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Tags: Barack Obama | Budget | Federal Budget | QE | Sen. Charles Schumer | TARP

Is There An Alternative to Obama's Budget?

By    |   Monday, 09 February 2015 03:35 PM

This is Barack Obama’s Budget: a $6 trillion increase in total (non-entitlement) debt, a deficit for next year alone of 2.5 percent of Gross Domestic Product (GDP),  a doubling the previous half trillion dollars for public works, an average tax rise of $164 per household aimed at the nation’s most productive capital, a $280 billion tax burden on multinational corporations, another increase in the capital gains tax on new investment, higher pay for federal employees, and — more regulation.

Besides the lack of new thinking — with smaller numbers this could be any Democratic Budget of the past half-century — how can these investment-spurning proposals get the economy moving again, to move beyond the slowest and most uneven recovery of modern times?

What is the Republican alternative? Appropriations strategist Rep. Tom Cole, R-Okla., opposed the president’s proposals but argued that he must first offer serious entitlement reform if he wants more funding for his favorite programs.

Even if Obama did, is this not conceding these tired old programs are worth funding? The president did offer $1.8 trillion in deficit reduction but mostly through increased taxes.

Will Republicans compromise for half through higher taxes? Republicans are reportedly ready to offer reforms of Social Security, Medicare, Medicaid, and other entitlements that the president will certainly dismiss as attacks on the elderly and poor.

There is some fresh thinking on the right. Former House Budget Committee staffer Dennis Teti wants “a stronger executive hand in the budget process,” allowing the president’s budget to prevail if Congress does not come up with one of its own by July 1. It has not done so for years.

Is this a creative way to rationalize President Obama’s Budget? Some on the Democratic side do realize a new approach is required. Sen. Charles Schumer, D-N.Y., criticized his party for appealing to a too narrow constituency, with Obamacare aimed at only helping the uninsured poor and ignoring the broader middle class. But his solutions of a larger stimulus, minimum wage increases, more unionization, and ending sexual wage disparities were not exactly novel.

A more serious strategist William A. Galston recognized that “the old answers have lost their credibility,” a stimulus, tax cuts and even educational grants. He asks what kind of public investment, tax reform, growth, incentives, energy policy, entrepreneurial activity, and international policies should replace or supplement them?

Galston did not provide the answers because no one can. The question should be, are there any answers from his old liberal welfare state perspective? His questions require more centralized regulation to solve all the problems he raises. What if the very idea the national government can solve such matters is mistaken?

National Association of Manufacturers (NAM) President Jay Timmons argues that there are so many regulations restraining the economy at a $2 trillion annual cost, they are the problem not the solution. Even most Republicans still justify supporting the $700 billion Troubled Asset Relief Program (TARP) stimulus and Quantitative Easing (QE) regulations to fix the economy after which solution the market fell an additional 40 percent.

What is the real alternative? The Brookings Institution’s Bruce Katz has one.
The piecemeal way Washington allocates discretionary spending severely limits its ability to stimulate large-scale change. It’s a legacy arrangement. Money is distributed through a set of outdated agencies, many formed in the 1950s and 1960s — carrying out programs established in the 1970s and 1980s — through means more appropriate for a pre-Internet age. The funds are narrowly targeted at discrete programs run by separate agencies under inflexible rules.

Today’s economy demands the opposite. In the metropolitan areas producing 91 percent of GDP economic and political conditions vary enormously.  Integration and collaboration across public agencies is necessary for success. Cities need the flexibility to devise their own approaches to problems — because what works in Phoenix, for example, will not be the same as what works in Pittsburgh.

To be a meaningful platform-setter for the nation, the federal government needs to allow cities and metropolitan areas to consolidate funding streams and use them to address problems in ways they see fit.

He argues the “source of the federal government’s feebleness is structural,” that it spends most of its funds on entitlements for the elderly and poor, leaving only 17 percent for domestic programs, not sufficient to do big things even if it could.

He concludes, “As Washington fades into the background, the rest of the nation is engaging in a great experiment — can a country successfully invest in its future without the national government being a relevant player? America’s cities are already finding out.”

Decentralizing to states and communities would be real Budget reform. Who could think your author — whom Ralph Nader’s raiders called Ronald Reagan’s most conservative presidential appointee — would agree with a progressive Brookings vice president on Washington’s core problem, and the proper solution? If you live long enough, anything is possible.

Donald Devine is senior scholar at the Fund for American Studies, the author of "America’s Way Back: Reconciling Freedom, Tradition and Constitution," and was Ronald Reagan’s director of the U.S. Office of Personnel Management during his first term. For more of his reports, Go Here Now.


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To be a meaningful platform-setter for the nation, the federal government needs to allow cities and metropolitan areas to consolidate funding streams and use them to address problems in ways they see fit.
Barack Obama, Budget, Federal Budget, QE, Sen. Charles Schumer, TARP
Monday, 09 February 2015 03:35 PM
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