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Obama Releases $3.55 Trillion Budget

President Obama's 2010 budget was released today. It amounts to $3.55 trillion and, according to the Washington Post, will push the deficit to $1.75 trillion.

Included is a $634 billion health care fund. How will it be paid for? In large part, by increasing taxes on those earning more than $250,000. [More...]

The budget proposes to raise taxes on couples earning more than $250,000 a year, generating $636 billion over the next decade. To do so, Obama would raise the top two marginal income tax rates to 39.6 percent and 36 percent, limit itemized tax deductions and increase taxes on capital gains to 20 percent from the current 15 percent.

The spending plan also proposes to raise taxes on venture capitalists, executives of private equity firms and other investment partnerships by $24 billion by eliminating the so- called carried interest tax loophole. The provision currently allows investment managers to pay 15 percent tax rates on their compensation rather than the usual income tax rates.

Obama also would raise $210 billion by cracking down on offshore tax havens and another $5 billion by clamping down on business transactions that are solely designed to reduce companies’ tax bills. He would also generate $61 billion by ending a tax accounting technique called “last-in, first-out” or LIFO that primarily benefits oil and gas companies but is widely used across industries.

How did Wall Street react? Drug company stocks fell big.

For those of you with some economic knowledge, is the budget a good deal or not?

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    I would say this is the opposite of the Stimulus (5.00 / 1) (#5)
    by steviez314 on Thu Feb 26, 2009 at 07:54:46 PM EST
    Bill.

    It's the most progressive budget in a generation, and he's given himself LOTS of room to negotiate if needed.

    I like what I see (5.00 / 1) (#6)
    by Steve M on Thu Feb 26, 2009 at 07:55:03 PM EST
    the tax increases are reasonable and about all the current state of the economy can probably sustain.  It's going to be a big enough deficit as it is.

    I love the tax policy part except for the (5.00 / 1) (#17)
    by masslib on Thu Feb 26, 2009 at 10:01:11 PM EST
    treatment of corporate dividends, which I had to look up, and are a hold over from GWB's tax policies.  But, the hedge fund/private equity taxes are excellent.  The permanent, what looks like payroll tax refunds, paid for by cap and trade for 95% of working Americans, very good.  The carbon cap and trade is very good, though I would have liked to have seen a straight carbon tax.  In effect this returns us to Clinton era tax policy and then a little more toward income redistribution via cap and trade and health subsidy funds.  The cap and trade will make significant headway toward clean energy, though not as much as a carbon tax.  The Medicare fixes are good policy, though I would rather have seen the complete elimination of Medicare Advantage, still very good stuff.  Basically, this budget undoes a lot of the domestic problems caused by GWB and then some.  It's really good, and shows what you get when OMB and the department heads plan a budget versus the lemon socialism of the Treasury secretary.

    Oh and LIFO, live that accounting change. (none / 0) (#18)
    by masslib on Thu Feb 26, 2009 at 10:03:51 PM EST
    love Not live (none / 0) (#19)
    by masslib on Thu Feb 26, 2009 at 10:04:03 PM EST
    The devil is in the details... (none / 0) (#1)
    by FoxholeAtheist on Thu Feb 26, 2009 at 07:21:02 PM EST
    and the loopholes. I'll await the verdict of progressive economists.

    FTR, that's $6.34B/decade, not $6.34B/yr (none / 0) (#2)
    by RonK Seattle on Thu Feb 26, 2009 at 07:25:59 PM EST


    No, it's $634 billion over ten years, (none / 0) (#10)
    by Anne on Thu Feb 26, 2009 at 08:36:12 PM EST
    which is $63.4 billion per year.

    Parent
    I have a question (none / 0) (#3)
    by Saul on Thu Feb 26, 2009 at 07:45:02 PM EST
    Excuse my ignorance.  But when the president puts out his budget does that mean those expenses and or cuts will occur automatically or does each item on the budget need to be approved by congress before it can be implemented?

    The President sends a budget (none / 0) (#4)
    by andgarden on Thu Feb 26, 2009 at 07:49:43 PM EST
    that Congress is free to ignore.

    Parent
    So everything in the budget is approved (none / 0) (#7)
    by Saul on Thu Feb 26, 2009 at 08:09:40 PM EST
     if Congress doesn't  challenge it.  Is that correct?

    Parent
    Not even close (none / 0) (#8)
    by andgarden on Thu Feb 26, 2009 at 08:12:19 PM EST
    All spending and tax bills must start in the House.

    Parent
    Lets not kid ourselves (none / 0) (#13)
    by ai002h on Thu Feb 26, 2009 at 09:13:41 PM EST
    The House may write the bill...but it will pretty much fill in the details to Obama's outline, much like the Stimulus. Obama's running the show here, Dems in congress will write the bill he wants. There may be adjustments, but by and large he's running the show.

    Parent
    Not sure how that's a response to me (none / 0) (#14)
    by andgarden on Thu Feb 26, 2009 at 09:17:07 PM EST
    I as addressing this question:

    So everything in the budget is approved if Congress doesn't  challenge it.  Is that correct?



    Parent
    No (none / 0) (#23)
    by lambert on Fri Feb 27, 2009 at 12:01:33 AM EST
    Article I, Section 7:

    All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.

    For all the Constitutional effect it has, the President's budget might as well be a sternly worded letter.

    Parent

    Which, if you read the thread, (none / 0) (#24)
    by andgarden on Fri Feb 27, 2009 at 12:03:36 AM EST
    was my answer too.

    Parent
    Sorry! (5.00 / 1) (#50)
    by lambert on Fri Feb 27, 2009 at 12:48:53 PM EST
    Missed it.

    Parent
    To be fair (none / 0) (#9)
    by CoralGables on Thu Feb 26, 2009 at 08:29:10 PM EST

    Included is a $634 billion health care fund. How will it be paid for? In large part, by increasing taxes on those earning more than $250,000.

    $1.75 trillion isn't being funded at all. It's a loan. Also, the long term goal of cutting the deficit in half is misleading. It's only cutting the annual deficit rather than the overall deficit which will still leave a huge yearly deficit adding to our overall total debt.

    The house of cards we continue to build is extremely dangerous. Let's hope the plan works over the long haul.

    I do not think (none / 0) (#12)
    by Steve M on Thu Feb 26, 2009 at 09:13:35 PM EST
    that it is misleading, except maybe to people who refer to the national debt as a deficit.  The distinction is pretty clear IMO.

    Parent
    Maybe then (none / 0) (#15)
    by CoralGables on Thu Feb 26, 2009 at 09:40:06 PM EST
    the most honest way to phrase it is... based on our projections, the long term goal of the budget we are presenting is intended to sink the nation further into debt each and every year for the next decade.

    Parent
    Sure (none / 0) (#16)
    by Steve M on Thu Feb 26, 2009 at 09:54:00 PM EST
    if you think the amount of the deficit is immaterial as long as one exists, then sure, that's the most honest.  If you prefer full information, then it's more honest to point out that the deficit is narrowing.

    Your argument is like saying that if a company is in debt, it's not even relevant to know whether the profits are increasing each year.  There are two different concepts.

    Parent

    I agree it's one of semantics (none / 0) (#20)
    by CoralGables on Thu Feb 26, 2009 at 10:21:22 PM EST
    but the profits aren't increasing. As long as you run an annual deficit, there are no profits to report.

    I would see the comparison more similar to, my 401K lost $50,000 this year, but next year I'm only planning on it losing an additional $25,000. Now if you can spin that to making it sound like I'm saving $25,000 next year, then you have a job as budget headline writer :)

    Parent

    Heh (none / 0) (#21)
    by Steve M on Thu Feb 26, 2009 at 10:54:14 PM EST
    So if your business lost $50,000 last year, but only $25,000 last year, you think it would be misleading to say that you're closer to becoming profitable?

    The only way to run a surplus and pay down the debt is to decrease the deficit, year after year, until it no longer exists.  Of course it's relevant if we're getting closer to that goal or further from it.  I have no idea why you're being so weird about this.

    Parent

    I think because (none / 0) (#22)
    by CoralGables on Thu Feb 26, 2009 at 11:17:15 PM EST

    The only way to run a surplus and pay down the debt is to decrease the deficit, year after year, until it no longer exists.

    Until the year you actually run a surplus your debt keeps getting bigger, and the current plan increases the national debt for every year in the plan. To me that's losing ground each and ever year not gaining ground.

    But I sincerely hope the long term plan is ultimately successful, because if not today's mess will be penny-ante by comparison.

    Parent

    We're going to (none / 0) (#11)
    by SOS on Thu Feb 26, 2009 at 09:00:47 PM EST
    have to take some risks to get out of this mess.

    When I read (none / 0) (#25)
    by lentinel on Fri Feb 27, 2009 at 07:20:16 AM EST
    the figures, it doesn't seem that Obama will be realizing nearly enough money from tax increases. The deficit will continue to grow. What happens if China wants to pull in its' markers? What the hell. I love Chinese food. The country I thought I knew, respect for privacy rights, separation of Church and State, congress being the body that is the one to declare war - all that passé stuff. I'd rather be Chinese than Iranian - not that I could actually choose. Japan used to appear to be the one to own us. Rockefeller Center is Japanese last I heard. But now they're going down the tubes. I wonder to whom they will sell it to raise cash.

    Of course, I wouldn't be foolhardy enough to suggest that we stop spending a half million dollars a minute in Iraq. No no. Not that. We must continue this venture to protect "our interests" whatever tf they are. No no. This "dumb" war must go on - and we must send umpteen thousand souls to Afghanistan because, as the witch of the West says, "poppies will make them sleep", and also the Taliban is bad and Al Queda is badder and we must send drones over Pakistan to create more members of Al Queda so that things can go on indefinitely.

    Sounds good.
    Another coffee?

    Is it common for high government finance... (none / 0) (#26)
    by kdog on Fri Feb 27, 2009 at 08:41:18 AM EST
    to defy all common sense?

    When you're broke, common sense tells you to pinch pennies, do more with less, be frugal.  Certainly not to double your yearly expenditures....that seems like the worst thing you could possibly do.

    Maybe there is a secret plan to stiff our loan sharks and rip up the debt when it gets too big...or a plan to hide our assets in Canada and file international bankruptcy.  Who knows...but I ain't too confident this is gonna end well...my common sense won't let me defy it and believe.

    Not a good analogy (5.00 / 1) (#29)
    by cenobite on Fri Feb 27, 2009 at 08:58:36 AM EST
    The government differs from your household or a business because it has the power of taxation and controls the money supply.

    Government budgets running deficits is normal and to be expected, and not unhealthy like paying for your groceries with a credit card, despite what common sense tells you.


    Parent

    But my household... (none / 0) (#31)
    by kdog on Fri Feb 27, 2009 at 09:27:24 AM EST
    has the power to raise revenue too...not through taxation, but through work.  The end result is the same though...revenue raised.  And my household controls my household's money supply.  Is it really that far off aside from the obvious difference in scale?

    Parent
    It's not even close to the same thing (none / 0) (#36)
    by cenobite on Fri Feb 27, 2009 at 09:47:11 AM EST
    "money supply" is an economic term and it means "the government can print/create money and you can't."

    The government's power to tax has little dependence on its efforts whereas your power to work is sharply limited by what you can physically do.

    Parent

    Please explain (none / 0) (#46)
    by lentinel on Fri Feb 27, 2009 at 11:17:42 AM EST
    I know it is usual for our government to run deficits, but why is it "normal"? Why is it not unhealthy?

    Am I wrong to recall that when Clinton left office we had a surplus?
    I think things felt somewhat more healthy - but maybe it was an illusion since it didn't take much time for Bush plus the Dems to wipe it out.

    Parent

    Yes. (none / 0) (#27)
    by sweetthings on Fri Feb 27, 2009 at 08:48:12 AM EST
    The rules are different for you and the US government. You can't print money. They can.

    Parent
    Yep (5.00 / 1) (#28)
    by ai002h on Fri Feb 27, 2009 at 08:52:46 AM EST
    And the US government, unlike you, is responsible for an economy of a country and is a purchaser of last resort. If the government doesn't invest, we're toast.

    Parent
    Is it investing.... (5.00 / 1) (#30)
    by kdog on Fri Feb 27, 2009 at 09:21:20 AM EST
    or is it looting?  I wish I knew...

    Firing up the printers at the mint surely has consequences, no?  What good is an "economic recovery" when in the recovered economy a loaf of bread costs ten bucks?

    I really hope they know what they are doing...

    Parent

    Redundant... (none / 0) (#32)
    by lentinel on Fri Feb 27, 2009 at 09:32:41 AM EST
    I know that this is redundant, but our government doesn't seem to have any trouble investing our hard-earned loot in Iraq. 500,000 dollars a minute.

    And there's plenty more where that came from for wonderful enterprises of this nature.
    How about shooting a few billion more down the sink-hole of Afghanistan? Sounds good. Cash? No problem.

    Parent

    Exactly what I mean.... (none / 0) (#33)
    by kdog on Fri Feb 27, 2009 at 09:35:55 AM EST
    by "investing" being Orwellian Newspeak for "looting".

    Parent
    Just curious... (none / 0) (#34)
    by lentinel on Fri Feb 27, 2009 at 09:41:04 AM EST
    Is there anything at all that isn't Orwellian  Newspeak these days?

    Parent
    Official language... (none / 0) (#35)
    by kdog on Fri Feb 27, 2009 at 09:45:59 AM EST
    of government now as far as I can tell.

    In the proletariat sections you can still find straight talk:)

    Parent

    Sometimes (none / 0) (#38)
    by lentinel on Fri Feb 27, 2009 at 10:08:59 AM EST
    it's really enhanced interrogation technique to sift through government newspeak.

    Parent
    Very few families operate without debt... (none / 0) (#37)
    by Lacey on Fri Feb 27, 2009 at 10:08:33 AM EST
    Can we do away with this faulty notion that households always balance their budgets. Every household runs in the red. We have mortgages, car loans, credit cards, ect. that we need to rely upon. It's not like someone can buy a house outright. They BORROW the money to do it, then pay it off over time. The government does the same thing. Imagine if someone said from now, if you want a house, you have to pay for the entire thing up front?
    Government determines certain services are required to make our society properly function. Then, it pays for those services through a combination of taxes and borrowing. Now, what you need to look at is what type of "mortgage" payments is the government making to pay down that debt.  

    Parent
    My household is freakish..... (5.00 / 1) (#39)
    by kdog on Fri Feb 27, 2009 at 10:33:04 AM EST
    I don't anybody a dime as far as I know...I forget sometimes how outside the norm that is these days...probably why I don't get high government finance, it is so foreign to me.  

    No credit cards besides a prepaid, Never had a car loan, always bought used in cash....when my whip dies I've got a couple grand stashed away to buy another used jam.  

    And if I ever own a home, I'm paying in cash...so odds are I'll never own a home, but I'd rather rent than having a 100k or more in debt hanging over my head.  I'd be a nervous wreck 24/7...I'd feel trapped and less free.  Debt-free works for me...I really don't see why it can't work for the nation.

    Parent

    Everyone's gone a bit overboard with debt (none / 0) (#40)
    by Lacey on Fri Feb 27, 2009 at 10:39:42 AM EST
    And I think cutting back on how much we all owe is vital, but I don't think it's realistic for think everyone can live debt-free. Most people want to own a home and getting a mortgage is usually the only way. In fact, most of the time mortgages and car loans are very manageable for most families. It's when the banks start handing out loans to those who simply shouldn't get one that it becomes a problem. I live in Canada and our mortgage system is totally different up here. When you apply for a mortgage, the bank sends the entire application to the government. If your payments exceed a certain percentage of your monthly income, or if you already owe a whack of money, the government will not allow the bank to lend to you. The rules are fairly tight. But, I think Canada is the only industrialized nation that hasn't had to bailout any banks.  

    Parent
    debt-free (none / 0) (#41)
    by CST on Fri Feb 27, 2009 at 10:48:49 AM EST
    is a whole lot easier if you don't have kids.

    Especially college-aged kids.

    Parent

    Kids bring a whole new meaning to expenses (none / 0) (#43)
    by Lacey on Fri Feb 27, 2009 at 10:52:58 AM EST
    My wife and I have two-year-old son. We spend only what we need and the remainder of our cash goes to him. And every month he seems to cost more and more. We're going to start to put together a college fund for him so we don't run into the "crunch" 15 years from now. But kids help make you reset your spending priorities.  

    Parent
    True... (none / 0) (#44)
    by kdog on Fri Feb 27, 2009 at 11:00:54 AM EST
    unless I married rich a family would be out of the question at my income level without a credit line...eh, I could probably house and feed one rug rat with cuts to my pleasure budget:)

    I'm still in shock at how my parents raised four on their income without amassing a pile of debt, ...that time my dad brought home a "new" station wagon that he bought for 50 bucks from a guy who hung out at his bar must have helped...and them waiting 20 years after marriage to purchase their first home with a sizeable down payment.

    My parents ingrained in me a mantra..."if ya can't afford it, ya don't need it"...it has served me well.  The nation can't afford a drug war...we don't need one.  The nation can't afford foreign occupations...we don't need that either.  I know Obama is talking cuts to defense, and that is good...but it ain't enough.  They need to cut out all of it that we can't afford and don't need.  It feels like they're thinking we can have our cake and eat it too....doesn't it?

    Parent

    I agree although... (none / 0) (#45)
    by Lacey on Fri Feb 27, 2009 at 11:07:42 AM EST
    In all fairness, it's not like they've had a lot of time to sift through the budget. Maybe (big maybe) they'll spend the next year or so really going through it. But the blame lies with the people. They elect the politicians to govern and if the people don't complain or punish them at the polls then the politicians can do whatever they want.
    My father inlaw is one of eight kids. I couldn't imagine looking after, let alone feeding and clothing eight kids. I don't what has changed, or when it did change, but things are definitly different today.

    Parent
    Different today (none / 0) (#48)
    by CST on Fri Feb 27, 2009 at 11:25:50 AM EST
    My parents bought their first house in the city for under 10G.

    I mean, inflation helps with some of that, but even adjusting for inflation, it's not even close to being that affordable today.

    The cost of living has risen far faster than average wages.  The rich are much richer, and the middle-class is way poorer.

    Parent

    Right about that... (none / 0) (#49)
    by kdog on Fri Feb 27, 2009 at 11:29:15 AM EST
    "you get the government you deserve"...truer words never spoken.

    Television has something to do with it I think, and all the accompanying advertising.  My parents were the last generation that weren't staring at a tv since birth...it has done something to us.  Led us to believe the key to happiness is in material possessions and the accompanying pile of debt...like Tyler Durden said (paraphrase) "Your possessions end up owning you."

    Parent

    Yes we can... (none / 0) (#47)
    by lentinel on Fri Feb 27, 2009 at 11:19:10 AM EST
    We can print money.
    It's just that we get put in jail for doing it.

    Parent
    budget (none / 0) (#42)
    by kennyrodgers on Fri Feb 27, 2009 at 10:49:38 AM EST

    Just a few questions.

    Why do I have the sneaky suspicion that the people who would supposedly be getting their taxes raised would either A: leave the country thus costing us the taxes they were paying or B: lobbying congress for favorable tax laws thus just complicating the tax code further?

    Why would I be willing to bet that if the cap and trade on carbon dioxide is passed that companies will just go to Asia to build their plants since they would not be taxing this and we would see a lot of companies finding it totally uneconomical to compete in the world market under these conditions so they would move their factories overseas thus increasing unemployment when supposedly we're trying to increase it?

    Finally, about the person who gave as an example buying your groceries on a credit card, you still have to pay the credit card company back.

    as one who will be paying the additional tax (5.00 / 1) (#51)
    by Jlvngstn on Fri Feb 27, 2009 at 12:59:18 PM EST
    I won't be leaving the country.  I won't be looking to offshore.  I won't be looking for loopholes.

    So it costs me an extra 12-20k in taxes.  Ouchie, my kids may not get the GI Joe with the Kung-Fu grip.

    I hate when my taxes are spent on unprovoked wars.  I love that a portion of my taxes will go to insuring health care for every American.

    Parent

    Why (none / 0) (#52)
    by Wile ECoyote on Fri Feb 27, 2009 at 02:53:05 PM EST
    not donate directly to groups that do that?  Even better than paying for a bureaucracy.  

    Parent
    why? (5.00 / 0) (#54)
    by Jlvngstn on Fri Feb 27, 2009 at 03:58:09 PM EST
    bureaucracy exists even in "other groups" as well.  As a childhood recipient of WIC, food stamps and county medical, assistance that provided subsistence and HOPE for me and my family as children, I can only HOPE that my taxes go to help some other person.  The availability of those resources as a child fed me and clothed me, and assistance in our neighborhood was not banging on our door.

    What I find most comical is most of the complainers about the raise in my taxes aren't in the same bracket.  For those in the same bracket who oppose the tax, I get it and do not think they are selfish.  As one who benefitted from the same services as a child I would like to see them funded.  

    What is also comical is that 16 of the top 20 food stamp receiving states are red states.  Go figure.

    Parent

    Um (none / 0) (#56)
    by Wile ECoyote on Fri Feb 27, 2009 at 05:54:51 PM EST
    Why hope?  If you want to see them funded, why wait until the gov't takes the money from you, why not donate?  Don't tell the the gov't is more efficient with it compared to ngos.  

    Parent
    brothers keeper i guess (none / 0) (#57)
    by Jlvngstn on Fri Feb 27, 2009 at 06:58:10 PM EST
    Heh (none / 0) (#53)
    by CST on Fri Feb 27, 2009 at 02:55:10 PM EST
    cuz there is no "bureaucracy" involved when you donate...

    Parent
    :) Those off-shore accounts might find (none / 0) (#55)
    by Inspector Gadget on Fri Feb 27, 2009 at 04:09:03 PM EST
    themselves in the same boat as the Swiss accounts that are now having names and history turned over to the US Gov't as part of the bailout agreement.

    Helio Castroneves, the racecar driver is very unhappy about how his off-shore account worked for him.


    Parent