Obama’s Budget Gets Mixed Reviews, From Nonstarter to His Boldest

President’s budget proposal called both unpassable and a great campaign tool.

Everyone agrees President Obama’s budget proposal has no chance of actually passing. Rather than a policy document, it’s a wish list of what the administration hopes to achieve if the Democrats do well in the 2012 election, and an opening salvo in this year’s presidential campaign. The proposals include tax hikes on the wealthiest Americans and massive spending on transportation infrastructure and education. The Daily Beast rounds up reactions to the president’s proposal.

Stimulus and Tax Reform

Obama’s $3.8 trillion budget proposal puts numbers behind some of the policy initiatives he introduced in last month’s State of the Union. The budget contains new stimulus spending, including $30 billion to modernize schools and another $30 billion for teachers and first responders. Obama’s budget also goes big on infrastructure, allotting $476 billion on surface-transportation projects.

Sounding a populist note, Obama proposes paying for these projects with a $1.5 trillion tax increase, most of which falls on the wealthiest Americans. The budget calls for the expiration of the Bush-era tax cuts for people earning more than $250,000, taxing dividend gains as ordinary income, and eliminating the tax break for “carried interest.” The collection of tax reforms, known as the “Buffett Rule,” would effectively raise the tax rate for households making more than $1 million a year to 30 percent.

Overall, the budget clearly places stimulus and tax reform ahead of deficit reduction and austerity. The budget forecasts a deficit of $1.3 trillion before falling to $901 billion in 2013, or 5.5 percent of gross domestic product. Even if Obama got his entire tax agenda, the deficit won’t fall back below 3 percent of GDP until 2018.

Little Chance of Becoming Law

Republicans were calling Obama’s budget dead on arrival even before it was announced, writes The Daily Beast’s Dan Stone, and the details have done nothing to change their stance. “The president’s budget is a gloomy reflection of his failed policies of the past, not a bold plan for America’s future,” said House Speaker John Boehner. while Mitt Romney called it “an insult to the American taxpayer.” Of course, the Obama administration knew full well that the budget was destined to be more of a conversation starter in this year’s election than an actual governing document. If the GOP doesn’t want to play ball, one aide tells Stone, “then let’s have that debate.”

Taxes Higher, Deficits Lower Than Under Romney’s Plan

If President Obama’s budget is a campaign document, it’s instructive to compare it to Mitt Romney’s, writes Ezra Klein. Obama’s budget would raise revenues to 19.2 percent of GDP over the next decade, mostly by raising taxes on people making more than $250,000 a year. According to the Tax Policy Center, taxpayers in the bottom 20 percent would pay an average federal tax rate of 1.8 percent, those in the middle 20 percent would pay 15.2 percent, and the top 1 percent would pay 36.3 percent. Under Romney’s plan, taxpayers in the bottom 20 percent would pay a rate of 3.4 percent, those in the middle would pay 15.6 percent, and the top 1 percent would pay 25.9 percent. So lower- and middle-income Americans would pay more under Romney’s plan, while the wealthiest would pay less. Romney’s plan cuts taxes to about 17 percent of GDP, and because he’s ruled out cuts to defense spending, he’d have to slash every domestic spending program by more than 35 percent in order to balance the budget as promised.

Doubles Down on Wall Street Regulation

The populist tone of Obama’s budget proposal can best be seen in its treatment of Wall Street. “The American free-market system is the most powerful engine of economic growth and job creation the world has known,” his budget reads. “But the free market was never meant to give the financial system free license to take irresponsible and reckless risks of such a size that they can harm our economy and leave taxpayers with the bill.” In the last budget, Obama proposed a “financial crisis responsibility fee” that would charge banks about $40 billion over 10 years as a way to repay taxpayers for the bailouts. Not only is that proposal back in this budget, it’s twice as large. Similarly, Obama is trying once again to increase the budgets of the Securities and Exchange Commission and the Commodity Futures Trading Commission as they try to implement the Dodd-Frank financial-regulation bill. The American Bankers Association came out against the proposals, as they had in the past, but told the National Journal’s Chris Frates that they had so little chance of passing Congress they “don’t plan to do anything aggressive at this point.”

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Mathew Yglesias agrees that the budget is a political nonstarter, but he says it marks a change in the administration’s habit of starting low in negotiations with Republicans in order to seem reasonable. Yglesias says Obama’s decision to count already-agreed-upon spending cuts toward the ratio of cuts to taxes shows that he’s prepared to push for a high ratio of taxes to cuts. This is a “recognition that efforts to get the GOP to sign on to a compromise have failed,” writes Yglesias. “The 2012 elections, rather than a congressional debate, will settle the fate of the Bush tax cuts.” The Washington Post’s Aaron Blake agrees that it’s smart for Obama to start high. The Republicans weren’t rewarded in the polls for their budget-cutting zeal following their 2010 electoral victory, and there are indications that voters still care far more about job creation than they do about deficits.

What Might Actually Pass?

Acknowledging that much of the budget proposal has no hope of becoming reality, The Atlantic Wire’s John Hudson picks a few initiatives that might actually pass. He writes that tax reform might get through Congress, especially if the Obama administration decides to use the impending expiration of the Bush tax cuts as leverage. Republicans will probably also get behind proposed cuts to the Environmental Protection Agency and budget freezes to the National Institutes of Health and the Department of Interior. Jonathan Masters at the Council on Foreign Relations writes that the two parties might be able to come together behind a proposal to lower the corporate tax rate and close loopholes.

No More Saturday Mail, Higher Airline Ticket Fees

Along with major stimulus initiatives and tax reform, Obama’s budget has a lot of smaller tweaks. It once again floats the idea of ending Saturday mail delivery by 2013. The U.S. Postal Service has proposed the cut several times, but Congress has never taken up the option. Under another measure, airline passengers could see their ticket prices increase. The administration is asking major air carriers to pick up more of the cost of security screenings. Under the proposal, ticket fees that help pay for screenings would double to $5 per one-way trip and go up to $7.50 in 2018, yielding between $9 billion and $25.5 billion over 10 years.