Wednesday, April 13, 2011

The Annotated Budget Address

This afternoon President Obama gave a speech close to what many of us were hoping to hear. It should have been given months ago, but at least he has said what had to be said in response to the unrealistic and cowardly budget plan put forward by the Republicans. I have reprinted below, in red italics, exact quotes of what I think are the most significant sections of this address; I have added some comments below each quote.

You can find the entire speech here.

I would like to know exactly why the President decided to give this speech in the middle of the day. Was there a strategic or tactical reason for not having his exact words being heard during prime time, or was there no network time available to him? When I watched the national news this evening, his speech was not even the top story of the day, and only brief snippets were shown. Couldn't he have made this rare "bully pulpit" excursion more public? Anyone know?

Anyway, returning to the speech itself: after some introductory remarks, he set the general tone by reminding us of the "social contract" that has been tacit in America for over two centuries:

We believe, in the words of our first Republican president, Abraham Lincoln, that through government, we should do together what we cannot do as well for ourselves.

How easily the Republicans and Tea Screamers forget that the American Constitution and Declaration of Independence sit squarely in the strong tradition of the social compact: that we unite and govern ourselves in order that each of us can join collectively to help our fellow citizens. Here's the beginning:

"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."

Note how often the "promote the general Welfare" is left out of the discussion by the folks who so often talk about the "common defence" and wave the flag so much. "General Welfare" sure must sound like socialism to them.

(Pursing the military terminology: Should Gen. Welfare outweigh Pvt. Profit?)

Part of this American belief that we are all connected also expresses itself in a conviction that each one of us deserves some basic measure of security. We recognize that no matter how responsibly we live our lives, hard times or bad luck, a crippling illness or a layoff, may strike any one of us. "There but for the grace of God go I," we say to ourselves, and so we contribute to programs like Medicare and Social Security, which guarantee us health care and a measure of basic income after a lifetime of hard work; unemployment insurance, which protects us against unexpected job loss; and Medicaid, which provides care for millions of seniors in nursing homes, poor children, and those with disabilities. We are a better country because of these commitments. I'll go further – we would not be a great country without those commitments.

At one time in this country the lot of the poor, the weak and the elderly was quite harsh and only slightly ameliorated by the work of private charity. When people became aware of these conditions through the work of progressive reformers such as Jane Adams, Jacob Riis, Upton Sinclair etc. they became outraged and the reforms began that culminated in the New Deal and the "safety nets" that Obama refers to. For many decades only hard-core reactionaries referred to as "socialist" the child labor laws, the laws recognizing labor unions and standards for pure food and drugs, and Social Security. Unfortunately, this reactionary Empire is striking back by trying to underfund and undermine these social commitments that identified us as a "great country."

For much of the last century, our nation found a way to afford these investments and priorities with the taxes paid by its citizens.

Yes, and that is part of the "social contract": we don't like to pay taxes but most of us have recognized that that's the only way we can do what we believe needs to be done. These laws and taxes didn't just appear: they were passed by our democratically elected representatives. The original Boston Tea Party wasn't particularly against taxes, it was against taxation without representation (in the Houses of Parliament). The taxes we now have were instituted exactly by us, in a democratic, representative way. They reflected the will of the majority of the people, as expressed democratically through the mechanisms provided by our Constitution.

As a country that values fairness, wealthier individuals have traditionally born a greater share of this burden than the middle class or those less fortunate. This is not because we begrudge those who've done well – we rightly celebrate their success. Rather, it is a basic reflection of our belief that those who have benefited most from our way of life can afford to give a bit more back. Moreover, this belief has not hindered the success of those at the top of the income scale, who continue to do better and better with each passing year.

Actually, to this I'd add that wealthier individuals may pay a greater share of the tax dollars, but they don't necessarily bear a greater share of the burden. "Burden" is measured by the effective load that one bears; in terms of wealth this must be measured by the "pain" one incurs in meeting the tax obligations. If one's tax dollars come out of one's food, medicine, or shelter, then that is a great burden. If one's tax dollars come out of funds available for diversion or luxury, then that is less of a burden. Such funds, which are over and above the costs of mere living, are called "disposable income," and part of the definition of "wealthy" or "upper class" is that one has a large disposable income. In assessing tax burden then, you must take into account both the actual labor represented by the tax dollars, as well as the actual economic pain of paying them. By these standards it is not at all clear that the larger amount of taxes that the rich pay actually represents a greater burden: paying with fat is easier than paying with bone and sinew.

But after Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program – but we didn't pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts – tax cuts that went to every millionaire and billionaire in the country; tax cuts that will force us to borrow an average of $500 billion every year over the next decade.

To which I would add that this kind of off-budget deficit spending is exactly what radical rightists encourage. As they themselves put it, they want to "starve the beast" -- i.e. waste so much government money that (a) the government can't afford anything else and (b) people will view their government with suspicion and derision. If there are enough unfunded and off-budget programs, there won't be enough left to regulate business -- exactly what people like the Koch's want. These actions to discredit and marginalize our own government are unpatriotic. Until Reagan's "government is the problem" citizens of this country by-and-large respected their government because they knew that it represented them through democratic elections. Yes, we have historically opposed corruption in our government when it was discovered, but that was the fault of corrupt individuals: they were the problem, not our government. Indeed it is truly our government.

So here's the truth. Around two-thirds of our budget is spent on Medicare, Medicaid, Social Security, and national security. Programs like unemployment insurance, student loans, veterans' benefits, and tax credits for working families take up another 20%. What's left, after interest on the debt, is just 12 percent for everything else. That's 12 percent for all of our other national priorities like education and clean energy; medical research and transportation; food safety and keeping our air and water clean.

No comment needed here: this is just useful info. Obama also pointed out that foreign aid makes up [only] about 1% of our entire budget. Fewer than 1 in 4 American realize this; I doubt that any Tea Screamers do.

Obama then turned to the Republican proposals for debt reduction, describing their basis as follows:

It's a vision that says if our roads crumble and our bridges collapse, we can't afford to fix them. If there are bright young Americans who have the drive and the will but not the money to go to college, we can't afford to send them. Go to China and you'll see businesses opening research labs and solar facilities. South Korean children are outpacing our kids in math and science. Brazil is investing billions in new infrastructure and can run half their cars not on high-priced gasoline, but biofuels. And yet, we are presented with a vision that says the United States of America – the greatest nation on Earth – can't afford any of this.

It's a vision that says America can't afford to keep the promise we've made to care for our seniors. It says that ten years from now, if you're a 65 year old who's eligible for Medicare, you should have to pay nearly $6,400 more than you would today. It says instead of guaranteed health care, you will get a voucher. And if that voucher isn't worth enough to buy insurance, tough luck – you're on your own. Put simply, it ends Medicare as we know it.

This is really pretty good rhetoric (for a change). One thing I would add is to ask how likely is it that a person of age 65+ would be able to find an affordable health insurance policy in the private sector? The chance that such a person could find a meaningful use for a voucher sized by Republicans is vanishingly small.

Next Obama turned to a bit of much-needed "class warfare" rhetoric; isn't it about time?

Think about it. In the last decade, the average income of the bottom 90% of all working Americans actually declined. The top 1% saw their income rise by an average of more than a quarter of a million dollars each. And that's who needs to pay less taxes? They want to give people like me a two hundred thousand dollar tax cut that's paid for by asking thirty three seniors to each pay six thousand dollars more in health costs? That's not right, and it's not going to happen as long as I'm President.

Will Obama actually live up to this promise?

One good thing is that Obama is phrasing tax reform not as "increases" but as an action to "reduce spending in the tax code." It's about time we started using our framing of the issues, not theirs.

Next up is military spending.

Just as we must find more savings in domestic programs, we must do the same in defense. Over the last two years, Secretary Gates has courageously taken on wasteful spending, saving $400 billion in current and future spending. I believe we can do that again. We need to not only eliminate waste and improve efficiency and effectiveness, but conduct a fundamental review of America's missions, capabilities, and our role in a changing world. I intend to work with Secretary Gates and the Joint Chiefs on this review, and I will make specific decisions about spending after it's complete.

This is totally vague, with no promises or hints as to where cuts might come. What is needed is to eliminate the troops enforcing the Pax American around the globe. Bring home the tens of thousands of troops from Japan and Europe and dismantle the bases there. End "Star Wars" definitively; stop producing carriers. Bring home the troops from Afghanistan and Iraq and Saudi Arabia. Cut all military aid to non-democratic regimes and replace some or all of the money with humanitarian aid. This is what we need to hear, not vague talk about "wasteful spending and efficiency.

But let me be absolutely clear: I will preserve these health care programs as a promise we make to each other in this society. I will not allow Medicare to become a voucher program that leaves seniors at the mercy of the insurance industry, with a shrinking benefit to pay for rising costs.

This is another promise we will remember.

As I said in the State of the Union, both parties should work together now to strengthen Social Security for future generations. But we must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans' guaranteed retirement income to the whims of the stock market.

We know exactly how to preserve Social Security: tax all incomes without any cut-off. The FICA tax is regressive as it is: it hurts people with lower incomes since it takes more of their disposable income (see above).

Beyond that, the tax code is also loaded up with spending on things like itemized deductions. And while I agree with the goals of many of these deductions, like homeownership or charitable giving, we cannot ignore the fact that they provide millionaires an average tax break of $75,000 while doing nothing for the typical middle-class family that doesn't itemize.

My budget calls for limiting itemized deductions for the wealthiest 2% of Americans – a reform that would reduce the deficit by $320 billion over ten years. But to reduce the deficit, I believe we should go further. That's why I'm calling on Congress to reform our individual tax code so that it is fair and simple – so that the amount of taxes you pay isn't determined by what kind of accountant you can afford.

I don't need another tax cut. Warren Buffett doesn't need another tax cut. Not if we have to pay for it by making seniors pay more for Medicare. Or by cutting kids from Head Start. Or by taking away college scholarships that I wouldn't be here without. That some of you wouldn't be here without. And I believe that most wealthy Americans would agree with me. They want to give back to the country that's done so much for them. Washington just hasn't asked them to.

Well, this is a bit of an overstatement, since a lot of the money that is backing the anti-tax movement comes from wealthy people like the Kochs and Grover Norquist; they also cynically support not-necessarily rich but misinformed people like the Tea Screamers. It is true, however, that many wealthy people do have the sense of responsibility that Obama describes: see here for example. I would like to have heard the President mention other means of revenue enhancement, such as a Financial Services or Parasite Tax. Maybe we'll hear about it later, but I'm not holding my breath.

This sense of responsibility – to each other and to our country – this isn't a partisan feeling. It isn't a Democratic or Republican idea. It's patriotism.

Right on.

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