The Obama budget’s big ambitions
The plan, projecting a $1.7 trillion deficit, includes a down payment on universal healthcare.
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The $634 billion would cover only about half of the cost of Obama’s health plans. The source of the rest of the money is, in essence, penciled into the budget with the designation “TBD” – To Be Determined.Skip to next paragraph
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On climate change, the Obama budget assumes that the US government will reap hundreds of billions of dollars in revenue from a so-called “cap and trade” system, beginning in 2012.
Under a cap and trade system, the government would cap greenhouse-gas emissions that big industries are allowed to emit. They could then trade or sell their rights to release the pollutants, with the government getting a slice of the overall revenue.
The revenue from this system would be used to help pay for development of renewable-energy technology – as well as subsidize the inevitable cost hikes consumers would face if Congress passes cap and trade legislation.
“Because our future depends on our ability to break free from oil that’s controlled by foreign dictators, we need to make clean, renewable energy the profitable kind of energy,” said Obama in Feb. 26 remarks on the budget’s release.
Increased taxes on the wealthy
On taxes, the Obama administration in its budget proposes boosting federal revenue collections from about 16 percent of the GDP this year to 19 percent in 2013.
The White House would allow some of the tax cuts passed under the previous administration to expire for those making more than $250,000 a year. Officials would also allow the tax on the highest US income tax bracket to rise from 35 to more than 39 percent.
The bottom line here is that beginning in 2011, taxes would begin to rise on the nation’s wealthiest taxpayers.
Big policy shifts
The administration’s healthcare reserve fund, by itself, would represent a huge change in national direction, as it implies that the US will move towards some sort of universal healthcare system.
A cap and trade system similarly would be a matter of enormous import, by itself committing the US to an entirely new way of handling the economics of pollution.
Add in higher taxes – always an item of contention in Congress – and Obama’s budget can be seen as just the beginning of a lengthy and contentious Washington debate.
The historical level of government spending is about 20 percent of GDP, says Mr. Riedl, yet Obama’s budget projects that that figure will stay at about 22 percent of GDP after the recession has ended.
“A lot of people will give the president a pass for increasing spending during a recession. But he’s assuming that a large expansion of government will occur after the recession,” says Riedl.
But people voted for change, points out Mr. Collender of Qorvis Communications. And, he argues, it is easy to exaggerate the degree to which Obama’s budget represents a permanent expansion of the federal government.
The budget contains a penciled-in increase of $250 billion to help fix troubled banks, for instance. It also contains continued spending for the wars in Iraq and Afghanistan, though the need for that spending is predicted to eventually diminish.
“On the domestic side, other than healthcare, the changes in this budget are relatively small,” says Collender.