If President Obama's proposed $3.6 trillion federal budget for the 2009-2010 fiscal year, and especially the $1.75 trillion deficit it includes, seems mind-boggling, it is. Sadly, that is the cost of the stunning budget deficit passed on by President Bush in his final year in office - the year the economy finally collapsed under the weight of his epic $6 trillion in deficit-spending and his deregulatory binge - and the initial cost of mopping up the damage.
The Obama budget mainly sweeps away the smoke-and-mirrors budgeting fantasies of the Bush years. It also affirms the long-denied need to deal with the revenue issue that the previous borrow-and-spend president maddeningly avoided. And it lays down a reasonably clear-eyed, traceable schedule for cutting the deficit by two-thirds by 2013. All in all, it's surprisingly good for the shape we're in.
The Obama budget and forward-looking timeline for the next four budget years fairly reflects the upfront costs of dealing with the economic recovery funding - the $750 billion banking bailout and the $780 billion stimulus package. It also puts on budget the enormous costs of two wars that were continually, deceptively left off the books by the Bush administration as "emergency supplemental" (read: borrowed) funding.
And for the first time in years, the budget makes plain what Washington refused to acknowledge the past eight years: that the tax cuts for the super-wealthy had to be rolled back to begin addressing the $6 trillion in new debt left by President Bush over the past 8 years.
That President Obama is willing to do that should be no surprise. He said throughout his campaign that he would cut taxes for American families earning less than $250,000 a year - and this budget does that. And he always said that he would let the Bush tax cuts expire on schedule in 2011 for those earning more than a quarter of a million dollars a year, and that he would reset the investment tax rate from a low 15 percent to 20 percent.
He also proposes to make hedge fund managers pay regular income taxes (rather than the far lower capital gains taxes) on their earnings, which often run into the hundreds of millions of dollars; to end agricultural subsidies to big agribusiness and wealthy farmers; to cut the $4 billion in subsidies that private banks earn off college loans; to end the insane taxpayer subsidies ($175 billion over the next 10 years) to private health insurers to entice them to compete with Medicare through "advantage" insurance; and to negotiate with big pharmaceutical companies on drug prices.
Republicans' knee-jerk criticism that the restored higher income and investment tax rates will hurt small businessmen and amount to a tax on capital creation is simply not true. Most small business owners don't cross the $250,000 income threshold.
In reality, it is the richest 1 percent of Americans - the multi-millionaires and billionaires - that captured more than half of the nation's total income growth since 1993; their taxes should reflect that gain.
On the flip side, income inequality between the vast majority of American families and this nation's super-rich has worsened significantly in recent years. For the 90 percent of American workers whose income is less than $195,000, average inflation-adjusted salaries rose by just 2 percent, to $38,000, between 1976 and 2006, according to IRS tax data. In the same period, average salaries of the top 10 percent rose by 57 percent, to $195,000.
It is fair to begin reversing America's world-leading income inequality, and fair to ask the super-rich to contribute more to the well-being of the country and workers who support their vast wealth. Republicans who object obviously don't care about the bottom 90 percent of Americans. Never mind their propaganda: They are simply defending the super wealthy status quo, and the campaign contributors who keep them entrenched in power.
This nation needs, for a change, investment in education, health care, infrastructure and fair taxes for the vast majority of Americans. The Obama administration has made a serious stab at an honest budget that reflects real national needs. It's about time a president did that.