Was that liberal enough for you?

It was nothing if not bold. Far from sliding away from his promise to reform healthcare, Obama affirmed it by proposing a $635 billion "downpayment" on the cost, financed about equally by high-income taxpayers and by squeezing Medicare payments to private providers. To announce an initiative of that scale and scope in the same budget that predicts a $1.75 trillion deficit in 2009, and a full-employment deficit of 3% of GDP even after ten years of brisk recovery and steady growth, took some nerve. Obama clearly has plenty. Left-leaning Democrats who have spent recent weeks moaning about centrist appointments and attempts at outreach to Republicans should hang their heads in shame. This is the budget they have been dreaming about for years.

I am not what you would call an instinctive leftist Democrat, yet so far as substance goes I like a great deal of what is there. The intelligence of this administration shines through at many points. My objections are mostly about the gaps.

I am for comprehensive healthcare reform. It would have been easier to do in a strong economy, of course--but Obama has the momentum to get this job done. It is urgent and has already waited too long, and so I applaud his determination to press on. It is good that he plans a big reserve to cover perhaps a third to a half of the likely eventual cost: better to leave that crucial line in the budget half-blank instead of entirely blank. I am also glad to see substantial cap-and-trade revenues make their first appearance. A carbon tax would be better, but still.

Obama and Peter Orszag seem intent on cleaning up the budget process, too, which is good. No more nonsense about expected revenues from the alternative minimum tax; no more off-budget accounting for military spending in Iraq and Afghanistan; and so on. Congratulations on switching from a current-law to a current-policy baseline. (Shame they had to go and spoil that by extending current spending in Iraq into the out years, just to get them to their phony $2 trillion of "savings". Current policy on Iraq is not to stay there forever, any more than current policy on infrastructure is to spend at the stimulus-package rate for the next ten years.)

I find the out-year arithmetic a bit baffling. Granted, under present circumstances you really need more than one scenario to make sense of things. The economic assumptions in the budget are very optimistic--more optimistic (unless I'm reading the numbers wrong) than in the base-case stress test to be applied to the banks under the new financial stability plan. A drop in output of barely 1% this year (the stress test assumes a drop of 2% in the base case and 3.3% in the adverse case) is followed by growth of 3.2% in 2010 (as against 2.1% in the base-case stress test and 0.5% in the adverse case). If things go that well, halving the dollar deficit by 2013 then letting it stay at 3% of GDP indefinitely is not nearly ambitious enough. If things go badly, the goal of halving the dollar deficit by 2013 is rash.

The persistent full-employment deficit, and the fact that the costs of healthcare reform are at best only half accounted for, implies the need for further very large increases in taxes and/or cuts in spending once the economy has recovered. (This is to say nothing of the longer-term budget pressures, acknowledged by the administration but not reflected in this timescale.) What is the point of doing a ten-year budget if you are not going to lay those options out?

The budget expresses a very strong preference for piling all the costs on the rich--meaning households earning $250,000 a year or more. Not only does it reverse the Bush tax cuts for these high-earners, it also claws back some of the value of their tax deductions (in order to part-fund the health policy reserve). Limiting exemptions is an intelligent way to raise taxes. Lower rates and smaller exemptions is good tax policy. But higher rates and smaller deductions? That starts to look harsh. Spare a thought not for hedge-fund managers and bank CEOs, but for successful two-earner professional households, or owners of thriving small businesses, who have just watched their savings destroyed and their housing equity crushed, and who are now promised taxes higher than, not merely equal to, what they were paying before Bush. And here's the rub: the budget still needs much more revenue. Extrapolating the political preferences in this blueprint, where is that revenue going to be found? If you can limit exemptions to a 28% rate, why not to 20%--or why not abolish them altogether?

In this "new era of responsibility", as the budget document is called, it would have been better for Obama to signal that huge and desirable initiatives like universal health care will impose at least some costs on all Americans. It is literally impossible to make the rich pay for everything, and telling 95% of voters that they can have all these things at no cost is not good leadership. It has even less to do with shared responsibility.

For all I know, however, it might be good politics. We will have to see how that plays out. One thing, though: unless and until he adjusts the message of this budget, Obama's claim to be centrist and pragmatic looks false. On the stimulus, he successfully characterised the Republicans as unconstructive doctrinaire rejectionists and himself as the pragmatic bipartisan leader. It wouldn't have taken much in this budget to build on that success: on taxes, confining himself to reversing the Bush tax cuts, as he promised in the campaign, might have been enough. The surprise of the extra $30 billion a year in capped deductions was enough to make "redistribution" the big story. Time will tell if that was a mistake.