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.
Maintain Long-Term Fiscal Sustainability. But there are no details in his budget that speak to how to achieve these broad goals.