President Obama unveiled a budget proposal Tuesday that's more of a Democratic Party wish list than a realistic spending blueprint for a divided government. Higher taxes on the wealthy? Check. More spending on anti-poverty programs, research, infrastructure and schools? Check. But while Republicans in Congress were quick to dismiss Obama's proposal— "[P]erhaps his most irresponsible budget yet," asserted House Speaker John A. Boehner, conceding only the vague possibility that Obama had done worse before — they should at the very least act on his suggestions for promoting employment and economic growth that dovetail with their own ideas.
Washington faces at least three intertwined fiscal problems: a sluggish economy that's not creating enough good jobs, large annual budget deficits left over from the recession and rising healthcare costs that could cause the deficit to grow uncontrollably in the not-too-distant future. As in his previous budgets, Obama made no herculean efforts to bring the budget into balance or solve the long-term problems in entitlements. His main effort instead was on breathing more life into the economy now.
That's a perfectly fine thing to focus on, considering how long the economy has been stuck in low gear, how many people remain unemployed and how much a vigorously growing economy will help solve Washington's fiscal problems. Obama's problem is that so many of his ideas for promoting growth — such as spending more on education and training, overhauling U.S. immigration law and extending unemployment benefits — are nonstarters with the House Republican majority.
Within Obama's $3.9-trillion budget, though, are at least two proposals that make economic and political sense, and that the Republicans might be persuaded to support. One is to expand the tax credit for individual low-income workers without children. Republicans invented the earned income tax credit as an alternative to welfare payments, and unlike some other benefit programs, it gives participants a financial incentive to work their way out of poverty. Although Republicans won't like how Obama proposes to pay for it — by raising taxes on hedge fund managers and some self-employed individuals — they should seize the opportunity to strike a deal to expand the credit.
The president has also called, again, for beefing up infrastructure investments. With more fuel-efficient cars on the road, the amount of gas tax dollars available to repair America's crumbling roads and bridges has been shrinking. Yet lawmakers have been unable to agree on how to replenish those funds. The president offered a temporary fix: using one-time revenue from overhauling the corporate tax code to pay for a new round of projects. This stopgap approach would let lawmakers spend more now while costs are still low, rather than waiting to agree on a long-term solution.