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Is Federal Budget Season Nothing to Get Excited About?

January 19th, 2010 . by economistmom

Over on Roll Call, Stan Collender suggests that the release of the federal budget is no longer a big deal–not even to the fiscal policy wonks working here inside the Beltway:

There was a time when the submission of the president’s budget to Congress was a very big deal. Not only was it a front-page story across the country, but the major daily newspapers typically had a multi-page spread with reporters pulled from other beats to write about many different aspects of what was proposed. The president’s budget typically didn’t just lead the evening news on the day it was released; it dominated that night’s broadcast and was the subject of follow-up reports through the week.

It’s not the same today. Although the phrase “dead on arrival” hasn’t been as evident in recent years as it was a decade or so ago, the president’s budget still often quickly fades from view. Instead of being news for days or even weeks, the president’s budget increasingly has become a one-day story…

To a certain extent, the president’s budget has always been at least partly a political document. But the budget’s other major roles — providing an accounting of what was done in the past and serious plans for what to do next — increasingly have taken a backseat to the political aspects of what’s being proposed today. That’s why the substantive, functional presentations of what’s in the president’s budget have been replaced over the years with things that provide decidedly less information…

Well, true, the budget document has become a little too glossy and a little less than perfectly clear on the details of the President’s tax and spending proposals (and speaking of being “clear”–this analysis from Sunday’s Washington Post and accompanying video above may interest you).  But it’s still true that the President’s budget, no matter how vague, still lays out a hugely important agenda or at least “vision” for fiscal policy going forward.  And what the budget can do to motivate us to get on the best path going forward is a lot more valuable than any detailed documentation of how past decisions (good and bad) led us here.

In the submission of this year’s budget, President Obama is choosing among a huge range of paths going forward.  He might present a budget that looks very much like the one he presented last year–with recommended policies that would lead to a ten-year deficit of more than $9 trillion, which CBO explained (last summer) more than doubles the deficits that would occur under current law.  Or he might choose to revise his plans this year in light of his Administration’s own worsening deficit projections and a still-slow-to-recover economy:  if he modifies his position on the extension of the Bush tax cuts by only temporarily extending them, for example, he could reduce the deficit impact of his proposals by maybe 40 percent.  The difference between just these two options:  staying the course outlined last year versus cutting back on the deficit-financed Bush tax cuts, is the difference between being on an “unsustainable” path versus starting down a sounder path that could more reasonably lead to longer-term fiscal sustainability if coupled with some strategies to encourage some tough choices going forward.

So I think this federal budget season and the President’s upcoming budget is something to get excited about, no matter the details or lack of details in the actual budget document, and no matter how political the “spin” on the budget proposals will be–or how glossy the pictures.  Let me be clear(!):  there are real and huge matters of substance underlying the President’s budget, and what the President says in his budget (as well as how he says it and “sells” it) will indeed really matter–hugely.

So if despite Stan saying the budget is nothing to get excited about or gear up for, you’re still (like me) looking forward to seeing it, you can get ready for it by studying what’s on Donald Marron’s fiscal outlook reading list;)

3 Responses to “Is Federal Budget Season Nothing to Get Excited About?”

  1. comment number 1 by: SteveinCH

    Just curious Diane, if President Obama said, for example, that he was committed to extending the Bush tax cuts by only 2 years, why would you feel better than you felt 2 years ago?

    Two years from the purported sunset, Obama will be either starting a second term or leaving office. Why exactly should anyone feel better about that promise than we felt in December of 2008?

  2. comment number 2 by: economistmom

    Steve: It’s a “baseline issue.” Two years ago we didn’t yet know the economy was headed into the worst recession since the Great Depression. And two years ago we didn’t have a new president who despite having campaigned on “change” and having complained about the fiscal irresponsibility of the Bush tax cuts was proposing to continue almost all of them in his first budget. And two years ago we had a Democratic Congress that had passed budget resolutions assuming the Bush tax cuts would expire as scheduled–or at least the revenue levels consistent with that–so there were still all the signs that we didn’t have to put up with any more deficit-financed Bush tax cuts. So the “reality baseline” has shifted dramatically in two years, and now I think the best chance we have, realistically, of getting our revenue policy back towards a sustainable path is to convince President Obama that he can keep his campaign promise (of no tax increases for the middle class) and keep the stimulative effects of the Bush tax cuts (while the economy is still struggling to recover) without unnecessarily committing to trillions of dollars of deficit-financed tax cuts that represent the former president’s (supposedly “bad”) policies. So under my new “reality baseline,” extending most or all of the Bush tax cuts for “just” one or two more years, even if deficit financed, is looking pretty darn good to me right now–especially if it gets coupled with a commission or other device that gets us to more seriously reform the tax system and more adequately raise revenue.

  3. comment number 3 by: SteveinCH

    Diane,

    I get the point. I guess my reaction is the opposite. I would have been more confident 2 years ago than I am today. I’m not sure why we should believe any politician who promises they are going to deliver pain down the road.

    I understand the math, it’s the psychology I don’t think I buy. Said differently, a 2-year additional sunset would presuppose that the Congress in 2012 is willing to allow taxes to go up dramatically and that President Obama (and not a Republican) is elected in the next election cycle. I guess I wouldn’t put high odds on the 2-year extension being only 2 years.

    Maybe a better solution would be to step back to the rates that we decide we want (pre-Bush or otherwise). I think the move is so large that it’s hard to take it all at once.

    Said differently, I think the only way to raise taxes is in small steps rather than big ones.