 27th from web

clairecmc: And keep in mind that in FY06 a Republican President signed off on 27 Billion in earmarks from the Republican Congress.

I didn’t know these facts.  So if Sen. McCaskill has constituents in Missouri who follow her on Twitter but disagree the level of spending in the budget, they will at least be able to hear her side of the story very easily.  Sen. McCaskill also claims to read all the replies to her tweets, which provides her with useful feedback from her constituents.  Right now she has nearly 19,000 followers, which may be one of the highest numbers of any public official besides @BarackObama.

An online grassroots effort called Tweet Congress is trying to collect signatures to encourage more Senators and Representatives to join Twitter.  You can go to this site, look up your local Rep or Senator, and petition him or her to join Twitter and start communicating with the public using this platform.  Of course, it all depends on how they use Twitter.  Just signing up is not progress in itself.  But overall, this looks like a good project to increase the social media savvy of our government.

I watched President Obama’s speech about General Motors and Chrysler today, and I had the same reaction that most people had.  How can the President justify such a different tone between the banks and the auto industry?  And it wasn’t just the difference in tone.  I wondered: is the President overreaching in demanding that the CEO of GM, Rick Wagoner, resign as a condition of future taxpayer dollars to GM?  After all, I didn’t hear about Obama demanding that the CEOs of any of the banks resign as a condition of them receiving more money.

Don’t get me wrong: I think Obama is on the right course in trying to save GM while requiring the company to do major restructuring.  However, I can see major political problems developing for the President among auto workers who will see a double standard in the way that Obama is treating the financial industry compared to the auto industry.  That assessment may not be fair, in the end, but there is an appearance problem here.

And finally, although I’m not outraged by the President’s action Monday, I do think we need to have a debate about the limits of government intervention in the economy.  Is it a good development that the federal government is now basically making management decisions in one of the largest industries in the United States?  Was Obama justified in demanding the resignation of Wagoner, or should he have simply expressed his strong recommendation that Wagoner resign?

We’re definitely in uncharted territory.  I guess the thing about a mixed economy is that sometimes it just leaves you mixed up.  But, maybe that is a good thing, and a refreshing break from the ideological certainty of recent years.

I suspect that one of the great debates that will be unfolding about the Obama years is his approach to economics–Obamanomics.  I have begun writing about this economic philosophy on this blog, and in the future I’m going to devote much more attention to the debate about Obamanomics.  Monday, Robert Reich had an excellent piece in the Wall Street Journal where he offered his view of how Obama wants to change President Reagan’s “trickle-down” or “supply side” economics with a “trickle-up” approach that uses public investments as a way to increase human capital more broadly in society.  Or, in Reich’s words:

Obamanomics, by contrast, holds that an economy grows best from the bottom up. The president proposes to increase taxes on the highest 2% of income earners starting in 2011. Those tax increases will fund more Pell grants allowing lower-income children to attend college, better pay for teachers that show they’re worth it, broader access to health care, improved infrastructure, and more basic research. These and related expenditures are designed to help Americans become more productive. You might think of it as “trickle up” economics.

The key is public investment. Reaganomics did not view any public spending as an investment in the future except when it came to spending on the military. Hence, since 1980, federal spending on education, job training, infrastructure and basic research and development (apart from defense-related R&D) have all shrunk as a proportion of GDP. And apart from a modest expansion of health insurance available to poor children, there has been no significant attempt to make health insurance broadly affordable to Americans.

Obamanomics is premised on the central importance of public investments in the productivity of Americans. The logic is straightforward. Capital no longer remains within the borders of a nation where it is saved. It moves to wherever around the globe it can get the best return. Some of it flows as highly liquid investments that slosh across borders at the slightest provocation, as we’re witnessing in the current financial crisis. But much takes the form of direct investments in new plants and equipment, telecommunications systems, laboratories, offices and — most important of all — jobs. Such capital goes to nations that can deliver high returns either because labor is cheap and taxes and regulations low or because labor is highly productive: well educated, healthy and supported by modern infrastructure.

In this way, every nation faces an implicit choice of whether its strategic advantage will lie in low costs or high productivity. For the better part of the last three decades America’s job strategy has tended toward the former. But this inevitably exerts downward pressure on the real wages of a larger and larger portion of our population.

Only those Americans whose parents can afford to give them a high-quality private education and health care, and who can situate themselves in locations with excellent infrastructures of telecommunication, transportation, public health and safety, have been able to link up with global capital on more positive terms. But not even they are entirely secure economically, because they face growing shortages of talented people they can rely on within easy reach, and can’t entirely avoid the disadvantages of a deteriorating public infrastructure, such as ever more congested roads and airports.

Obamanomics recognizes that the only resource uniquely rooted in a national economy is its people — their skills, insights, capacities to collaborate, and the transportation and communication systems that link them together. Public investment is the key to attracting long-term private investment so that a nation’s people can prosper.

I don’t know if I’ve found a better statement of Obamanomics yet.  But I have one question: does a commitment to a green economy also count as a fundamental part of Obama’s economic philosophy?

By the way, I’m not crazy about the term “Obamanomics.”  Reaganomics has always bothered me too.  Why do we feel the need to slap a president’s name to an economic view, but only for some presidents?  You never heard Clintonomics or Carteromics, or Bushonomics, for that matter.  Well, after trying out those names, I can see why they never caught on.  They sound even worse.

I can’t believe I just found out about this yesterday.  It’s funny, because I had actually thought about printing out the stimulus bill and blogging about it as I read the whole thing.  Aren’t you glad I didn’t?  Well, I fully support Steve Coll’s efforts here, and I’m going to become a regular reader of this blog.  I will report back on what he finds in his Talmudic study of the American Recovery and Reinvestment Act.

By the way, Steve Coll is also President and CEO of the New America Foundation.

From now on, I’m going to feature comments from time to time on the main page of this blog.  There are some comments that I think should be displayed more prominently on this site so that more people can read them. Last weekend, Lainey Melnick helped organize an OFA canvass in Austin, and the results of her canvass were very impressive.  She commented on my post about my tweet-up and OFA Pledge Project canvass, and here is what she wrote.   -Jared

We organized a pledge canvass out here in Austin, Texas and had a very positive experience with it. I worked on the campaign here and we’ve kept a very tight organization of volunteers and everyone has been chomping on the bit for something to fight for. We’ve had some local battles here like on voter id legislation that got us going, and this national initiative helped to give us more to organize behind.

We used the website that I created during the campaign, linktoaustin.com, plus mybo, FB, twitter, state democratic party, Travis County democratic party,  and emailed all the precinct captains, democratic clubs and used word of mouth. We have a facebook group for our local organization, Organizing for Austin - Central Texas. We had about 35 definite rsvps and 25 more maybes, but ended up with about 14 volunteers who came to our rally and worked the high-traffic areas. We had a few other canvasses hosted in our area that had a few more volunteers. All in all, we were able to gather 467 pledge signatures from the Austin-Central TX area, a decent showing.

Yes, there were definite hiccups, but anyone who worked on the campaign knows that this is how they learn. They actually read the feedback and revise, learn from the mistakes. This is one of the things I really like about the organization. I am not an Obama-bot. I was actually a Hillary supporter, so I am not drinking the kool-aid, but I am very proud that I worked so hard to elect President Obama and that I am now working to support him.

It looks like OFA has made a few changes and now would like us to call supporters from home:

http://my.barackobama.com/page/contact/splash/budgetaction

I think this is a much better idea for people who can’t commit to several hours out in front of people. Canvassing is not for everyone!

Everything that we do to heal the world, is good work. Keep it up!

–Lainey Melnick
OFA Regional Lead - Austin CD 21/25

Yesterday the New York Times had a nice profile of the man behind the budget, Dr. Peter Orszag, who is the Director of the Office of Management and Budget.  It’s worth reading, if for no other reason than that it adds to one’s confidence that Obama has a very capable team behind him.  There is evidence here that in addition to Obama’s clear commitment to health care reform, Dr. Orszag is also very much interested in this issue, partly because he believes that we need it for the sake of reducing the deficit.

The NYT article mentions that Orszag had a well-regarded blog when he was the Director of the Congressional Budget Office.  However, it neglects to mention that he’s blogging again as the Director of OMB.  I was a fan of the CBO Director’s Blog when Orszag was there, and his new blog is worth checking out.

Finally, this piece confirms my early take on the Obama administration–this is a team of high-powered geeks.  In fact, Orszag appears to be a supergeek, which I define as an extremely geeky person in a position of great authority.  I also appreciate that the NYT article adds some credibility to the distinction between nerds and geeks that I tried to make in that earlier post.

Because of some time constraints today, I’m going to have to limit myself to a short post about President Obama’s proposals for education in his 2010 Budget.  There is a lot to say about this topic, and I’m not going to do it justice here.  It’s too bad, because I suspect that improving our educational system may be the issue that Obama cares about most.  I just put that out there based on my reading of Dreams from My Father and The Audacity of Hope.  From those books, I got the impression that what drives Obama as a politician (apart from the personal ambition that drives all politicians) is a sense that a large segment of America’s youth are being neglected due to poor parenting and a lack of concern from the rest of society.  As a result of this neglect, America is falling behind in the world, and we may soon be surpassed technologically and economically if we do not begin major reforms in our schools.  But Obama’s views about the importance of education for keeping America competitive in the world are only half of the story.  In my view, Obama’s dramatic rise to become the first African-American President was largely a result of two factors in his early life:  first, a parent who cared intensely about his education and, second, the excellent educational opportunities that he had.  Barack Obama has a better understanding than most people of how important education can be to helping every individual achieve his or her potential.

Since I can’t go in depth today about Obama’s education proposals in the budget, I’m going to do something different from the other posts I’ve written for Budget Week.  I’m just going to link to a speech that everyone needs to watch.  Obama gave this speech to the United States Hispanic Chamber of Commerce a few weeks ago, and in it he laid out his budget priorities for education.  One of the things that is most distinctive about Barack Obama’s education plan is how free from ideology it is, and that quality is on display in this speech.

It’s very much worth your time to read about some of the “pockets of excellence” that Obama references in his education speech.  First, there is the inspiring work that Geoffrey Canada is doing in Harlem to improve early childhood education through his Harlem Children’s Zone.  Second, in Nicholas Kristof’s NYT op-ed “Education’s Ground Zero,” he tells the story of the Chancellor of Washington DC’s school system, Michelle Rhee.  Chancellor Rhee is making major reforms in the District to reward good teachers and remove teachers and principals who are performing poorly.  She has only been in her job for two years, but test scores in the nation’s capital are already rising.

In this third post for Budget Week, I’m going to discuss some of the provisions in the 2010 Budget that deal with clean energy.  I want to explore how the spending in this area will help us transform our economy so that we achieve the “post-bubble” economy that President Obama has talked about.  The more I learn about green technology, the more I am starting to believe that the post-bubble economy will be a green energy economy.  Although it is almost becoming conventional wisdom by now, I do believe that the foundation for economic growth over the next several decades will be the new technologies we develop to avert the disastrous consequences of climate change.

Before I go any further, I hope I don’t need to convince anyone who reads this blog that climate change is real and that it’s threatening the future of the planet.  The evidence is almost indisputable at this point.  If you don’t have a solid grasp of climate change and you haven’t seen Al Gore’s film, An Inconvenient Truth, go rent it soon.  To read about Dr. James Hansen’s view that we only have 10 years to take bold action before it’s too late, check this out.  For those who don’t believe that climate change is real and a threat to the planet, nothing I could possibly say would convince you otherwise, so I won’t even try.

Again, my focus for this post is the connection between the clean energy proposals in the budget and building a new economy, so back to it.  There are many positive developments in the budget that will enable the US to change the ways that we produce and use energy.  Here are just a few of the spending commitments that the President seeks for the Department of Energy’s budget:

- Additional funding to the $1.6 billion in the stimulus for support of climate science through the Office of Science as well as an expansion in graduate fellowships in energy-related fields.

-  Loan guarantees to encourage the early adoption of renewable energy technologies.

-  Additional funding to the $3.4 billion in the stimulus for the development of low-carbon coal technologies.

-  Support for the President’s plan to modernize the electric grid, including the development and demonstration of smart grid technologies.

Taken together, the clean energy proposals in the budget would cost $150 billion over ten years.

If you haven’t heard much about these provisions as we’ve watched the budget discussions, there’s a reason for that.  President Obama proposed a cap and trade program in his speech to Congress on February 24, and he followed that up by including the program in his budget.

Cap and trade has been something that people concerned about carbon emissions and climate change have been wanting to see for a long time.  Here is how cap and trade is described by the Environmental Defense Fund:

Cap and trade is the most environmentally and economically sensible approach to controlling greenhouse gas emissions, the primary driver of global warming. It’s the policy solution rooted in the four principles of effective climate policy.

The “cap” sets a nationwide limit on emissions, which is lowered over time to reduce the amount of pollutants released into the atmosphere. The “trade” creates a market for carbon allowances, helping companies innovate in order meet, or come in under, their allocated limit.  The less they emit, the less they pay, so it is in their economic incentive to pollute less.

It’s worth noting that cap and trade is not viewed by everyone as the best way to control carbon emissions, since there are many proponents of a carbon tax.  In fact, I believe that we need to take much stronger action than President Obama is proposing with a cap and trade.  James Hansen made the case for even bolder action than is being proposed in his letter to Obama before the inauguration.  But it seems that with the current economic crisis, phasing out coal plants at this time is simply a non-starter.

In any case, a cap and trade system would be a major improvement over the status quo in decreasing carbon emissions and beginning to fight climate change more seriously.  It would create an incentive for companies to lower their emissions and a mechanism for reducing emissions over time.  In President Obama’s budget, cap and trade would not begin until 2012, so that utility companies would have time to prepare for the reduction in emissions.

Cap and trade would raise an enormous amount of revenue for the government.  That is because the government would sell “allowances” or “credits” to companies at a rate of $20 per ton of carbon emitted.  Here is the Wall Street Journal reporting that the Obama administration believes it may have underestimated the amount of revenue it could raise through cap and trade:

A top White House economic adviser told Senate staff a proposed cap and trade system could raise “two-to-three times” the administration’s existing $646 billion revenue estimate, according to five people at the meeting.

This could mean the cap and trade system could actually generate between roughly $1.3 trillion and $1.9 trillion between fiscal years 2012 and 2019.

Part of the revenue generated by this program would be used to cover the costs of the $150 billion in clean energy initiatives discussed above.  Another part of the revenue would go toward the Making Work Pay tax credit so that it becomes permanent.  Making Work Pay is the tax cut for 95 percent of working families that was included in the stimulus.  It is set to expire in two years.   Finally, some of the revenue from cap and trade would go to help people pay for any increases in the cost of utilities that results from the program.

The cap and trade provision has been a major sticking point for Congress this past week, and there is growing evidence that it will not be included by Congress in the final budget that is sent to Obama.  In fact, Obama may be resigning himself to this reality and choosing to make health care reform his primary battle for 2009.  There is simply a lot of resistance to a cap and trade among Democrats as well as Republicans, and the political will in the country seems to be lacking.  A new poll shows that for the first time in the 25 years that Gallup has asked the question, Americans now believe that economic growth takes precedence over protecting the environment:

Despite the gloomy reports that Congress may drop the cap and trade piece of the budget, Obama may be able to save it after all.  At his blog, Marc Ambinder discusses how the President could empower the EPA to regulate carbon emissions, thus forcing Congress to overrule the EPA with its own regulatory law.  This seems unlikely to me, but maybe Obama’s commitment to fighting climate change is stronger than we all think.  His rhetoric about a “planet in peril” during the campaign suggested that he is very serious about this issue.

It may make sense to wait a year before we tackle this extremely complicated issue.  Despite my belief that we have a short period of time to act, I don’t know if I’d go as far as Dr. Hansen in saying that we only have 10 years to close down the coal plants.  But I do believe we need to do something about climate change as soon as possible, and I hope that Congress keeps the other clean energy components of the President’s budget.  They are a second best option if we can’t get a cap and trade program this year.  We need to start investing in green technologies right away, and not just to avert a climate disaster, but to help build a new economic foundation.

The debate over the potential for green jobs is growing.  These are jobs in renewable energy fields such as wind, solar, and biodiesel.  For a great report on the various kinds of green jobs and how they might change the workforce in several states, check out this report by the Center for American Progress.  Some reports are not all that optimistic about the potential for green jobs to grow rapidly anytime soon.  For example, this piece in US News questions whether all the talk about green jobs is anything more than hype.  On the other hand, the New York Times reports that the Union of Concerned Scientists released a report this week showing that over 200,000 jobs could be created in clean electricity.  This could be accomplished by achieving a national standard for renewable electricity which would require making 25 percent of the electricity produced in the US based on clean sources, such as wind and solar energy.

I haven’t even discussed hybrid cars, electric cars, high speed rail, and ways that our transportation system is going to be changed over the next few decades.  There are clearly many industries that are going to be affected when we finally face up to the challenge of climate change.  If the public is more concerned about the economy than the environement right now, maybe President Obama needs to do a better job of connecting the two issues.  We may end up missing an opportunity with this year’s budget, but it is not clear how many more chances we will have to save “a planet in peril.”

Suarez, Essdras M/ Globe Staff

Today, Congress began considering the President’s 2010 Budget.  Congress will certainly make some changes to the proposals that Obama has laid out.  The good news is that it sounds like lawmakers want to stick closely to the major elements that Obama wanted.  We’ll see if that actually happens.  I have a feeling this is going to become a major fight.

In my second installment for Budget Week, I’m going to look at the health care proposals in the 2010 Budget.  I’ll outline them and pose the question: will Republicans join the President in reforming our health care system?  What are the prospects of health care reform being a major bipartisan breakthrough?  But first, I want to look at how broken our health care system is.

If you have ever lost your job and lost your health insurance, you know that the system is broken.  I recently had to choose between my health and my wallet when I was in between jobs and I didn’t have health insurance.  I became very sick and had to go to the ER.  When the doctors recommended some very expensive tests, I declined, risking my health because I feared that the tests would get me in serious financial trouble.  A woman I met recently had to pay $18,000 out-of-pocket to a nursing home for her husband even though they are separated.  He only has Medicaid, and it doesn’t cover nursing home costs.  Since he couldn’t pay, lawyers for the nursing home demanded that she pay for him.  She did so, taking most of the $18,000 out of her 401(k) and putting the rest on credit cards.  She then decided to quit her job so that the state would have to pay.  Financially, it was better for her to do so.  This is the crazy system that we have, causing fear and financial disaster in people’s lives.

Here are some sobering facts about the costs of health insurance from the National Coalition on Health Care:

• The United States spends about $2.2 trillion a year on health care, which is about $8,000 per person.
• Health care costs constitute 17 percent of all spending in the United States, and that number is growing so rapidly that it will be 20 percent in 2017.
• We spend 4.3 times more on health care each year than we do on national defense.
• Workers are paying $1,600 more in annual premiums than they did in 1999.
• A Harvard study recently found that over 50 percent of all bankruptcies in the US were partly the result of medical expenses.
• Every 30 seconds, an American files for bankruptcy because of a serious health problem.
• About 1.5 million families lose their homes each year due to unaffordable medical costs.
• The United States spends six times more per capita on the administration of the health care system than its peer Western European nations.

The Wall Street Journal recently published a very useful graph showing how dramatically our spending on health care has been increasing over the past 50 years:

And in terms of limited access to our health care system, consider these facts courtesy of the Department of Health and Human Services new HealthReform.Gov website:

• From 2000 to 2007, the proportion of non-elderly Americans covered by employer-based health insurance fell from 66% to 61%
• An estimated 87 million people - one in every three Americans under the age of 65 - were uninsured at some point in 2007 and 2008.
• More than 80% of the uninsured are in working families.

I could go on and on, of course.  You get the idea, and you’ve probably seen many of these figures before.  Most politicians, whether they are Democrats or Republicans, believe we need to reform our health care system.  The problem is how.  The President’s budget is the first step in achieving his twin goal of 1) lowering health care costs, and 2) making health insurance affordable so that every American can have access to it.

If you are wondering why people keep calling President Obama’s budget “bold”, look no further than his health reform proposals.  It turns out that the $634 billion that the President is proposing to spend on health care reform over 10 years almost didn’t make it into this budget.  Jonathan Cohn, one of the best journalists on health care that we have, has written a piece in the New Republic about the near-death experience of health care reform in this budget.  His article, “Stayin’ Alive“, is essential reading for anyone who is interested in this issue.  Based on more than a dozen interviews with senior administration officials, it tells the story of how Obama’s senior advisors, including David Axelrod and Larry Summers, cautioned him against tackling health care early in his administration.  These advisers were worried about increasing the deficit further during a recession, and wondered whether tackling the complexities of health care would distract the President and his senior staff from focusing on the recession.  It also appeared to be a move fraught with political risks for the President.  But one member of the administration strongly resisted this message of caution: Barack Obama.   It also appears that health care reform was the most pressing issue in discussions and debates about the budget in the White House.  As Cohn writes:

“There was no aspect of the budget that the president spent more time discussing,” says one senior adviser, noting that it was the primary topic in four of the seven budget deliberations that Obama personally attended.

Cohn’s piece offers some insight into just how committed President Obama is to reforming our health care system.  While that commitment is evident in the large amount of money that Obama wants to put aside as a “down payment” on health care, what is surprising is that, as of now, there is no specific plan for health care reform.  Here’s what the budget says about the matter:

[T]he Budget sets aside a reserve fund of more than $630 billion over 10 years that will be dedicated towards financiing reforms to our health care system.  The President recognizes that while a very large amount of money and a major commitment, $630 billion is not sufficient to fully fund comprehensive reform.  But this is a first crucial step in that effort, and he is committed to working with the Congress to find additional resources to devote to health care reform.  The Administration will explore all serious ideas that, in a fiscally responsible manner, achieve the common goals of constraining costs, expanding access, and improving quality.

The President does go on to outline eight principles that will guide his work with Congress in reforming the health care system: 1) Protect Families Financial Health, 2) Make Health Coverage Affordable, 3) Aim for Universality, 4) Provide Portability of Coverage, 5) Guarantee Choice, 6) Invest in Prevention and Wellness, 7) Improve Patient Safety and Quality Care, and Maintain Long-Term Fiscal Sustainability.  But there are no details in his budget that speak to how to achieve these broad goals.

If health care reform passes this year, I believe the strategy that Obama is pursuing may be one of his savviest political moves as president.  Most experts believe that to achieve universal coverage, the federal government will have to ultimately spend at least $1 trillion.  By offering a “down payment,” which may constitute over half the total cost of achieving reform, while simultaneously providing little details of a plan, Congress can have the opportunity to play a major role in crafting that plan.  In stark contrast to the strategy pursued by President Clinton in 1993 when the health reform effort was conducted through private meetings in the White House, then presented to Congress, Obama’s strategy works in just the opposite direction.  A large part of the funding for reform will be available first without opponents of the President latching on to one detail in the plan that they don’t like.  The hard part will be the details, but that will come later, and with lots of input from all sorts of people–insurers, businesses, doctors, nurses, both parties in Congress, voters, etc.  The wide range of input that will go into formulating the plan will add legitimacy to a very major change to our economy that is being proposed.  A sense of legitimacy will increase the chances that a major health reform law will achieve final passage in Congress this year.

But where will we get $630 billion over the next ten years for health care reform?  The budget identifies several areas of savings.  First: reduce Medicare overpayments to private insurers, which currently amount to about 14 percent in waste.  Second: reduce drug prices by increasing access to generic drugs and increase the Medicaid drug rebate from 15.1 percent to 22.1 percent.  Third: save billions of dollars that are lost each year by cracking down on overpayments and fraud in the Medicare and Medicaid programs.  Fourth: provide hospitals with incentives and penalties to reduce the rate of hospital readmission.  Fifth: require that hospitals meet specific quality of care measures in order to receive Medicare payments, thus saving over $12 billion over 10 years.  Sixth: reform the physician payment system so that quality of care, rather than quantity of care, is the primary measure of compensation.  Seventh: limit the rate of itemized deductions for families with incomes over $250,000 to 28 percent, which would raise $318 billion over ten years.

So, a significant part of the funding for Obama’s health care proposal in his budget will be increased taxes on the wealthy.  Therein lies the potential for trouble.  So I leave it to the reader to consider: will this plan be able to win support, particularly with Republicans, if a major piece of its funding would be increased taxes on those making more than $250,000?

In this first installment of my posts about the President’s 2010 Budget, “A New Era of Responsibility,” I want to focus on laying out some of the broad themes of the budget and pose one question about it: why now?  Many of the discussions of this budget have focused on whether or not Obama is trying to do too much at once considering that we are facing an economic meltdown.  The criticism is that the President should devote all of his attention to the immediate economic problems instead of trying to also focus on such ambitious long-term goals.  The budget is certainly an attempt to begin implementing the long-term vision of where President Obama promised to take the country during the campaign.  But is it “too much too fast“?  I think last night’s press conference was a good step for the President in addressing this criticism.  I’ll get to that in a minute.  But first, I want to just lay out the main components of the budget in broad outline.  Then I’ll discuss the question of why the President thinks that now is the time to make these bold changes to our economy.  For the rest of this week, I will go into more detail of each major component of the budget.

In the President’s first address to Congress on February 24, 2009, four major themes of the budget were laid out to the American people.  The first priority Obama mentioned was energy:

But to truly transform our economy, protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy.  So I ask this Congress to send me legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America.  And to support that innovation, we will invest fifteen billion dollars a year to develop technologies like wind power and solar power; advanced biofuels, clean coal, and more fuel-efficient cars and trucks built right here in America.

The next major piece of the budget mentioned in the address was health care:

This budget[...]includes an historic commitment to comprehensive health care reform – a down-payment on the principle that we must have quality, affordable health care for every American.  It’s a commitment that’s paid for in part by efficiencies in our system that are long overdue.  And it’s a step we must take if we hope to bring down our deficit in the years to come.

This was all that the President said about how his budget will address health care reform.  If it seems like he didn’t say much, there is a reason for that, which I will get into more in my post about health care tomorrow.  The third major element of the budget that the President talked about was education:

But we know that our schools don’t just need more resources.  They need more reform.  That is why this budget creates new incentives for teacher performance; pathways for advancement, and rewards for success.  We’ll invest in innovative programs that are already helping schools meet high standards and close achievement gaps.  And we will expand our commitment to charter schools.

And finally, President Obama emphasized the goal of fiscal responsibility:

Yesterday, I held a fiscal summit where I pledged to cut the deficit in half by the end of my first term in office.  My administration has also begun to go line by line through the federal budget in order to eliminate wasteful and ineffective programs.  As you can imagine, this is a process that will take some time.  But we’re starting with the biggest lines.  We have already identified two trillion dollars in savings over the next decade.

The President went on to identify some of the areas where he wants to trim spending in order to achive his goal of cutting the deficit in half by the end of his term.  As I’ll discuss on Sunday, I think this fourth plank of his economic agenda is the weakest link.

So those are the major themes of the budget that are worth focusing on and debating.  There have been many resources online which have helped lay out the overall picture of the budget.  One of the most helpful resources that I have found is a piece in the Wall Street Journal which has some excellent interactive graphics showing the funding the budget supports by department, a comparison to the economic stimulus package, and a timeline of deficits and surpluses.  There is also a “Budget Stepping Stones” feature which visually explains the budget process.  The WSJ reports that the budget will cost $3.6 trillion over ten years.

This budget was greeted by the press as being “bold” and for some, “radical”.  Just type in the words “Obama”, “budget”, and “bold” in Google and you will get dozens of articles.  Liberals, or “progressives” as some of us prefer to be called, reacted very positively to Obama’s budget.  Even Paul Krugman had a kind word for Obama:

Elections have consequences. 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.

And another liberal analysis that I thought was insightful came from Mike Lux of Progressive Strategies:

Though the recent economic recovery bill was too small and had its flaws, it was literally the biggest single investment in progressive social capital - health care, public education, green jobs, infrastructure, universal broadband - in history. His budget might well be the most audacious and sweeping in progressive history as well - certainly one that competes with LBJ’s 1965 budget and FDR’s 1935 budget. Obama is fulfilling his promise to the American people in the 2008 campaign: big, bold, truly transformative change.

But there is a question of how Obama can justify trying to do so much when there are such pressing immediate problems with our economy.  David Brooks has been one of the more thoughtful conservative pundits to ask this question repeatedly in his NYT op-eds.  For example, Brooks’s first response to the budget was to decry it as “evidence of a party swept up in its own revolutionary fervor — caught up in the self-flattering belief that history has called upon it to solve all problems at once.”  After Brooks received an earful from senior White House officials, Brooks wrote a follow-up in which he was somewhat more charitable, but still wary of the President’s plan:

I didn’t finish these conversations feeling chastened exactly. The fact is, after years of economic growth, the White House still projects perpetual deficits of more than $500 billion a year. That’s way too much, especially with the boomers’ retirements looming. Moreover, Congress will likely pass the spending parts of the budget and kill the revenue parts, like the cap-and-trade energy tax and the limits on itemized deductions, thus producing much, much bigger deficits.

Plus, I’m still convinced the administration is trying to do too much too fast and that the hasty planning and execution of these complex policies will lead to untold problems down the road.

This seems like a very reasonable critique of the budget to me.  I know that the President has said that he can “chew gum and walk at the same time”, but this understates and ignores the issue.  Last night, I believe the President did well in beginning to more fully address the charge that with his budget he will be doing “too much too fast.”  He had started to flesh out his response several weeks ago, when he talked about how we need to create a new “post-bubble economy.”  In remarks after a meeting with his Economic Recovery Advisory Board, Obama said:

The last point that I’d make — and I made this point to the Business
Roundtable yesterday — it is very important, even as we’re focused on
the financial system and the credit markets, that we are laying the
foundation for what I’m calling a post-bubble economic growth market.
The days when we are going to be able to grow this economy just on an
overheated housing market or people spending — maxing out on their
credit cards, those days are over.

He repeated this language almost word for word in his speech at the press conference but connected the idea of a post-bubble economy more directly to reducing the deficit:

At the end of the day, the best way to bring our deficit down in the
long run is not with a budget that continues the very same policies
that have led us to a narrow prosperity and massive debt. It’s with a
budget that leads to broad economic growth by moving from an era of
borrow and spend to one where we save and invest.

And that’s why clean energy jobs and businesses will do all across
America. That’s what a highly skilled workforce can do all across
America. That’s what an efficient healthcare system that controls costs
and entitlements like Medicare and Medicaid will do.

That’s why this budget is inseparable from this recovery: because it
is what lays the foundation for a secure and lasting prosperity.

This strikes me as a very strong response to people like Brooks who think that the President is taking on too much in proposing an ambitious budget agenda at this time.  It is strong because it goes to a fundamental critique of the way our economy has been structured over the past thirty years and it offers a concrete plan for how to create a new, more sustainable economy.

Obama is indicting the legacy of Reagan’s trickle-down economics as having been a primary cause for creating an economy that was fundamentally unsustainable.  The “narrow prosperity” of tax cuts for the wealthy and a lack public investment in energy, health care, and education, has contributed to a false sense of economic security among the American people and policy makers.  As long as the markets went up and housing prices increased, we could ignore the rising costs of health care, the lack of real growth in most Americans’ income, and an educational system that was allowing our kids to fall further and further behind compared to the rest of the world.  Wall Street became empowered in a way not seen since the Gilded Age.  How did we ever allow a financial system to develop in which a handful of banks became too big to fail?  What we have seen in recent years was an all-out assault on liberalism by free-market ideologues that President Clinton, while he tried to slow it down, could not halt.  We have seen a dismantling of a mixed economic system to a more radically libertarian economic system.  This recent history created a bubble economy in which prosperity was measured by stock market gains, housing gains, and speculation rather than by whether the average American’s income and savings rate was rising.

If our economy recovers without fundamental changes to our economic system, we will go back to a false sense of security and we will be increasingly vulnerable to economic downturns.  We need transformational changes to be made to our economic system in the areas that the President’s budget addresses.  Brooks and other critics who question whether the President is doing “too much too fast” are correct to worry about whether the administration can succeed in its ambitious agenda.  This will be a very difficult task.  But the agenda is the right one, and we have to try now, because we may not have another chance to right our economic course.