Drinking to the Budget

We should all celebrate the honesty and integrity of President Obama's first budget blueprint, says Michael Ettlinger.

We should all celebrate the honesty and integrity of President Obama’s first budget blueprint. (iStockphoto)
We should all celebrate the honesty and integrity of President Obama’s first budget blueprint. (iStockphoto)

If a Martini is your drink, skip the Vermouth. If Whiskey’s your poison, take it straight. If you’re a teetotaler, make an exception. And if you really, really shouldn’t drink, close your eyes and take a deep breath. But, under no circumstances should you look at President Obama’s budget blueprint for the next ten years without fortification.

The American people have long been craving a president that would tell them the truth. Now we’re going to find out if we can handle it. The sticker-shock truth that hits hardest is the budget deficit number: clocking in at $1.8 trillion for 2009, $1.2 trillion for 2010. Those represent 12.3 percent and 8.0 percent of Gross Domestic Product, respectively—both representing levels not seen since World War II.

The administration printed this budget blueprint in black and white, but it’s red all over. This is what happens when a president gives it to us straight. If the pundits and politicians who oppose President Obama don’t at least give him credit for a level of integrity we haven’t seen in many years, they should be ashamed of themselves.

Even a crooked budget would have been ugly this year, with the falling economy dragging tax revenues off the cliff. A big deficit is entirely appropriate during times like these as the government must step in to get the economy going again. But the Obama administration decided to go a step further in presenting its budget: sweeping aside the Bush era budget deceptions—and some that pre-date that president.

The United States is at war and this budget looks us square in the eye and says “pay for it.” Gone are the shenanigans of sneaking through a budget that dishonestly shows a low deficit by the artifice of leaving the tab for the war to later emergency supplemental budgets. Defense supplementals have been running from $50 billion to $100 billion per year.

Gone, too, is the shabby practice of using trick accounting to slip costs to six years from now and, surprise, surprise, only showing the next five years of costs in the budget. Obama shows us 10 years out. The President also eschews the trick of extending revenue-reducing provisions for a single year when every one knows they’re going to get extended again and cost us much more than the budget shows.

Case in point: the Alternative Minimum Tax is no longer dealt with by a one-year “patch.” Obama has gone for the full surgery but pays the price: $575 billion over ten years.

For all the attention to the bold new programs that this budget will pay for, the integrity with which these initiatives are dealt with that stands out. Energy, health reform and investments in education—we’re shown how they’re paid for if they are and, if they’re not paid for, we’re shown that as well.

Nor are there hidden tax increases. They’re spelled out and they’re going to provoke outrage. Some tax hikes everyone knew were coming, most notably allowing some of the Bush tax cuts on the wealthy to expire and trimming tax incentives for corporations to move jobs overseas. The proposed reduction in itemized deductions for the well-off is a new wrinkle. This will especially hit costlier states where itemized deductions run high. Members of Congress from such states will certainly take notice—among them the Chairman of the House Ways and Means Committee Charles Rangel (D-NY). Not an easy fight.

Even a questionable policy choice reflects a certain honesty. During the presidential campaign Obama said he was going to only raise the top tax rate on capital gains and dividends to 20 percent—a lower rate than are applied to wages, interest and earnings from small businesses. This was an unfortunate position to take on the campaign trail, and it’s an unfortunate promise the President has kept.

It’s bad policy to keep these rates so low. Not only do these rates offer a substantial tax break for the well-off, but they also incite a range of tax-dodging activity as accountants and tax lawyers find creative ways to convert, on paper, income that should be taxed at higher rates into more pampered forms of income.

The administration does propose closing one such loophole (a particular means by which hedge fund managers do this). But as long as there are substantially lower rates for particular types of income, the law and the Internal Revenue Service will always be one step behind the accountants and lawyers. The policy is unfortunate, but the sight of a president sticking to what he said in a campaign is welcome.

On the spending-cut side, even though many of the details are yet to come it’s clear that this administration has no fear in taking on sacred cows. Every one of the areas being cut has a well-heeled or loud-voice constituency. Programs that are eliminated may not be effective, but the people who are employed by them or benefit from them probably don’t see it that way. And those who fought for them in Congress originally and have trumpeted them as legislative successes will not want to see the fruits of their legislative labors turned to dust.

Taking on misguided agricultural subsidies, education programs which have legends that outstrip their reality, or major defense programs that have been carefully structured to employ contractors in politically key states, is not a mission for the faint of heart. But these budget fights need to happen. Obama understands that.

This budget blueprint heralds programs that will change the face of the American economy. Health care reform, energy independence and education are, as the President has said many times, the lynchpins of a strong future for the country. President Obama could have tried to slip these in the back door, hidden their costs, used tricks, chicanery and bombast to hide what he was doing and, most importantly, how much they cost. He certainly wouldn’t have been the first president to do that—most certainly.

Instead, he took a different course. Not every forecast in this budget will come true, not every estimate will be on target. But we’re being treated as adults who can understand what’s going on and won’t be fooled by the inevitable distortions that will come from those who oppose the President. Are we ready for this? I think the answer is yes. So, yes, I will have a drink, a bourbon . . . a double . . . neat—but in celebration, not for fortification. It’s a welcome change.

Michael Ettlinger is Vice President for Economic Policy at the Center for American Progress. To read more of his analysis, please go to the Economy page of our website.

Read more on President Obama’s budget from CAP:

Overview: A New, Ambitious Course of Action, by Michael Ettlinger

Defense: Obama’s Defense Budget Is on Target, by Lawrence J. Korb

Energy: Energy Budget Is Sunlight After Eight Years of Darkness, by Daniel J. Weiss

Education: Investing Wisely in Our Children, Cynthia G. Brown and Melissa Lazarín

Health Care: One Step Closer to Better Health Care, Karen Davenport

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.


Michael Ettlinger

Vice President, Economic Policy