Pursuant to the Congressional Budget Act of 1974, a quaint if not outdated law that requires the President to submit to Congress a budget for the succeeding fiscal year, President Obama submitted to Congress on Tuesday his economic plan for 2015. It has a top line number of $1.014 trillion, compared to $1.02 trillion in 2014, and is consistent with the bi-partisan budget agreement passed last December.
From a 50,000 foot level, it can be viewed as a plan that is designed to continue the downward trend of the budget deficit and bring a sense of stability to the markets by reining in the growth of the U.S. economy. How it gets there, however, is not being universally applauded. In fact, many are calling it dead on arrival which probably comes as no surprise to the Administration. It is a political statement at best presenting the Administration's goals in its version of a perfect world.
The proposal contains a good deal of new spending which is offset by cuts in some discretionary spending as well as a large amount of new tax revenue, much of which is coming through the elimination of tax breaks.
Many of the initiatives the President put forward on Tuesday have been included in his prior budgets. This includes tax credits for the poor and middle class and pre-school education financed by an increase in tobacco taxes. The President's Budget would increase funding for transportation projects financed by the repeal of $4 billion in tax incentives for oil, gas and other fossil energy. It also formalizes the so called "Buffet rule" by requiring millionaires to pay at least 30% of their income in taxes.
A signal program in the President's Budget is a $56 billion "Opportunity, Growth and Security initiative." Half of that amount would go to defense and the rest would go to discretionary programs. On this element specifically the Democratic Chairman of the Senate Budget Committee and the Republican Chairman of the House Budget Committee have said they do not support the additional spending.
The Pentagon's budget would be $495.6 billion, which is consistent with the December budget agreement. That amount would be supplemented by the additional $26 billion described above. The chairs of the House and Senate Appropriations Committees have also indicated their opposition to the additional spending.
Obama's Budget proposes to "reform the management of the Department of Interior's on-shore and off-shore oil and gas programs by improving the return to taxpayers from the sale of these federal resources and are improving transparency and oversight."
The Budget is a running narrative of the Administration's goals and ideals. In fact, very little of it will ever be considered by Congress let alone become law. The Budget process today is more about optics and, like much of legislation, a way to differentiate one political party from the other. Although, in theory, the President's Budget is supposed to begin an iterative process, but in fact will be ignored by Congress. The Republican led House will unveil its budget next month and it will be markedly different. The Democratically controlled Senate has already said that it will not pass a budget this year—a practice that it has followed in recent years. In the end, this is much ado about nothing anyway as there is no need for a budget this year. That is because the budget agreement reached in December already provides the major guidelines and limits necessary for the appropriations committees to fund government operations in FY 2015.
The bottom line is this, Democrats will run on many aspects of the President's Budget as a way to convince voters why they should be elected. House Republicans will rely upon the very different budget that they will unveil shortly. No budget will be passed and in the end, very little will have changed.