The Fairness Doctrine

I was on Bill Scher's Liberal Oasis radio show this morning (it airs tomorrow - you can get the podcast on iTunes here) talking about the federal budget, and if there's one word I can use to describe it, I'd pick "fairness". Peter Orszag is simply soft-selling the implications. The budget returns us to an era of tax fairness where everyone in society invests according to their means for the greater good. There are certainly some on the right who would call that socialism - I hope they have no use for the police, fire department, libraries, post offices, or roads. The fact is that there are public goods that we all must contribute to because only government can provide them, and with this budget, we begin to engaging the whole country in that project once again.

Paul Krugman is pleased that progressive priorities on health care and the environment are pushed forward in this budget and will be paid 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.

Krugman believes that eventually, taxes may have to be raised more broadly to deal with long-term budget snags, perhaps with a value-added tax. But for now, Obama is boldly creating a fairer vision for who pays in society.

The budget that President Obama proposed on Thursday is nothing less than an attempt to end a three-decade era of economic policy dominated by the ideas of Ronald Reagan and his supporters.

The Obama budget — a bold, even radical departure from recent history, wrapped in bureaucratic formality and statistical tables — would sharply raise taxes on the rich, beyond where Bill Clinton had raised them. It would reduce taxes for everyone else, to a lower point than they were under either Mr. Clinton or George W. Bush. And it would lay the groundwork for sweeping changes in health care and education, among other areas.

More than anything else, the proposals seek to reverse the rapid increase in economic inequality over the last 30 years. They do so first by rewriting the tax code and, over the longer term, by trying to solve some big causes of the middle-class income slowdown, like high medical costs and slowing educational gains.

Reducing inequality is a major goal of this budget, and the right way to re-create a broad middle class to spur sustainable economic growth. In a tremendous post, Charles Lemos discusses how inequality has crushed us economically and why this budget is so hopeful.

Just how far have we fallen during that three-decade era of economic policy dominated by the ideas of Ronald Reagan and his supporters? Well, a UN report last year on urban poverty found that out of the world's 120 major cities New York was found to be the ninth most unequal in the world and Atlanta, New Orleans, Washington, and Miami had similar inequality levels to those of Nairobi, Kenya and Abidjan, Côte d'Ivoire. In western New York state nearly 40% of the black, Hispanic and mixed-race households earned less than $15,000 compared with 15% of white households. The life expectancy of African-Americans in the US is about the same as that of people living in China and some states of India, despite the fact that the US is far richer than the other two countries. Is this right? Is this America? It is the America that Reagan has wrought and that President Obama seeks to undo. Undoing Reagan, how sweet the sound.

Unequal societies have throughout history been prone not just to social upheaval but also to economic turmoil. Beginning in the 1970s and accelerating after 1980, the US began undoing a series of policies that dated to FDR led to what historians call the "Great Compression" a flattening of income so that by 1964 the ratio of CEO pay to average worker pay was 24:1, the narrowest in the nation's history. Before the financial meltdown the ratio was around 400:1, or back to levels last seen in the late 1920s. And this is actually down from a high of 525:1 in 2000 (the reason is that executive compensation is largely paid in stock). In 1970, the top 1% of Americans controlled 8% of the nation's wealth, by 2000 they controlled 15%. In 1973, the income of the top 20 percent of American families was 7.5 times that of the bottom 20 percent. By 1996, it was 13 times. By 2006, it was 18 times.

The last 30 years have ushered in a New Gilded Age, with all the trappings of the robber barons prevalent at the outset of the last Depression. The moral as well as economic implications of this have been tragic. Just as the reinvention of the middle class with shrinking inequality drove the tremendous expansion of the post-war era, so can too the radical change Obama is proposing here.

So of course, Republicans and so-called Democrats are blasting it, and using the same small-bore nonsense of twisting the meaning of a program to make it sound crazy ($200,000 for tattoo removal, when it's an anti-crime program), as well as the persistent lie that taxes on the rich hurt small businesses, which will never get old for them and also never be true.

bama is proposing to raise taxes on households earning over $250,000 by increasing the rate on the top two tax brackets and limiting deductions, starting in 2011.

Republicans and other critics, knowing they will get little mileage from defending the rich, instead are casting the plan as a tax hit on people who run industrious little companies driving job growth.

That's not likely, according to one in-depth analysis, which found that more than 95 percent of small business owners would be off the hook.

Then there are clueless Blue Dogs like Gene Taylor, who returns to his tried and true hobby horse of fiscal responsibility - but see if you can find the incongruity:

(CNN) – Mississippi Democratic Rep. Gene Taylor blasted the budget outline President Obama submitted to Capitol Hill today, saying “I don’t like it…change is not running up even bigger deficits that George Bush did.”

“That’s what George Bush did very well. Apparently that’s what President Obama is doing.”

Taylor, a conservative “blue dog” who voted against the stimulus bill, noted he was still reviewing the plan but was troubled by the additional amount of spending for many government programs on top of the recent increased funding many agencies received in the economic stimulus bill.

As a member of the Armed Service Committee, Taylor noted the budget only gives the Defense Department a “small increase,” which he said would barely cover the cost of living adjustments for the military.

Get that? Obama's running up huge deficits, but he deserves a scolding for only giving the Defense Department a "small increase." Because military spending is magic spending, the largest expenditure in the federal budget but one that somehow never hits the bottom line.

I don't want to paint too rosy a picture. The economy is in big trouble and we're probably going to have to go back for another round of stimulus. But the principles of this budget - with a focus on the middle class, and tax fairness, and investment in national priorities - is what will eventually lead us back to prosperity.