President's Budget Proposal: A Strong Tightrope Walk
Earlier this week President Obama announced his budget proposal for the coming year. These are precarious times with conflicting demands. Most economists agree that more government spending is needed to help speed the end of the recession and bring down unemployment. But there is also mounting concern that that federal deficit is getting too large, which weighs against added longer term spending. The President’s proposal walks the tightrope between these concerns and promotes both the short term “jobs” goal and the longer term deficit-reduction goal. It contains important policy and spending priorities and deserves support.
Help for states and working families
The President proposes to extend the life of crucial enhanced payments to states under Medicaid, the state fiscal stabilization program, and the TANF Emergency Contingency funds. These three funding streams created by the American Recovery and Reinvestment Act (ARRA) stimulus law have helped states patch their budgets, save and create jobs, and protect health coverage. It is important that as much of this relief as possible be included in the immediate “jobs” proposal (some call it a “second stimulus”) being debated for passage in Congress in the next weeks, rather than waiting for the next federal fiscal year.
Improve revenues overall while protecting middle-class tax relief
The budget proposal allows the Bush-era tax credits for the wealthy to expire as scheduled, and it closes a number of tax loopholes. It also makes permanent the improved middle-class tax relief that was put in place by ARRA through the Earned Income Tax Credit, Child Tax Credit, and the American Opportunity Tax Credit.
Targeted discretionary spending freeze, but program increases
The discretionary spending freeze got the most press. It is a “global” freeze, in that the overall number is frozen, but within that number there are important priorities. Some programs actually get increases, while less effective programs will be cut. Child care would get a $1.6 billion per year increase. Housing Choice vouchers (Section 8) would get a $1.3 billion increase, enough to fully fund renewal of all 2.1 million current vouchers. Pell Grants would increase by over $7 billion and would be taken out of the “discretionary” category altogether. And Head Start would increase by $1 billion.
Assumes passage of health reform
By making financial decisions that assume that health reform measures are in place, the budget proposal corroborates the frequent statements of the President and others that the Administration intends to complete the health care reform process.
The budget proposal walks the difficult line between short-term stimulus and long-term deficit reduction, while setting important priorities for low- and middle-income working families.
