It’s of course tempting to decry the President’s budget as “dead on arrival” but I wouldn’t be nearly so quick to go there. To dismiss its content because it’s not going to become the nation’s budget is painting with far too broad a stroke. Here are a number of ways that some of the ideas that administration trotted out today will be referenced in months and even years to come.
–Though the budget, wisely, proposes to spend beyond the too-tight caps in place from earlier budget deals, that extra $55 billion may well not see the light of day. Still, while legislators, as part of the Murray/Ryan deal, agreed to top-line appropriation numbers, the President’s budget provides the White House’s recommendations as to how those spending levels should be spread across agencies and programs. That blueprint will surely be in the mix when appropriators allocate discretionary spending.
–Increasing the amount of the Earned Income Tax Credit going to childless adults is an idea that’s been espoused by partisans on both sides of the aisle (see box on page 16 here) and I don’t think it’s going away (which is, of course, not the same as saying it’s going anywhere soon). The fight will be over payfors, including closing the carried-interest loophole, which virtually no one defends—it’s awfully hard to provide a rationale for the favorable tax treatment of the earnings of private equity fund managers—but still remains in place. But I’d bet that eventually, some version of what the President proposed today will become law.
–Tax reform, at least on the corporate side. I stumbled on two articles today that ticked off tax reform ideas that both President Obama and Republican House chief tax-writer Dave Camp agree on (including carried interest, btw). Yes, it’s true that many of his fellow R’s ran from Camp (they decamped?) as quickly as they could. But especially on the corporate side, where both parties are arguing for a lower rate and broader base, there could eventually be some compromise.
–Transportation spending: The corporate proposals also relate to this one, as both President Obama and Rep. Camp take some one-time revenues raised from the transition to a new approach to taxing multinationals and use those resources for improving our transportation infrastructure. To be clear, Obama and Camp’s ideas for international tax reform are quite different, but any such change involves a one-time levy on something like $2 trillion in deferred foreign earnings. In other words, if there’s ever going to be corporate tax reform, this seems like it could well be a feature of it.
More broadly speaking, I’ve heard many dismiss the President’s budget as a “political document.” Um…yep. And, as such, it will play a significant role in our political debate on the role of government, much as I suggested here. In this regard, it’s far from DOA, both in the specifics noted above and in the broader case for a more activist role for government in meeting the challenges and market failures facing way too many Americans.