Budget Battles

The President released his budget today and the usual suspects are lining up to either hail or damn it. Predictably political affiliation pretty much determines reaction though the President is getting perhaps a bit more blowback from his left flank than he might have expected. Here are two analyses which I suspect will more or less encompass the substance of the thousands of blog posts, columns and op-eds which are sure to follow.

On the Left we have Derek Thompson at the Atlantic. His take can pretty much be summed up by his opening comments.

If the Paul Ryan budget, in nine words, was:

“Save the rich; Forget the poor; Spare the old

President Obama’s budget, in nine words, is:

“Tax the rich; Spare the poor; Remember the young”

The contours of the president’s plan will be familiar to budget nerds, because he’s been cooking up different styles of the same dish for months now. And there are two sticking points, which will also be familiar to budget nerds, because they’re the same old sticking points: Taxes and entitlements. Obama’s plan raises taxes on the richest households by $600 billion — not by raising rates, but instead reducing the deductions these families can take. Second, his plan adopts a new measure for inflation, which would slowly cut Social Security benefits, and it proposes additional cuts to Medicare.

Most Republicans hate the first part. Most Democrats hate the second part. Will this new budget compel both sides to reconsider? Honestly, who knows.

On the right we have Veronique de Rugy at the National Review.

 The FY2014 budget figure is astonishing: $3.77 trillion.

This is the only number that really matters and should be taken seriously, considering the amount of rosy assumptions and wishful thinking built in the out-year numbers. And in FY2014 the president went all out. I assumed his spending proposal would be higher than the FY 2013 number and the Republican budgets (both Ryan and Paul), but I didn’t think he would spend more than the Senate Democrat plan. Here is a recap of other headline budget figures for 2014:

So much for his budget being conciliatory or trying to find a middle ground. President Obama’s budget would spend $160 billion more in FY 2014 than the Congressional Budget Office’s baseline. That’s a lot of extra spending.

If it happens, it will put an end to the relatively flat spending levels (even decreasing levels) that we have had in the last few year (which you can see in this chart).

There you have it. Republicans are heartless bastards only looking out for their friends or Democrats are irresponsible spendthrifts capable of only bidding up the national debt. We won’t get into the possible kernels of truth which might lay in either position, rather note that this is both politics and a negotiation. Put those two together and you have as complex a puzzle as any you can conjure in which principle is very much a secondary consideration. That President Obama chose to bid on the high side is no more surprising that the Republicans approach the process with low bids. Each wants to establish the starting point hoping to see the outcome as close as possible to their position.

Of course, there may be no reconciliation. Given the gulf that separates the two sides compromise is not a given outcome. There is no guarantee that Congress can produce any bill that would go to the White House for signature and no certainty that once there it would be signed. Each side may calculate that the political gains of no decision outweigh the gains or losses they would sustain in agreement. After all, they have become quite adept at managing albeit from manufactured crisis to manufactured crisis without a budget.

Whatever the outcome, I suggest that you follow de Rugy’s advice and focus only on the current year budget. The rest is all budgetary gamesmanship subject to revision at the whim of whichever party happens to have the upper hand. And, enjoy the show.



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