Budget Musings

The President's budget for FY2010 is online. This is a pretty remarkable leap forward, and offers the ability for geeks and wonks of all stripes to dig into the line-by-line appropriations and see what the President is offering. While Congress will almost certainly change some of these terms, a lot of what's here is promising while not totally sufficient. Bill Scher has a good overview of two of the major concerns, energy and health care.

Over the course of the 10-year budget window, President Barack Obama envisions a $634 billion fund for health care reform that would provide coverage for all Americans, paid for by higher taxes on the wealthy and various budget savings -- a dramatic gesture that confirms the deep commitment from the White House to solve the health care crisis.

But as the White House acknowledges and The Treatment's Jonathan Cohn observes, $634 billion is but a healthy down payment. More will be needed [...]

On energy and climate, I wrote yesterday about the stunning news that the White House expects to have revenue from a carbon cap and emissions trading system to combat global warming and transition to a clean energy economy.

Such a plan would raise significant revenue, particularly in the early years of the plan while the carbon cap would be looser (it would gradually tighten over time). However, the White House understandably wants to return the vast majority of revenue from polluters to consumers, to reduce the impact of short-term price spikes and refute charges that the plan amounts to a tax hike.

But that means the White House only expects to use $15 billion to invest in clean energy. The Apollo Alliance concludes we need to invest $50 billion a year for 10 years to transition to a clean energy economy. Again, a good down payment, but not all we need.

The other big funding tranche, education, is getting a pretty good deal, more than even a lot of optimistic education advocates expected. It looks like Obama will reauthorize No Child Left Behind but with the actual funding to make it work. There is a definite effort to split the difference between reformers and teacher's unions on things like charter schools, where I think he can get significant Republican buy-in. And this is great:

Recognizing that the push for college access for low-income and minority students must be complemented by a new focus on college completion, the administration is proposing a $2.5 billion Access and Completion Incentive Fund, "to support innovative State efforts to help low-income students succeed and complete their college education."

The administration wants to originate all student loans in the direct lending program, cutting out wasteful middle-men. This is a very good thing, as it will save the federal government billions of dollars that can be funneled back to students.

There is just no need for the government to invent a secondary student-loan market, adding an unnecessary layer of inefficiency. Good thinking.

There's also a dedicated state grant program for high speed rail of about a billion dollars a year. Again, great, but somewhat insufficient. And there is a provision to speed the development of generic drugs into the market and tear down attempts by drugmakers to block them, which would save the government and consumers billions.

Still, there are concerns. First of all, while most of the fuzzy math is gone, the budget depends on pretty robust growth in 2011 and 2012. Obviously Obama feels that the results of his policies will return us to better times, and that may be true, but he's using pretty optimistic numbers. The other issue is the military budget. Again, Bill Scher:

Congressman Barney Frank argues we can and should cut our $670 billion military budget by 25 percent. That includes spending for our wars in Iraq and Afghanistan.

Disregarding the President's budgeting for Iraq and Afghanistan (because I don't believe we can discern too much on his strategy from the budget numbers), Obama's basic defense budget is scheduled for a slight increase in 2009: from $513 billion to $534 billion.

The WSJ reports that there is likely to be major weapons reductions in the future, as a result of putting the wars in Iraq and Afghanistan back on budget.

President Barack Obama has talked about the need to prune some high-end Pentagon acquisitions programs and withdraw most U.S. combat troops from Iraq by mid-2010, both of which should result in significant defense-spending reductions. But the president plans to direct additional financial and military resources into Afghanistan, so much of the savings may be offset by new spending on the troubled war effort there.

That could force the military to cut back its spending on its most-advanced weapons, and the Pentagon plans to overhaul its weapons-purchasing system.

I'll have more as I keep reading.

...One thing I'm noticing, reading over the President's budget, is that it is a starkly ideological document. Almost shockingly so. For example, read pages 5-17, describing what got us into this mess. And many of the backpedal steps that Obama made on domestic issues during the campaign are not in here at all. Nothing on nuclear power in the energy section. Nothing on offshore drilling - in fact, the only thing is an excise tax starting in 2011 to stop oil companies from getting excessive royalty relief. I'm not sure if all the numbers line up, but rhetorically it's really on point.