Barack Obama's Fiscal Year 2014 budget proposal was released at 6 a.m. this morning. Naturally, I haven't had time to read it in detail, but lucky for you, dear readers, I did get briefed yesterday so I know roughly what it says. Based on that and the House budget written by Paul Ryan earlier this year, I think you can see three key points of contrast:
— Rich vs. poor: In a way this is cliché, but it's also quite important. Paul Ryan balances the budget without increasing taxes or reducing military spending or cutting Social Security or cutting Medicare benefits for people aged 55 and older primarily by cutting spending on poor people. Food stamps? Cut. Medicaid? Cut. Pell Grants? Cut. If the idea of the program is to bolster the living standards of the least fortunate, the GOP budget cuts it. By contrast, Obama expands Medicaid, increases EITC and Child Tax Credits, makes the Opportunity Tax Credit permanent, and spares the poor from the cuts involved in adoping the chained CPI. How does he do it? Well, he does it in several ways, but one big part of the story is reducing tax deductions for rich people. Ryan, by contrast, reduces deductions across the board in order to lower rates on the rich.
— Young vs. old: Ryan's budget is a masterpiece of coalition politics, managing to cut spending a lot while minimizing cuts in spending on people who are old today—i.e., on Republicans. Obama's budget, by contrast, doubles down on the kind of Medicare "savings" found in the Affordable Care Act and creates headroom for a large expansion of pre-K services. Ryan keeps the sequestration cuts to education, and Obama reverses them.
— Jobs vs. austerity: The Obama administration's rhetoric has long since abandoned the concept of stimulus, but yet again we have a budget proposal for some meaningful short-term economic stimulus in the form of a $50 billion infrastructure program. Perhaps more importantly, the Obama budget would replace sequestration with alternative deficit reduction that's phased-in in a more sensible way. The House budget, by contrast, is immediate austerity. I think it's difficult to gauge the real Federal Reserve policy response function and thus the ultimate impact of this difference, but, broadly speaking, the direction of change is knowable—Obama's budget would mean more job growth over the next 12-18 months.
Now obviously this budget isn't going to be passed by the House. And at the same time, the White House isn't going to make the kind of concessions that House Republicans are angling for—a budget that's all cuts and no tax hikes. So in a sense, delving into the details doesn't even matter here. What's important here is the larger ideological clash, and it's well-captured by those three points of contrast.
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