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Archive for April, 2013

From OMB to OMG: Waking Up to Obama’s FY14 Budget

Sunday, April 28th, 2013

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Is This What We Voted for in 2008, 2012?

We will have more to say in the coming days about the president’s 2014 budget—there’s so much to, uh, appreciate—but here’s a start. The graphics above and below, from the National Priorities Project, based upon the Office of Management and Budget, show the proportion of discretionary spending (about one-third of the total, allocated through Congress’s appropriations process), of total spending, and the sources of revenue, such as individual income tax, corporate income tax, and so on. (Click here for a glossary of federal budget terms.)

The federal budget deficit, driven up primarily by the Bush tax cuts and a decade of wars, has actually been going down, though Fox News and “fiscal conservatives” don’t want you to know that. The New York Times reports that the projected deficit for the current fiscal year, after (FY13), “after four years of post-recession deficits exceeding $1 trillion,” is is $973 billion. President Obama’s $3.77 trillion budget released April 2013 projects $744 billion deficit for FY14. Some of the budget’s money-saving proposals are worthwhile, but some are definitely not.

“Chained C.P.I.” Is a Bad Idea

One of the centerpieces of Obama’s budget that has been denounced by liberals, as indeed it should be, is his proposal to change the formula used to compute Social Security cost-of-living increases. This idea, originally proposed by the (sometimes liberal) Center for Budget and Policy Priorities, has been taken up by Obama so he can show fiscal conservatives that he is, as a Times editorial puts it, “willing to antagonize his supporters to get a budget compromise, putting Republicans on the spot to do the same.” As if. Senate minority leader Mitch McConnell (R-Ky.) has dismissed the White House’s budget as unserious. It is hard to see how congressional Republicans—particularly the hardliners in the House—are ever going to budge on raising taxes on the wealthy and on corporations. It is also hard to see how anyone in the president’s position could work with an opposition party so far to the right and so insistent on denying him even a speck of victory. Mr. Obama has many talents and virtues, but negotiation has never been one of them. (See “What a Deal,” 8/1/11). We wish the president and his staff would study and learn the methods of President Lyndon B. Johnson, who wasn’t called “master of the Senate” for nothing.

As The New York Times explains the chained C.P.I. idea:

Under the president’s budget, the government would shift in 2015 from the standard Consumer Price Index—used to compute cost-of-living increases for Social Security and other benefits and to set income-tax brackets—to what is called a “chained C.P.I.” The new formulation would slow the increase in benefits and raise income tax revenues by putting some taxpayers into higher brackets sooner, for total savings of $230 billion over 10 years.

While many economists say the new formula is more accurate, opponents say it does not adequately reflect the out-of-pocket health care expenses that burden older Americans. All Social Security beneficiaries would be affected, but Mr. Obama proposes that at age 76 they would get gradual benefit increases to offset the depletion of their private assets or pensions.

Senator Bernie Sanders of Vermont writes in a letter to the Times:

The chained C.P.I. would take benefits away from more than three million disabled veterans and their families. A veteran who began receiving V.A. disability benefits at 30 would have benefits reduced by $1,425 at 45 and by $3,231 at 65, according to the Congressional Budget Office.

You can read more about why the chained C.P.I. would be bad for seniors, orphans, women, veterans, and other vulnerable citizens here and here.

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A good idea in the budget, however, is to raise the cap on the wages subject to the payroll tax to pay for Social Security. In 2012, the payroll taxable limit for Social Security was $110,100. Labor lawyer Thomas Geoghegan has written, “We could lift the cap on high earners, the 6 percent of workers who make over $106,800 a year. If earnings above the cap were subject to the payroll tax with no increase in benefits to high earners, there would be no deficit in the Social Security trust fund in 2037, as projected.”

Another good idea proposed in the Obama budget would make couples with incomes above about $170,000 have to pay about 5 percent more for Medicare premiums. That sounds fair enough. And, the Times points out, “The carried-interest tax break used by wealthy hedge fund operators would rise to ordinary-income levels, overall tax breaks for couples making more than $250,000 would be reduced, and a ‘Buffett Rule’ that would ensure that millionaires pay at least 30 percent of their income in taxes.”

Mattea Kramer at the National Priorities Project, in “Five Things to Know About President Obama’s 2014 Budget,” observes that “the president is proposing a total deficit reduction package heavily tilted toward reducing spending, with a 2.5-to-1 ratio of spending cuts to new tax revenue,” and points out that while the wealthy will see fewer tax deductions, “The president does not propose any new taxes on corporations.” This at a time of incredible corporate profit increases. ThinkProgress reports:

U.S. corporations’ after-tax profits have grown by 171 percent under Obama, more than under any president since World War II, and are now at their highest level relative to the size of the economy since the government began keeping records in 1947, according to data compiled by Bloomberg.

More about Obama’s FY14 budget in the days to come.

Suffice it to say that this is not quite what we had in mind while campaigning door to door and working the phones to get out the vote in the fall of 2012, or working for “change we can believe in” in 2008.

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