President Obama, proclaiming a once in a generation opportunity, has proposed a forward-looking, 10-year budget that reflects his determination in the face of recession to spend his political capital in reshaping the nation's priorities. His first budget recognizes what most Democrats have been too scared or Republicans have been too ideologically blind to admit: to recover from George W. Bush’s reckless economic policies, taxes must go up – for the wealthy. Obama said his budget breaks from the recent troubled past, attributing the current economic storm to "an era of profound irresponsibility that engulfed both private and public institutions from some of our largest companies' executive suites to the seats of power in Washington, D.C."
After years of steady increase in their share of the pie, Obama is calling for tax changes that would require high-income earners to shoulder more of the load. At the same time, he wants to ease the decades-long burden carried by the middle class. He also calls for taxing private equity partners (people living off of their dividends or trusts) just like the rest of us. Under current law, multimillionaires pay tax on much of their income at about the lowest rates in the tax code. Warren Buffet acknowledged the discrepancy in saying it is unfair that his secretary pays more in taxes than he does. Under the Obama budget, these high dividend earnings would lose favored status and be taxed the same as ordinary income. But, according to officials, there will be no increase in taxes, however, until the economy recovers.
Anyone who really believes in fiscal responsibility will not object to the proposed tax increases. Yet, a political fight is brewing with Republicans over not only the slightly increased tax (just 3% more) on the wealthiest Americans, but of having an economic engine based on privilege for a few.
The President projects a fiscal 2010 budget of nearly $3.6 trillion, and a deficit for the current fiscal year of $1.75 trillion — a level not seen since WWII. He wants to shrink annual deficits through higher revenues from rich individuals by allowing the Bush tax cuts for the wealthy to expire, by taxing polluting industries, reducing Iraq war costs, and through economic growth by 2010. The proposals signal a serious attempt to tame deficits in a way that restores fairness to a tax code that has been tilted in favor of the very rich for far too long, resulting in a deficit that has disproportionately burdened everyone else.
The budget cuts Obama proposes underscore the changes he seeks. He wants to cut about $5 billion in the coming year for direct payments to large corporate agribusinesses and larger farmers with more than $500,000 in annual net income. He also wants to cut $4 billion in annual subsidies to private banks that make college loans. Instead of private bank loans, he wants to steer people toward government-provided Pell Grants for needy students, increasing the maximum yearly grant for inflation. Those two cuts alone will provoke big fights with the farm and banking lobbies and their mostly Republican supporters in Congress. While Republicans and big business condemned the tax proposals, at the same time, Robert Greenstein, director of the Center on Budget and Policy Priorities, praised the budget as "bold, courageous, and honest." He said that the new budget takes on one vested interest after another (pork). It will require all of the President's skills to get it through Congress.
The President wants to overhaul health care, arrest global warming, expand the federal role in education, and shift more of the costs to the wealthiest taxpayers and corporations, especially the corporations that have made huge profits by sending American jobs overseas or to Mexico. He wants to give tax breaks to companies that hire U.S. citizens. This budget is so ambitious that it has an advantage: Even if Obama achieves only part of his goals, it will still leave a strong record of accomplishment.
Even greater than the scale of Obama's proposals is his determination to break with the conservative laissez-faire, trickle down economic principles that have dominated national politics and policymaking since Reagan. The wealthy made their wealth in America and should, in turn, be willing to support America. Those individuals who net more that 200k or married couples who net more than 250k are being asked to pay just 3% more in federal income tax. If that breaks their budgets, then they are living too high on the hog. They should quit whining, step up to the plate, and help their country instead of complaining that they are being “punished” for being rich.
President Obama’s proposals change the whole paradigm. If he is only half successful, we will have a government that helps all citizens, not just the wealthy, to live better lives. He will have reshaped the nation’s priorities.