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.

                                                                                                                 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 :

                                                                                               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:

                           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

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:

 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.

Caveats:

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.

WOOF

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Notes:

(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.