Budget Signals Obama Intention to 'End Mindless Austerity'

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Budget Signals Obama Intention to 'End Mindless Austerity'

Latest budget from the president is nowhere near perfect, but praise offered for plan to raise tax rates on wealthiest while giving middle class and public investment a needed boost

President Obama speaking at the Department of Homeland Security headquarters on Monday, February 2, 2015. The president's budget, though going nowhere fast in Republican-controlled Congress, serves as a key mission statement that allows him to frame the political debate for the next year and leading up to the 2016 election, when his party hopes to maintain control of the White House without him. (Photo: Yahoo News/Tumblr)

Is Obama aiming for a new title as the Anti-Austerity President?

Both in comments to the public and press as well as within his 2016 budget proposal, released on Monday, Obama has made it clear he is trying to distinguish his economic vision from his Republican opponents. Through his actions, the president argues that increased government spending and a more distributive tax structure is key to improving shared prosperity, strengthening the economy, and offering benefit to low- and middle-class workers while also improving education, public services, and the nation's crumbling infrastructure.

"I want to work with Congress to replace mindless austerity with smart investments that strengthen America," the president said on Monday.

The White House said it will push back hard against attempts by Republicans in Congress to extend the self-imposed spending limits known as "sequestration," which resulted from a previous budget battle between Obama and a split Congress in 2011. The president insists that targeted spending and a new tax regime, which offers relief for middle-income workers and higher rates for the wealthy, is the appropriate antidote to an economy that is working well for those at the top, but in which average Americans continue to suffer.

The Guardian reports:

Amid growing global debate over the wisdom of austerity economics, Barack Obama made clear in his own proposed budget on Monday that he believes the US should not be attempting to eliminate its deficit entirely and would only shrink debt as a proportion of the overall economy over the coming years.

But the administration’s proposals are largely symbolic without approval from lawmakers and officials made clear that the president would veto any version of the 2016 budget drafted by the Republican-controlled Congress that sought more aggressive cuts in spending.

According to Robert Greenstein, president of the Center on Budget and Policy Priorities, the Obama budget "would expand opportunity, especially for children; reform various programs and tax incentives to make them more effective; and help large numbers of middle- and low-income families while scaling back inefficient tax shelters that mainly benefit those at the top."

Though he described the budget as "bold," Greenstein said that, relative to history, it's actually not a big-spending plan. "Total federal spending over the next ten years would average 21.75 percent of gross domestic product (GDP) — identical to the average for the Reagan years.  In fact, despite the budget’s proposals to ease the sequestration budget cuts, discretionary spending would fall by 2019 to its lowest level on record as a share of GDP, with data back to 1962."

It is also true that part of what Obama considers "smart investments" includes the largest Pentagon spending spree in history—including funding for wars in Syria, Iraq, Afghanistan, and the never-ending and endlessly-expanding global war on terrorism. However, if the anti-austerity platform of his domestic spending plan is isolated, what emerges is a dramatic shift from other recent budgets and one specifically designed to challenge the Republican Party's mantra that government spending must continue to go down as the fortunes of the nation's wealthiest continue to go up.

Speaking on behalf of the National Priorities Project, the nonprofit, non-partisan federal budget research organization, executive director Doug Hall said the budget "contains initiatives that would be widely popular with the American people based on opinion polling. With an emphasis on job training and job creation, education, and a reduction in corporate and other tax loopholes, the president has released a budget that reflects Americans’ priorities."

According to the NPP, some of the notable non-defense domestic spending proposals include:

  • $60 billion over 10 years for students to attend community college for free
  • $478 billion over 6 years for surface transportation improvements
  • $146 billion for research and development
  • $5 billion in start-up funding for technology manufacturing
  • $1.5 billion in additional funds for Head Start early childhood education
  • $7.4 billion for clean energy technologies and $1.29 billion for the Global Climate Change initiative

"Obama’s plan is a populist political agenda very much aligned with his recent State of the Union speech," explained Dr. Marjorie E. Wood, managing editor of Inequality.org and a senior staff member of the Global Economy Project at the Institute for Policy Studies. "It’s ambitious and bold and will leave many Republicans scrambling to explain why they don’t support it."

She continued, "The plan is more than just a symbolic wish list. It’s a way to define and shape the debate. Aiming so clearly to lift up working families, reduce income inequality, and pay for it by taxing the rich, this agenda comes at a time when most Americans think a little wealth redistribution sounds great. Of course, Republicans have already come out strongly against it. But the Obama administration just may be betting correctly that the people will be on the President’s side."

Wood wasn't alone among progressive analysts who, despite important caveats, found much to applaud in Obama's proposal. Calling the 2016 White House Budget a "return to sanity," Dave Johnson, a fellow at the Campaign for America's Future, said the president has "drawn a dividing line between a Reaganomics era of 'trickle down' favors for the wealthy combined with cuts, austerity and intentional economic pain and harm, and a return to an era of a government that does things that make people’s lives better."

On Sunday, Obama also addressed the imposition of austerity policies across Europe as he waded into the reignited debate within the Eurozone following the leftwing Syriza party's electoral victory in Greece last week.

Asked if he agrees with Alexis Tsipras, the newly-elected anti-austerity Greek Prime Minister, during his appearance on CNN's Fareed Zacharia GPS, Obama responded, "I think what is true is that you cannot keep on squeezing countries that are in the midst of depression."

Obama acknowledged that some structural changes were and are warranted in Greece, but said, "it is very hard to initiate those changes if people’s standards of living are dropping by 25%."

Speaking more broadly, he said that both "fiscal prudence" and "structural reforms" are necessary during episodes of financial crisis, but said what his experience with managing the U.S. economy has taught him "is that the best way to reduce deficits and restore fiscal soundness is to grow and when you have an economy that is in a free fall there has to be a growth strategy and not simply the effort to squeeze more and more out of a population who is hurting worse and worse."

As for Obama's new fiscal proposal, CAP's Dave Johnson explained that although the "budget takes many steps in the right direction," it remains obvious that "the Republican Congress will block it." For a real anti-austerity agenda, he concluded, "There is still a long way to go."

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