President Obama has submitted a budget proposal that (finally) signals a break from cuts and austerity. It largely pushes in the right direction. Republicans will oppose it — even the parts they agree with.
Signals Dividing Line Between Cutbacks And Public Investment
President Obama is using his "bully pulpit" to push the country in a new direction. The President has submitted a budget that calls for more public investment in vital areas, and pays for it with more taxes on the wealthy. He 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.
To make this dividing line even clearer, President Obama has told Congress that he will not sign a budget that does not increase spending,
President Obama said Monday he will reject any budget from Congress that doesn’t boost spending on both defense and his own domestic priorities, saying the spending “sequesters” need to go.
“America can’t afford being short-sighted and I’m not going to allow it,” the president said while speaking at the Homeland Security Department as he released his $4 trillion budget for fiscal 2016.
His budget calls for boosting discretionary spending by more than 6 percent, and raising taxes to pay for it.
Ends Sequester, Helps Families
The President's budget finally ends the austerity-driven "sequester" cuts that have hampered the economic recovery. He asks for $478 billion for transportation infrastructure over the next 10 years. (This is just 13% of the $3.6 trillion that American Society of Civil Engineers' "Infrastructure Report Card" says is needed by 2020, to start repairing America's crumbling public infrastructure.) The President has been asking Congress for infrastructure funding all along — $302 billion last year — but this is a large increase in the request. This is a step in the right direction.
The President's budget offers more help for working families, with a $500 "second-earner" tax credit, increases in the college tuition credit, increases in the Earned Income Tax Credit, abd tax credits of up to $3,000 per child. These are steps in the right direction.
The LA Times reports, "An administration official said 44 million households would see their taxes cut by an average of $600 a year." This is a step in the right direction.
The President's budget increases the duration of Head Start programs, and helps pay for preschool for 4-year-olds from poor and middle-income families, as part of a Preschool For All initiative. These are steps in the right direction.
The budget extends unemployment insurance. It invests more than $3 billion on science, technology, engineering, and math (STEM) education. These are steps in the right direction.
Addresses Inequality By Increasing Taxes On The 1%
On the other side of the equation, the President proposes raising the capital gains tax. Most of the income of those at the top comes from capital gains, because the capital gains tax is lower. And the capital gains tax is lower because most of the income of those at the top comes from capital gains. As of 2007 the top 1% owned 50.9% of all stocks, bonds and mutual finds, and the next 9% owned another 39.4%. The bottom 50% owned 0.5% — that's one half of one percent. This has only gotten worse since 2007.
Raising the capital gains tax is a huge step in the right direction.
The president also is asking that the formula for computing capital gains not be "reset" when inherited. This is a bit complicated, but important. The "gain" in capital gains is the difference between the "base" price that was paid, and any later increase. Currently when stocks, etc., are inherited, the "base" is reset to the value at the time it was purchased — with no tax paid on the gain since it was purchased. This means that when the stock, etc. is later sold there is a much lower tax to pay. The President is asking that this base not be reset. So, the gain on a stock bought in 1930, and sold by an inheritor in 2015, will be calculated from the value of the stock when inherited, instead of the 1930 price. This is another huge step in the right direction.
The President also wants a tax on borrowing by large "too big to fail" banks. This will discourage those banks from borrowing, which risks another bailout when they fail. This is a step in the right direction.
This budget pushes the country back toward sanity. This budget takes many steps in the right direction. But the Republican Congress will block it. There is still a long way to go.