The Obama Budget: Tax the Rich, Spare the Poor, Remember the Young

It's not a perfect budget. But unlike the GOP alternative, it lives in the real world and it speaks to the problems we actually have.
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If the Paul Ryan budget, in nine words, was:

"Save the rich; Forget the poor; Spare the old"

President Obama's budget, in nine words, is:

"Tax the rich; Spare the poor; Remember the young"

The contours of the president's plan will be familiar to budget nerds, because he's been cooking up different styles of the same dish for months now. And there are two sticking points, which will also be familiar to budget nerds, because they're the same old sticking points: Taxes and entitlements. Obama's plan raises taxes on the richest households by $600 billion -- not by raising rates, but instead reducing the deductions these families can take. Second, his plan adopts a new measure for inflation, which would slowly cut Social Security benefits, and it proposes additional cuts to Medicare.

Most Republicans hate the first part. Most Democrats hate the second part. Will this new budget compel both sides to reconsider? Honestly, who knows. 

The Debate About Right-Now: Obama v. Ryan
Rather than predict the future, let's focus on the present cavernous gap between the Obama and Ryan plans. Over the next ten years, Obama is proposing about $46.5 trillion in spending. Ryan is proposing about $41.5 trillion in spending in that span. That $5 trillion gap, as Ezra Klein points out, is the true Colosseum of these budget fights.

The spending gap comes down to the uninsured, the poor, and the young. The Ryan budget accepts the sequester, repeals Obamacare, cuts federal spending to Medicaid, and cuts deep into "other mandatory spending," a catch-all category comprised of mostly (a) cash assistance to veterans, the jobless, and the poor and (b) retirement programs for vets and federal employees.

But there's something else that's gone mostly unreported: It's Ryan's cuts to "non-defense discretionary" spending. That sounds like an awfully unpalatable term. In fact, it's exactly what you probably think of as "government." It's scientific research, housing, international relations, education, public safety, public health, environmental protection, job training. It's the spending that could be conceivably be called investments, because it's spending that could pay off -- in new drugs, smarter kids, better roads, and cleaner skies. Ryan cuts non-defense discretionary's share of the government to a third below its modern low. It's a unambiguous divestment in productive government spending.

Obama sets aside some cuts for for non-defense discretionary, as well. But he also leads with $50 billion for infrastructure projects right away and increases federal spending on pre-K education. "This budget begins the difficult process of reallocating funds from more affluent seniors to lower-income families and their children," said Isabel Sawhill from the Brookings Institution. By cutting Social Security and Medicare, even subtly, while increasing spending on education, even more subtly, Obama's proposal is a small but important shift in spending from the old to the young.

Like the budget or hate the budget, you must acknowledge it represents (another) non-radical attempt from the White House to reduce our deficits -- which are already falling rather swiftly. As the president noted today, we've already signed off on $2.5 trillion in deficit cuts: $1.4 trillion in cuts under the Budget Control Act + $600 billion in new taxes in the fiscal cliff deal + interest savings. (That doesn't include the $1 trillion sequester.) The president is proposing another $1.8 trillion in savings, one-third from higher taxes and the rest from spending cuts.

The Ryan budget was a magical document that reflected a house-of-mirrors version of uber-conservatism. In order to balance the budget -- a dubious goal, since we can (and have) run deficits practically every year since the early 1800s -- Ryan concentrated spending cuts on the uninsured, the unemployed, and the poor. It was like a double-sequester, aimed at the heart of the America's most vulnerable households, paired with a tax plan so outlandish and unspecific, it left $5.7 trillion in tax spending cuts to be made later.

Obama's budget, for all its messy compromises, is at least a document that reflects certain realities of the time, among them: (1) Global capitalism, left to its own devices, is unlikely to help low-income families keep up with rising costs that come from overall productivity growth; (2) our access to medical care is an international embarrassment, and deserves a solution; (3) the deficit is shrinking too fast, not too slow; (4) we really, really, really don't have to balance the budget, ever; (5) it's better to reduce the deficit with spending cuts and tax increases. These are real problems. The president offers acceptable and defensible solutions.

***

It's a truth universally acknowledged in Washington that we don't think enough about the future. Maybe we think too much about it. We debate ten-year budget plans while unemployment lingers. We plan for future balanced budgets when the deficit is already falling, and probably too quickly. We prepare for the problems we think we might have in the future (inflation) while ignoring many of the problems we know we have today (underemployment).

In a city wrapped up in debating the future, Obama's budget does something quietly radical. It lives in reality. And it speaks in the present tense.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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