What Obama's 2012 Budget Does—and Doesn't Do

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The president's $3.7 trillion budget for 2012 raises taxes enough to enrage conservatives, cuts spending enough to vex liberals, and still doesn't go far enough to satisfy deficit hawks. In other words, it's a perfect Valentine's Day gift for Washington: good intentions all around, but everybody goes to sleep angry and disappointed.

Here's what the budget plan does: The 2012 budget proposes $1.1 trillion in savings over the next 10 years. One third of those savings are tax increases, and two thirds are spending cuts, most of which come from the White House's five-year freeze of non-defense discretionary spending. It also uses some of these savings to increase spending in infrastructure and education.

Here's what the budget plan doesn't do: It doesn't touch entitlements like Social Security and health-care spending, which are the main drivers of our long-term budget crisis. It doesn't propose tax reform. It assumes the Bush tax cuts will expire for the rich in 2013. If extended, those tax cuts could wipe out most of the trillion dollars of savings over 10 years.

But don't think of the budget as a blueprint. Think of it as an opening argument. Even when there was a Democratic House and Senate, the president's budget was more like a rough outline than a firm plan. But today, with a bitterly divided Congress, the president's budget isn't even an outline. It's an opening argument in a debate over how to shrink outlays -- and a test of who will howl the loudest as the budgetary scalpel draws near.

The budget echoes President Clinton's "cut and invest" philosophy by sacrificing expendable or low-impact items to expand wireless broadband, infrastructure, and clean energy R&D. The budget would cut oil and gas tax breaks by $46 billion and plow the money back into research and development support. It would adopt Defense Secretary Robert Gates' $78 billion in defense cuts and use the savings to make a $50 billion infrastructure "bank" to galvanize private investment in roads, bridges and rail.

In other words, some of these cuts aren't about shrinking government everywhere, but rather about making room to increase government support for White House priorities like infrastructure and innovation.

Here's a look at a couple of the cuts.

Pell Grants. Perhaps no other line item drew more advance outrage than the news that the Obama budget proposed to touch the Pell grant program for low-income college students. But the actual budget proposes no changes to traditional Pell grants, which are currently at their highest level ever. What it does is halt, after just two years, a program launched in the 2009-2010 school year that allowed students to apply for a whole second Pell grant for summer school or if they took extra credits.

That program turned out to cost 10 times more than expected, and there was no evidence it was helping anyone graduate from college faster. Instead, it appeared to be the case that for-profit colleges were gaming the system to encourage students to apply for the additional grants to take academically questionable courses.

Presented by

Derek Thompson and Garance Franke-Ruta

Garance Franke-Ruta is an Atlantic senior editor and Derek Thompson is an Atlantic associate editor.

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