The budget proposal President Obama planned to unveil today has something in it for almost everyone to dislike. Congressional Democrats hate parts of it, and congressional Republicans detest most of the rest.
Even the president himself has said his budget is not his “ideal plan.” This is why the budget exercise is more interesting than usual this year: For once, the president’s proposal at least represents a stab at something that could actually get done.
So much for complaints that our political system is somehow broken - that hyper-partisanship and polarizing ideologies have brought us to a standstill.
That critique doesn’t stand up. The gridlock of recent years is what set the stage for the president and lawmakers to find common ground. Republicans have changed their tune recently on immigration reform after their abysmal performance with Hispanic voters last fall. The president and at least a few other Democrats are talking about changing entitlement benefits they previously treated as sacrosanct. And both parties, at varying speeds, have begun to accept social changes such as same-sex marriage.
In the words of White House press secretary Jay Carney, today’s spending plan shows the president’s “priorities within a budget world that is not ideal” and that “requires compromise, negotiation and a willingness to accept that you won’t get 100 percent of what you want.”
Obama’s budget draws heavily on talks the president had with House Speaker John Boehner during December’s “fiscal cliff” negotiations. In the budget, Obama proposes many of the same spending cuts he then offered Boehner in return for higher taxes for more-affluent Americans.
Key among the proposed cuts is a plan to change how cost-of-living adjustments for Social Security benefits are calculated, which would eventually reduce benefits for most seniors. The budget would also cut $400 billion from Medicare and related programs by renegotiating prescription drug prices and increasing required contributions from wealthy beneficiaries.
While the budget does include some tax hikes, and the president says he will not accept the spending restraints without the added taxes, spending and taxes may not prove to be so closely linked. Having already gotten a tax increase as part of the fiscal cliff talks, the president may end up deferring the tax changes as Congress considers a more sweeping overhaul of the tax code. In the meantime, other congressional committees will be in charge of setting spending levels. They will take their cues, in part, from what Obama has said he is willing to accept.
Interestingly, the president would also apply the new inflation calculations he proposes for Social Security benefits to the system used to adjust tax brackets. This would increase tax burdens for the majority of payers across income levels. The proposal marks a departure from Obama’s typical tax stance that all additional revenue can and should be provided solely by “the wealthy.”
According to the nonpartisan Tax Policy Center in Washington, the change in tax bracket calculation methods would raise taxes by an average of $124 for 78.3 percent of households by 2020.
The cuts proposed by the president’s budget would replace the automatic cuts put into effect by the recent sequestration. Overall, the budget would bring down the deficit by $1.8 trillion, according to White House estimates.
The executive branch’s new interest in compromise is not solely the result of the president’s personal evolution. The White House hysterically predicted immediate disaster as the result of the spending sequester that took effect last month. Now that the sequester boogeyman has been unchained, it is far less scary; the disconnect between rhetoric and reality has undermined Obama’s credibility. The president, I suspect, is also beginning to recoil from the prospect of a second term dominated by never-ending budget battles. Unless he does something to get this issue off the table, he risks being remembered primarily as the nation’s accountant-in-chief.
In the run-up to the budget’s official debut, both sides focused on criticisms rather than praise. Liberals were thrown into a panic by the prospect of a Democratic president treating entitlement spending as anything less than sacred. Republicans, meanwhile, continued to focus on the president’s demand for tax increases, without giving much credit to his movement on spending cuts. According to Boehner, the president’s budget holds “modest entitlement savings… hostage for more tax hikes.” Boehner and other Republicans argue that Obama should support the spending cuts he has said he is willing to endorse without tying them to higher taxes.
Just a few months from now, the budget Obama is releasing today will be all but forgotten. Presidential budgets are not terribly important in the scheme of things. Congress ultimately wields, and jealously protects, the power of the purse. But the newfound willingness to compromise that the president’s budget reflects is meaningful.
It means that our system of checks and balances is working as designed. Even a newly re-elected president has to recognize the limits of his power if he wishes to accomplish anything beyond engaging in endless rhetorical debate when part of Congress is controlled by the other party. And it means our system continues to drive elected officials toward the political equator, even when they come from opposite ideological poles.
The equator is where the sun usually shines brightest.
Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book,
The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book
Looking Ahead: Life, Family, Wealth and Business After 55.
Posted by Larry M. Elkin, CPA, CFP®
The budget proposal President Obama planned to unveil today has something in it for almost everyone to dislike. Congressional Democrats hate parts of it, and congressional Republicans detest most of the rest.
Even the president himself has said his budget is not his “ideal plan.” This is why the budget exercise is more interesting than usual this year: For once, the president’s proposal at least represents a stab at something that could actually get done.
So much for complaints that our political system is somehow broken - that hyper-partisanship and polarizing ideologies have brought us to a standstill.
That critique doesn’t stand up. The gridlock of recent years is what set the stage for the president and lawmakers to find common ground. Republicans have changed their tune recently on immigration reform after their abysmal performance with Hispanic voters last fall. The president and at least a few other Democrats are talking about changing entitlement benefits they previously treated as sacrosanct. And both parties, at varying speeds, have begun to accept social changes such as same-sex marriage.
In the words of White House press secretary Jay Carney, today’s spending plan shows the president’s “priorities within a budget world that is not ideal” and that “requires compromise, negotiation and a willingness to accept that you won’t get 100 percent of what you want.”
Obama’s budget draws heavily on talks the president had with House Speaker John Boehner during December’s “fiscal cliff” negotiations. In the budget, Obama proposes many of the same spending cuts he then offered Boehner in return for higher taxes for more-affluent Americans.
Key among the proposed cuts is a plan to change how cost-of-living adjustments for Social Security benefits are calculated, which would eventually reduce benefits for most seniors. The budget would also cut $400 billion from Medicare and related programs by renegotiating prescription drug prices and increasing required contributions from wealthy beneficiaries.
While the budget does include some tax hikes, and the president says he will not accept the spending restraints without the added taxes, spending and taxes may not prove to be so closely linked. Having already gotten a tax increase as part of the fiscal cliff talks, the president may end up deferring the tax changes as Congress considers a more sweeping overhaul of the tax code. In the meantime, other congressional committees will be in charge of setting spending levels. They will take their cues, in part, from what Obama has said he is willing to accept.
Interestingly, the president would also apply the new inflation calculations he proposes for Social Security benefits to the system used to adjust tax brackets. This would increase tax burdens for the majority of payers across income levels. The proposal marks a departure from Obama’s typical tax stance that all additional revenue can and should be provided solely by “the wealthy.”
According to the nonpartisan Tax Policy Center in Washington, the change in tax bracket calculation methods would raise taxes by an average of $124 for 78.3 percent of households by 2020.
The cuts proposed by the president’s budget would replace the automatic cuts put into effect by the recent sequestration. Overall, the budget would bring down the deficit by $1.8 trillion, according to White House estimates.
The executive branch’s new interest in compromise is not solely the result of the president’s personal evolution. The White House hysterically predicted immediate disaster as the result of the spending sequester that took effect last month. Now that the sequester boogeyman has been unchained, it is far less scary; the disconnect between rhetoric and reality has undermined Obama’s credibility. The president, I suspect, is also beginning to recoil from the prospect of a second term dominated by never-ending budget battles. Unless he does something to get this issue off the table, he risks being remembered primarily as the nation’s accountant-in-chief.
In the run-up to the budget’s official debut, both sides focused on criticisms rather than praise. Liberals were thrown into a panic by the prospect of a Democratic president treating entitlement spending as anything less than sacred. Republicans, meanwhile, continued to focus on the president’s demand for tax increases, without giving much credit to his movement on spending cuts. According to Boehner, the president’s budget holds “modest entitlement savings… hostage for more tax hikes.” Boehner and other Republicans argue that Obama should support the spending cuts he has said he is willing to endorse without tying them to higher taxes.
Just a few months from now, the budget Obama is releasing today will be all but forgotten. Presidential budgets are not terribly important in the scheme of things. Congress ultimately wields, and jealously protects, the power of the purse. But the newfound willingness to compromise that the president’s budget reflects is meaningful.
It means that our system of checks and balances is working as designed. Even a newly re-elected president has to recognize the limits of his power if he wishes to accomplish anything beyond engaging in endless rhetorical debate when part of Congress is controlled by the other party. And it means our system continues to drive elected officials toward the political equator, even when they come from opposite ideological poles.
The equator is where the sun usually shines brightest.
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