Bobo and Prof. Krugman are both discussing the budget. (Bobo doesn’t learn, does he? If I were going to be on the same editorial page with Paul Krugman I’d probably find something like the mating and nest-building habits of the tufted titmouse to write about…) Bobo typed something called “The Uncertain Trumpet,” in which he says President Obama described in his speech the rot that is ingrained and pervasive in America, but what will he really do to change all that? He finessed the whole Jindal fiasco by pretending it didn’t happen. Prof. Krugman, in “Climate of Change,” says President Obama’s budget represents a huge break from policy trends. If he can get it through Congress, he will set America on a fundamentally new course. Here’s Bobo:
On Tuesday night, President Obama talked about a national culture of irresponsibility. He talked about the way Americans have sacrificed the long term for the short term, spent more than they could afford, and how the country’s leaders have broken promises and delayed reform. Obama described a rot that was ingrained and pervasive.
On Thursday, he offered a budget of his own, and the question arises: Will he really change all that?
The answer is somewhat, but not enough. Obama’s budget is far more honest than the ones that preceded it. It imposes real pay-as-you-go rules on future outlays. Intellectually serious efforts are made to pay for at least half of the cost of health care reform.
But the ingrained habits are still there, and the rot is not expunged. Obama enthusiastically perpetuates the myth that the American people can have everything they want without a dose of shared sacrifice. They can have health care, education reform, even a cure for cancer, and 98 percent of them need pay nothing. The burdens of progress will be borne by the rich while everyone else can enjoy their tax cuts and go shopping.
Obama perpetuates base-line gimmickry. He claims to save hundreds of billions by drawing down forces in Iraq. But even the Bush administration was going to draw down. Obama is claiming bogus savings by not spending money that never would have been spent anyway.
Obama grades himself on a curve. He’s set a target of merely cutting the deficit in half from 2010 to 2013. But the red ink has quadrupled in one year. Cutting the deficit to still unsustainable levels as the economy recovers is about as challenging as riding a sled downhill.
The greatest shortcomings are sins of omission, not commission. If you watched Obama’s magnificent speech Tuesday night, you got the impression that he bestrides Washington like a colossus. He imposes his authority in ways large and small, purging old habits. In reality, the situation is messier. At times, there is a weird passivity emanating from the White House, a deference to the Washington establishment. Almost no sacred cows are cut from this budget. The president is now engaged in an argument with Democratic appropriators about whether to strike earmarks from the omnibus spending bill. He’s apparently getting rolled even on a matter as easy and clear-cut as this.
The bigger problem is health care. This is an issue where everybody wants benefits they don’t pay for, where perverse incentives have created an expensive system that doesn’t deliver results. This is an area where aggressive presidential leadership is mandatory.
Yet in no other area does the administration cede so much authority. The administration has over-learned the lessons of the Clinton-care fiasco. They’re not going to send up a detailed 1,400-page program. Fine. But they’re not pushing a plan at all.
Instead, replicating the model that did such harm to the stimulus package, they are merely outlining eight general principles and then sending the matter up to Capitol Hill. They vow to have a series of “conversations” and then presumably at some point some group of committee chairmen will write a bill or a bunch of bills.
The balance of power will be clear. The White House will have no dominating figure to ride herd day to day now that Tom Daschle is out of the picture. Instead, the same old chairmen habituated by the same old interest groups will dominate everything.
If Hillary Clinton were still in the Senate, at least there would be a focus. If Ted Kennedy were at full strength, the negotiations would be coherent. Instead, there will be a wide array of committee chairmen in the House and Senate scrambling for influence, maneuvering with and against each other through a Machiavellian process of secret negotiations and back-room deals.
Thursday, there was a weird burst of optimism in the halls of the Washington Establishment. Most members of Congress and lobbyists are delighted that the White House has surrendered so much authority to Capitol Hill. Everybody is working on a way to push their own particular vision of reform through the muddle.
There are good plans on offer, but it won’t take long for this to get ugly. We’ll either get an irresponsible bill produced by the Old Order or no bill at all. It could be that even with a thousand “conversations,” no consensus will automatically emerge from the hundreds of players who have produced the gridlock of the past 30 years.
Even though the budget is not all one would have hoped, I’d trust the folks in the Obama administration to craft a decent health care plan before I’d trust the Congressional Old Bulls. Obama blew a mighty trumpet Tuesday night, but after you blow the trumpet, you actually have to charge.
Here’s Prof. Krugman:
Elections have consequences. President Obama’s new budget represents a huge break, not just with the policies of the past eight years, but with policy trends over the past 30 years. If he can get anything like the plan he announced on Thursday through Congress, he will set America on a fundamentally new course.
The budget will, among other things, come as a huge relief to Democrats who were starting to feel a bit of postpartisan depression. The stimulus bill that Congress passed may have been too weak and too focused on tax cuts. The administration’s refusal to get tough on the banks may be deeply disappointing. But fears that Mr. Obama would sacrifice progressive priorities in his budget plans, and satisfy himself with fiddling around the edges of the tax system, have now been banished.
For this budget allocates $634 billion over the next decade for health reform. That’s not enough to pay for universal coverage, but it’s an impressive start. And Mr. Obama plans to pay for health reform, not just with higher taxes on the affluent, but by putting a halt to the creeping privatization of Medicare, eliminating overpayments to insurance companies.
On another front, it’s also heartening to see that the budget projects $645 billion in revenues from the sale of emission allowances. After years of denial and delay by its predecessor, the Obama administration is signaling that it’s ready to take on climate change.
And these new priorities are laid out in a document whose clarity and plausibility seem almost incredible to those of us who grew accustomed to reading Bush-era budgets, which insulted our intelligence on every page. This is budgeting we can believe in.
Many will ask whether Mr. Obama can actually pull off the deficit reduction he promises. Can he actually reduce the red ink from $1.75 trillion this year to less than a third as much in 2013? Yes, he can.
Right now the deficit is huge thanks to temporary factors (at least we hope they’re temporary): a severe economic slump is depressing revenues and large sums have to be allocated both to fiscal stimulus and to financial rescues.
But if and when the crisis passes, the budget picture should improve dramatically. Bear in mind that from 2005 to 2007, that is, in the three years before the crisis, the federal deficit averaged only $243 billion a year. Now, during those years, revenues were inflated, to some degree, by the housing bubble. But it’s also true that we were spending more than $100 billion a year in Iraq.
So if Mr. Obama gets us out of Iraq (without bogging us down in an equally expensive Afghan quagmire) and manages to engineer a solid economic recovery — two big ifs, to be sure — getting the deficit down to around $500 billion by 2013 shouldn’t be at all difficult.
But won’t the deficit be swollen by interest on the debt run-up over the next few years? Not as much as you might think. Interest rates on long-term government debt are less than 4 percent, so even a trillion dollars of additional debt adds less than $40 billion a year to future deficits. And those interest costs are fully reflected in the budget documents.
So we have good priorities and plausible projections. What’s not to like about this budget? Basically, the long run outlook remains worrying.
According to the Obama administration’s budget projections, the ratio of federal debt to G.D.P., a widely used measure of the government’s financial position, will soar over the next few years, then more or less stabilize. But this stability will be achieved at a debt-to-G.D.P. ratio of around 60 percent. That wouldn’t be an extremely high debt level by international standards, but it would be the deepest in debt America has been since the years immediately following World War II. And it would leave us with considerably reduced room for maneuver if another crisis comes along.
Furthermore, the Obama budget only tells us about the next 10 years. That’s an improvement on Bush-era budgets, which looked only 5 years ahead. But America’s really big fiscal problems lurk over that budget horizon: sooner or later we’re going to have to come to grips with the forces driving up long-run spending — above all, the ever-rising cost of health care.
And even if fundamental health care reform brings costs under control, I at least find it hard to see how the federal government can meet its long-term obligations without some tax increases on the middle class. Whatever politicians may say now, there’s probably a value-added tax in our future.
But I don’t blame Mr. Obama for leaving some big questions unanswered in this budget. There’s only so much long-run thinking the political system can handle in the midst of a severe crisis; he has probably taken on all he can, for now. And this budget looks very, very good.
