Sunday, 1 March 2009

Four Bombshells Obama Just Dropped

Fri Feb-27-09 11:19 PM /

Four Bombshells Obama Just Dropped
by Matt Miller


The “class war” canard. The tax police are already having a stroke over Obama’s plan to limit the value of itemized deductions (like the ones for mortgage interest and for charitable donations) taken by people who earn more than $250,000 a year. Under Obama’s plan, such earners could deduct those expenses only at the 28 percent rate, not at the 35 percent rate (or the 39.6 percent rate, once Bush’s tax cuts expire after next year). What’s that mean concretely? Today, every $1,000 in mortgage interest or charitable gifts generates $350 in tax savings for top earners; under the new plan the tax savings would be $280.

To sell the tax swap across the aisle, they might slyly market it as the Sarah Palin plan.

Conservatives cry “class warfare.” But the truth is that current arrangements actually represent plunder from above (an enduring feature of America's tax history, as I show in this chapter of my book, The Tyranny of Dead Ideas). As a moment's reflection shows, the ability to enjoy more tax savings because you’re in a higher tax bracket is perverse; why should America subsidize John Thain’s mansion more than it subsidizes the average homeowner—or the average renter, for that matter, who gets no subsidy at all? As the GOP cries foul, I'd put Obama out in town-hall meetings to pose this question: “Why in America should a millionaire’s mortgage be worth more to him than yours is to you?” Plus, as Bob Greenstein of the Center for Budget and Policy Priorties cleverly points out, this takes the value of these deductions back to what they were under Ronald Reagan (when the top rate was 28 percent). Can the Gipper really not have been doing right by the top?

Climate "tax and dividend." Policy wonks of all stripes have long said the right way to implement higher carbon prices and spark a market-based move to green energy is to auction emission permits via some kind of cap-and-trade system, or to enact a new carbon tax and then to immediately rebate most of the proceeds to middle- and lower-income families hurt by the associated rise in dirty energy prices. Obama’s budget laudably does precisely that, dedicating 80 percent of expected cap-and-trade revenue to such tax cuts (by making Obama’s $800-per-couple “Making Work Pay” tax credit in the stimulus plan permanent). The balance covers Obama’s call for roughly $15 billion a year in new clean-energy investments. To sell the tax swap across the aisle, they might slyly market it as the Sarah Palin plan, since that’s basically what she’s done in Alaska: raise taxes on oil companies to give tax cuts to everyone else.

Not-as-big-as-you-think government. As an old fiscal hand, the first page I always turn to in the budget is the one that lays out spending, taxes, and deficits as a share of GDP. This offers the best measure of the “size” of government relative to the size of the economy. In 2009, the emergency spending to combat the recession and banking meltdown will take us to 27.7 percent of GDP (up from 21 last year), well beyond anything we’ve seen in decades. That’s a little scary. But if recovery proceeds reasonably well, Obama shows us on a path to a ten-year spending average of around 22 percent of GDP, just what spending was under (you guessed it) Ronald Reagan. No matter who’s in power these numbers will rise afterward as more baby boomers retire. But for now, the idea that this blueprint is some epic shift to “big government” is demonstrably false, unless you think Reagan’s spending made him a socialist. Which brings us to a related point:

Obama’s not “radical”—the debate has been too timid. The hyperventilating New York Times (in its news coverage, mind you) declared Obama's plan a “radical change in course.” But in reality Obama’s ambition only shows how timid the boundaries of debate have been. Take his two biggest initiatives. Over the next decade, Obama’s climate agenda involves about $670 billion in tax hikes, tax cuts, and investments—that’s about 2 percent of the $42 trillion in GDP now forecast over that period. His significant downpayment on health-care reform weighs in at about the same size. Only in Washington’s bizarre politico-media culture can a shift of about a nickel on the national dollar from current uses to different ones be cast as “revolutionary.” The hype underscores the extent to which our supposedly brutal partisan debates have really taken place between the 49-yard lines on either side. In budget terms, Obama’s moving us to the 45-yard lines to meet our challenges. It’s about time. But Lenin would scoff.

There are things to question in the new plan—does Obama buy enough reform for all the new money he’s throwing at schools, for example—and more fine print to come in April. But how much can you cover at one dinner party? And yes, it's obviously fair to ask whether Obama can get it all done; Bill Clinton’s far less ambitious agenda imploded in 1994 and left a shadow that crimped Democratic ambition for a decade. Still, at first blush, this is the most exciting effort in my lifetime to both deal with an unprecedented crisis while laying the ground work for long-term economic renewal. Let the budget battles begin!



YOU SAY YOU WANT A REVOLUTION.... It's probably fair to say that there's been some concern about whether President Obama would be as "audacious" as Candidate Obama. He'd talk about bold and systemic change, but would he be limited by timidity? Would the president prefer slower, incremental change?

The answer has become overwhelmingly clear over the last few days.

We got a very good hint on Tuesday night about where this White House was headed, with an ambitious speech to Congress. But the point was driven home yesterday, with the release of the administration's budget outline, which presents a sea change in the way the federal government would operate in the future.

Looking for change you can believe in? I think we've found it.

The NYT explained that Obama's proposal is "nothing less than an attempt to end a three-decade era of economic policy dominated by the ideas of Ronald Reagan and his supporters." The budget is "a bold, even radical departure from recent history," which would "lay the groundwork for sweeping changes in health care and education," and "reverse the rapid increase in economic inequality over the last 30 years."

The LAT reported, "Not since Lyndon B. Johnson and Franklin D. Roosevelt has a president moved to expand the role of government so much on so many fronts -- and with such a demanding sense of urgency." Sen. Chuck Schumer (D-N.Y.) said, "It changes the whole paradigm." USA Today described the budget as "unprecedented in size, breathtaking in scope and sure to have a major impact on millions of Americans."

Paul Krugman, who's been less than enthused by the president's vision of late, seems to be thrilled, saying Obama's plan "looks very, very good."

Elections have consequences. President Obama's new budget represents a huge break, not just with the policies of the past eight years, but with policy trends over the past 30 years. If he can get anything like the plan he announced on Thursday through Congress, he will set America on a fundamentally new course.

The budget will, among other things, come as a huge relief to Democrats who were starting to feel a bit of postpartisan depression. The stimulus bill that Congress passed may have been too weak and too focused on tax cuts. The administration's refusal to get tough on the banks may be deeply disappointing. But fears that Mr. Obama would sacrifice progressive priorities in his budget plans, and satisfy himself with fiddling around the edges of the tax system, have now been banished.

Robert Reich added that the budget "represents the biggest redistribution of income from the wealthy to the middle class and poor this nation has seen in more than forty years."

Once in a while, elections really do have consequences.


US STOCKS-Obama budget sinks indexes as health sector slumps

Thu Feb 26, 2009 4:27pm EST NEW YORK, Feb 26 (Reuters) - U.S. stocks fell in volatile trade on Thursday as investors sold off shares of healthcare companies such as Merck & Co (MRK.N) on worries that President Obama's budget proposal will strangle profits.


The plan to expand healthcare coverage and curb costs calls for cutting Medicare payments to private insurers, letting consumers buy cheaper medicines and preventing drug companies from making deals that block generic competition. … "They are certainly looking at providing healthcare across the board for everyone, but to pay for that they are looking to obviously reduce revenue for some of the healthcare agencies," said Peter Jankovskis, director of research at OakBrook Investments LLC in Lisle, Illinois....

The government released more bleak news on the economy on Thursday as one report showed the number of U.S. workers continuing to claim jobless benefits notched a fresh record in the second week of February while another showed U.S. orders for long-lasting manufactured goods fell for a sixth straight month in January to a six-year low. ...

Obama budget sinks stocks as health sector slumps Reuters - 26 minutes ago

NEW YORK (Reuters) - Stocks fell in volatile trade on Thursday as investors sold off shares of healthcare companies such as Merck & Co on worries that President Obama's budget proposal will strangle profits.

L-R: US President Barack Obama leads Treasury Secretary Timothy Geithner, Office of Management and Budget Director Peter Orszag and Domestic Policy Adviser Melody Barnes after he announced his administration's proposed Financial Year 2010 federal budget outline in Washington, DC.(AFP/Getty Images/Chip Somodevilla)

Obama 3.55 trillion dlr budget seeks aggressive fix

Thu Feb 26, 1:38 PM ET

WASHINGTON (AFP) - US President Barack Obama unveiled a 3.552 trillion dollar budget Thursday that outlines aggressive plans to boost the recession-stricken US economy and overhaul its health care system.

Thu Feb-26-09 05:52 PM
Obama promises to slash spending by $2 trillion

Thu Feb-26-09 05:02 PM
Obama seeks $75.5 billion for Iraq and Afghan wars 2009

Thu Feb-26-09 04:17 PM
India may contest Obama's move against outsourcing in WTO

Thu Feb-26-09 02:43 PM
Obama forecasts $1.75 trillion deficit this year

Thu Feb-26-09 01:21 PM
Obama to cut payments to farms making over $500,000

Thu Feb-26-09 01:05 PM
Obama sees war costs totaling $140 bln this year

Thu Feb-26-09 11:53 AM
Obama Expected To Kill Hedge Fund Tax Break

Thu Feb-26-09 11:09 AM
After Obama appeal, Congress renews efforts on climate change

Thu Feb-26-09 04:42 AM

Latest Breaking News
Obama to Seek Higher Tax on Affluent to Pay for Health Care

Thu Feb-26-09 05:24 PM
To Pay for Health Care, Obama Looks to Taxes on Affluent

Thu Feb-26-09 04:08 AM
Obama Will Stick with Bush Moon Plan

Thu Feb-26-09 04:02 AM
Obama to Seek New Assault Weapons Ban

Wed Feb-25-09 09:44 PM
Obama Budget Would Create $634 Billion Health-Care Fund

Wed Feb-25-09 10:02 PM

Political Videos
Obama's entire address last night (Video)

No comments: