Harsh, yes, but there’s a strong possibility that he’s right. In recent days, congressional Republicans loudly proclaimed that the president’s budget proposal would be dead on arrival. To which I thought: DOA would be an improvement. They were considering the document dead long before its arrival, certainly before any of them had seen it. Both Senate and House Republicans even took the unprecedented step of refusing to hold the usual hearings where White House budget officials present the budget to Congress.
I mostly think that’s terrible, a sign of just how deeply these conservatives are embracing gridlock and dysfunction. But I must admit that I appreciate the transparency. They’re not even going to pretend to give the other side a fair hearing.
The interesting question is this: Is there any way Stan’s assessment could be too pessimistic? Is there any path forward for some of the ideas in the new budget? One wants to avoid wishful thinking — I found a lot of good ideas in there — and there’s no way most of these ideas, especially the big ones, are going anywhere soon.
But I’m not ready to accept that it’s all for naught. After all, some proposals from President Clinton’s last budget were passed in President Obama’s first budget. These ideas could have more traction than we conventionally think.
Let’s start with a weedy point that may be the most important way this budget matters in the near term. Last year, in one of those budget patches that took place outside of the “regular order” (i.e., outside of the usual budget process), Congress agreed to total funding levels for defense and for non-defense discretionary appropriations for this budget year. The president’s budget will now show his administration’s choices within these top-line totals, and these preferences will matter to the committees that appropriate these totals down through the specific budget lines. Advocates of the president’s priorities will press for his distribution within the totals, and even in this Congress, that will hold some sway with appropriators.
In other words, no, the White House won’t get the $300 billion to invest in clean energy from a surcharge on oil sales in their new budget. But they might get a few hundred million for a worker training or Head Start program that wouldn’t otherwise go there. From where I sit, that matters.
Next, the budget proposes to close a tax loophole that really deserves progressives’ attention. The Affordable Care Act imposed a 3.8 percent tax on asset-based income (like capital gains or stock dividends) and a small surtax on earnings, which also brought the rate on earnings to 3.8 percent, for households above $250,000. The revenue was intended to shore up Medicare, and the surtax on earnings has combined with reforms to the delivery side of the health care system to do just that: the Health Insurance Trust Fund that supports Medicare gained 13 more years of projected solvency since the ACA was enacted.
But the full 3.8 percent tax does not apply to a large share of income from “pass-throughs.” In order to avoid certain disadvantages in the corporate tax code, taxpayers running certain businesses — partnerships, limited liability companies and “S corporations” — pass their business income through to the individual side of the tax code where they can mostly avoid the 3.8 percent Medicare surcharge on that income. The new budget closes this loophole for pass-through claimants with income over $250,000.
Why is this a cause that should be taken up well beyond this budget presentation? Because 30 years ago, the share of business income passed through was about 20 percent; now it’s 50 percent. Because their average tax rate is a relatively low 19 percent. And because of Jared’s first rule of tax avoidance: When an income type is privileged by the tax code, that’s the type of income that everyone with a tax lawyer all of a sudden discovers they have gobs of.
Along with some related loophole closures, this proposal raises $272 billion over the next decade. Add to those savings some proposed spending cuts to Medicare (to providers, insurers and drug costs) and the President’s budget will help pay for more than 15 years of solvency for Medicare, a vital social insurance program, at a time when more Americans are aging into the program. That’s huge.
There’s much, much more in the president’s budget that, in the spirit of Stan’s assessment, I won’t get into. Suffice it to say that this budget is in many ways a progressive blueprint that articulates — and, for the record, pays for without magic asterisks (albeit with revenue raisers that truly are totally DOA) — a smart role for government in an advanced economy where markets often fail and are short-sighted.
Regarding the latter — short-sighted markets that underprice fossil fuels — there’s a clean-energy agenda that puts a significant price on carbon (the oil fee noted above) and uses that revenue for infrastructure investment with an emphasis on cleaner ways to get around. On fighting inequality and boosting opportunity, the budget includes something that just the other day on this page I said I hoped to see in there: an early childhood education initiative featuring quality child care and preschool education targeted especially at children from low-income families.
I know. Whatever time you have to devote to politics today is probably spent scoping out tonight’s New Hampshire primary, not a budget that congressional Republicans are treating like an accounting version of the Zika virus (which, by the way, the president’s budget devotes a serious effort to fighting). I get that. But, at least as far as progressives are concerned, let me tie this budget to the goings-on in the campaign in a way that might be resonant.
At the heart of the Democrats’ primary is a healthy debate about how far to open the “Overton window,” i.e., what is the range of acceptable, plausible policy. This budget represents a clear point on that continuum. It does not fundamentally challenge or push to rearrange market forces in ways that some would like to see. It does not represent that sort of political revolution. It shores up what we have and adds to it in important, progressive ways that have the potential to help lots of people hurt by those forces, while at the same time incentivizing moves toward cleaner technology. In that regard, by the way, it couldn’t be more different than the budgets from those on the other side.
So, yeah, mostly dead on arrival. But not wholly, as per appropriations, and trust me, I’m going to be hammering on that pass-through loophole until it gets closed. Maybe most important, the new budget, as a description of a progressive role for government, is a microcosm of what’s at stake in this election.
In other words, even lame ducks can quack. This time, that quacking is worth a listen.
[Update: See CBPP’s President Bob Greenstein’s statement on the new Obama budget. Similar themes to above with more details.]