FEBRUARY 27, 2009 2:43PM

The President's Budget: A Mandate for Change

Rate: 30 Flag

Ignore the sensation-seeking headlines: "Shock and Awe," "$1.75 trillion Tax Hike." Piffle. Penned by people who haven't even peeked at the Fiscal Year 2010 Federal Budget[1]. It is a thing of beauty, crafted and drafted by economists with nous (instead of the ideological hacks of the Bush years). It exposes, without camouflage[2], the economic wounds of the American people and attempts directly and immediately to staunch the bleeding.  And it begins to redeem substantially, if not yet in full measure, the pledges made to the American people -- the Change We Voted For -- in the form of long term structural change.

Without any further ado, let's go to the videotape, or in this case, the pastel graphs.

FedBudg2010                                                                                                                 Source: Table S-3

This is what most people are focusing on and it is the least illuminating chart of all. As New England Patriots (hey, how about that Tom and Gisele, they finally tied the knot!) coach Bill Belichik is fond of saying: "It is what it is." The mandatory part is mandatory[3]. The discretionary portion (i.e.the various departmental budgets) show minuscule changes from last year and that the result of intramural jockeying than any particular philosophical concerns.

What is of interest in the Departmental Budgets are the introductory charts which spell out their outlays under the Recovery Act ("the Stimulus Package").


The American Recovery and Reinvestment Act of 2009 :

ARRA                                                                                               Source: Recovery.gov

This was the Stimulus Bill passed by Congress, clearly a middle-of-the-road result of political horse-trading. Note how the pie is divided into neat thirds: Tax Relief, State and Local Fiscal Relief + Medicaid Relief (most of which is passed on through the states), Direct Federal stimulus. In my not so humble opinion, the tax relief was pure political sop, and the direct intervention is not nearly enough, but it is a start.

And it is when we examine the direct stimulus portion of the Recovery Act by Federal department that we start getting a glimpse of the shift in priorities, the structural changes that will be put into effect, the changes that we need. 


Recovery Act Allocation by Federal Department:

Recovery Act
                           Source:  Departmental Allocations, Federal Budget FY 2010

This is the priority list the majority of American voter gave President Obama a mandate for: Education, Infrastructure, Alternative Energy, Health Care, Housing, Environment. These are the pledges being redeemed. Thank you, Mr. President.

Wait, There's More:

And then comes the section that makes this dog's heart sing: The Summary Tables. This is the Red Meat, dense-packed with data, which will glaze 99.9% of all eyes gazing upon them, but do not fear.  Your faithful canine has laid out this sumptious feast for you in bite-sized morsels for your elucidation and delectation. Here, in the Ten Year FY 2010-2019 totals are the clear break from the past and our direction for the future: 

                             Highlights from Summary Tables, S-6

  • Health Reform Reserve Fund : $ 634 billion 
  • Pell Grant Continuation          : $ 117 billion
  • Climate Revenues                     : $ 646 billion
  • Clean Energy Expenditures    : $ 120 billion
  • Tax Loophole Elimination      : $ 353 billion
  • Upper Income Tax Increase   : $ 637 billion

There's more, a lot more.  But now we clearly see the commitment to the mandate the President has been given: Health Care, Environment, Clean Energy, Education. And finally:

Ten Year Reduction in "Overseas Contingency Operations i.e. War Spending" compared to current levels (S-2, S-6): $ 1 trillion.

 President Obama today announced his decision to end combat operations in Iraq by August 2010. Thank you, Mr. President.


The Budget Document:

The expository part of the document is clear and hard-hitting. The President lays it out squarely in his opening Message: "We start 2009 in the midst of a crisis unlike any we have seen in our lifetimes. Our economy is in a deep recession..."   and "This crisis is neither the result of a normal turn of the business cycle nor an accident of history. We arrived at this point as a result of an era of profound irresponsibility..."

Even the title of the next section doesn't pull punches: Inheriting a Legacy of Misplaced Priorities. And here's the economist's take: "The past eight years have discredited once and for all the philosophy of trickle-down economics -- that tax breaks, income gains, and wealth creation among the wealthy eventually will work their way down to the middle class. In its place, we need economic opportunity to trickle up."

45 pages of as jargon-free as possible writing, with illuminating graphs (no pastel colors!) and tables leads to what most people regard as "The Budget" : the discretionary allocations by department. This section is of little interest, as the changes are minuscule and primarily a result of intramural jockeying, other than the introductory charts which spell out their outlays under the Recovery Act ("the Stimulus Package").

And finally, the heart of the matter, Section III: Summary Tables, which I described above.


People are understandably concerned about spending levels, especially  the mandatory items in the budget. But the pundits inveighing against Social Security and Medicare with special venom are focused on the incorrect items. These outlays and expenditures are in rough balance and expected to stay that way till 2017 or so. It is a line item called "Other Mandatory Programs" -- $ 571 billion in FY 2010 --which includes Food Stamps, Unemployment Compensation, Child Nutrition etc. and is basically unfunded that should be of greater concern.

Secondly, there is no way on God's green earth that middle class taxes will not have to be raised down the line for the above and other reasons.  Thus, the political sop of Tax Relief embedded in the Recovery Act will have to be unwound sooner or later, at what political cost it is impossible to guess.




(1) The Federal Fiscal Year 2010 Budget --  A New Era of Responsibility: Renewing America's Promise

(2) See, for example, Figure 3 on page 7 : The Underemployment Rate. This is the first time, to my knowledge, that official documents have used U-6 , the so-called "underemployment" rate as opposed to U-3, the "official" unemployment rate. Both series have been collected by and are readily available from the Bureau of Labor Statistics for a long time. While the December "official" unemployment rate was 7.2%, U-6 unemployment was 13.5% -- almost double.

(3) Mandatory Programs for FY 2010 are as follows (Table S-4):

  • Social Security - $695 billion
  • Medicare - $453 billion
  • Medicaid - $290 billion
  • All other mandatory programs - $571 billion. These programs include Food Stamps, Unemployment Compensation, Child Nutrition, Child Tax Credits, Supplemental Security for the blind and disabled, Student Loans, and Retirement / Disability programs for Civil Servants, the Coast Guard and the Military etc.


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It's really amazing the you do this for free.
I meant to type "It's really amazing that you do this for free."
I second what Michael said and then follow it by thank you for doing that for free. It's far better than you'll find it explained anywhere by anyone. Rated just doesn't cut it. GENErated!
Thank you, Michael, Greg. This one actually I am pretty proud of, as I think I was able to describe the clarity and progressive purpose of the budget for those who otherwise wouldn't dream of wading through this stuff. Just my paean of love to President Obama.

My dear chien jaune, you make all this financial info make sense even for those of us who aren't financially oriented. Merci.
This is an absolutely brilliant piece of clear, informative and useful writing---unlike ANYTHING I've seen elsewhere. NICE JOB!
Thank you, CCC. This is good stock for the soup, and reassuring on a variety of levels. I am starting to feel better about some of the earlier decisions made by President Obama, and I am grateful that we OS'ers have the big dog to help us understand the ingredients inside the package. Thank you. rated.
Thank you merwoman, chicago, dyno ole buddy, especially for your comments on clarity. That is one thing I try for in writing about the dismal science, where so many others take refuge in jargoned obfuscation. By the way, as I said in my piece, the writing in the first section of the Budget is masterful. I detect Larry Summers' invisible hand (I don't know Orszag's), the bugger can write.

I can't believe that I got all of this for no tuition, didn't have to pay a parking fee, and didn't have to hike a mile to the classroom to listen to some mumbling, digressing, tic laden lecturer!

Sheer brilliance. This is beyond rated: bookmarked!
Thanks for all your hard work!
I want to see the Editor's Pick and cover for this extraordinarily lucid (and delectable) elucidation.
Another great job, Caveat.
Incredible. Magnificent. Smart. Thoughtful. Effective. And this is missing from the cover of OS WHY????????? Triple rated. You're a genius.
I rarely comment on posts, for obvious reasons. But I must echo Verbal, Cartouche and others. This is a professional, publication ready post, and I mean publications far weightier than our dear OS, with beautiful writing and original insights rarely seen on "major media." While I am happy to have chosen this for People's Picks - it was a no-brainer - one must ask why this is not an EP and Cover.
Thank you for an invaluable service you’ve rendered to the OS family. This is an excellent post. The detail and understandable language illuminate the fact that our President intends to fiscally make good on his promises to bring the change we have hoped for.

Each of us really should write to our Representatives and Senators to make certain they know that the President's budget is the one we want passed before the fingerprints of “old Washington” have a chance to muddy the waters.

Once again thank you for all of the time and effort you put into this extraordinary post.

Rated, appreciated, and “woofed”.
Wow, thank you all so much for your comments. I thought it was a good post when I was doing it, I felt good about it, and now I feel doubly so at the corroboration by all of you OS "heavyweights". Woof.

Verbal, Cartouche, Critical: I just came from reading Padraig Colman's great piece on Sri Lanka. You guys are sounding like insurrectionist Tamil Tigers :-). The Editors can do what the Editors will. Your praise is sufficient unto the day.

Zum: You're the funniest -- "mumbling, digressing, tic laden lecturer." In fact, my tic started twitching like crazy :-). New name for Osama on Al Jazeera: Osama tic Laden. Woof.

Thank you, Jimmy, Dennis.

Dennis, you're absolutely correct and maybe I'll add an afterword to that effect. The Budget mentions the fact that only three -- three -- appropriations bills have passed so far, out of the hundreds (unless they do an omnibus) that need to be passed. Six months to the start of the next Fiscal Year is not that long, yet it's long enough for mischief. So, yes, please write to your Reps to pass the budget, as is, and quickly.

Oddly, I am now hungry for pie.
We've been working hard on analyzing the ARRA for the last 10 days since some of the federal funds will flow to the state agency for which I work and, like you, I've been very heartened by the priorities reflected in this budget. Even the more detailed pieces for HUD and HHS reflect a renewed commitment to anti-poverty programs, green energy initiatives, and gap financing that could actually help the housing situation. All in all, I think the President has done a very credible job with his first budget.

But my hat is off to you, sir, for the masterful presentation of this difficult material!
even I got it this time, thanks. Edu is a third of the DS pie equal to the outlay for energy and transportation taken together?!!! o wow...never happened where I live - ever :(
Why isn't this rated higher? Why isn't it an Editor's Pick?

I will now use OS's treatment of this post as an example for my 10 year old son about about life not being fair.
Why is this not an Editor's Pick? Why is it not on the front page? Why is this not on Salon? Oh, to have a "Hey Editor" button to flag gems like this.

Excellent work, CCC. It should be required reading for all of the people who are claim that this budget only promotes big government. And what good news about ending that war that we should have never, ever started.
Wow. Thank you. Why isn't this an EP and on the cover? Simply great financial reporting that is so superior to what I see on television or read everyday in both local and national news.

Will you be my friend?

If it's okay with you, I will post a link to this on my facebook account.

I'm not American, but like much of the world I am investing all my hopes and dreams for a clean and peaceful earth into President Obama. Not fair, perhaps. But ever time I hear him speak, I feel that he is in touch with the realities of the modern world and who is willing to try new, maybe even radical (!) solutions to our problems.

Being a cynic at heart, however, I have heard that little voice at the back of my head saying: but maybe its all just rhetoric--you have no NUMBERS to prove it.

Thanks for giving me the numbers!
tried sending you a msg telling you that I linked this post to my space at WP for my friends, but the msg isn't going thru even after adding you to the friend's list. dont know how it works. I hit send it doesnt turn up the "msg sent' sign. anyway if it isn't ok with you, do let me know wd take it off, yes?
The undersigned hereby petitions for a redress of grievances; to wit, that Tim Geithner, Larry Summers, et al, be replaced as Secretary of Treasury, Financial Adviser, and other positions of federal authority by Caveat Canem Croceum and whomsoever he designates to assist him in restoring the economy and the confidence of the American people in our financial institutions and our government.

(1) Tom Cordle
When Saturn was live blogging the speech by Obama my single question was where is the money coming from for ALL the agenda set down. I got the assurance that it was all forthcoming last Thursday. Well I did not really get everything on Thursday and I thank you dear Sir, for making it simple for me. Hope runs high and here's to forward thinking in BIG steps.
Why isn't this an editor's pick? Great work.
Thanks for the clear review of what is going on.
Unfortunately now I have a craving for pie