Obama’s Budget Moves in Right Direction, Needs to Go Further

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President Obama's fiscal year 2010 budget proposes an ambitious and exciting agenda that invests in our nation's future. His budget substantially invests in the long-deferred and vital areas of health care reform, clean energy, and education. The President partially pays for these investments though a mixture of progressive tax changes and other revenue measures.  

United for a Fair Economy applauds the new direction President Obama appears to be taking our nation and supports a number of his proposals. Overall, the Obama budget takes steps that reduce economic inequality, but does little to reduce the racial wealth divide. We also believe there are some critical improvements needed in the budget in the areas of military spending, racial justice and federal tax policy. UFE is working to improve the budget with organizational allies who share our values.

While the general proposals were accepted by both Houses of Congress, much is left to be defined in the details stil be to hashed out. Please let your US Representative and both Senators know your opinions.  Find your legislators here.

Military Spending

While President Obama's budget makes significant strides in social spending, the budget also makes a disappointing choice to increase, not decrease, both Department of Defense and Homeland Security spending.  (See chart: US Military Spending vs. The World, 2008.)

Obama is proposing that the Defense Department receive $533.7 billion as a baseline budget for fiscal year 2010, with another $130 billion in supplemental funding to bring the total to almost $664 billion, a 1.4 percent ($9 billion) increase over FY 09. These figures do not include roughly $7 billion in personnel, health care and military construction spending recently appropriated under the economic stimulus law.

The President's budget seeks $42.7 billion for the Department of Homeland Security in fiscal 2010, up 1.2 % from $40.1 billion in FY 09. That's in addition to $2.8 billion for homeland security included in the stimulus bill.

We applaud the long awaited investment to improve the medical treatment of wounded service members and veterans and the President's commitment to pursue a reform of the acquisition process to make sure that funds are not being wasted on expensive and outdated weapon systems. Yet, we  believe the President's decision to expand the Army and Marines neither supports desperately needed economic recovery nor responds to the desires of a majority of Americans to reduce our reliance on the military as a means of achieving security, stability, and peace among nations.

If the Obama administration is serious about a shift in how we relate to other nations and how the US engages in global affairs, then we must move away from policies and budget decisions that serve to maintain global US military hegemony. From experience, the world sees the Marine Corps as the invasion and intervention military outfit of choice, and the US army as its occupying counter part.

A large portion of the homeland security budget goes to border security and immigration. It includes $1.4 billion to Immigration and Customs Enforcement (ICE) to ensure that illegal aliens who commit crimes "are expeditiously identified and removed" from the United States. This investment is problematic as we have seen time and time again how ICE, under the guise of rounding up and deporting "illegal aliens who commit crimes", has indiscriminately rounded up and deported thousands of non-criminal undocumented workers and separated families. If the Obama administration is serious about controlling the influx of undocumented workers into our country, then it should consider redesigning US foreign and trade policies instead of implementing para-military persecution and building walls. (See  UFE's policy recommendations on Latin America.)

President Obama's budget proposal forecasts a roughly $50 billion yearly savings in war costs over time. But this doesn't really address the concern about spending billions of dollars to maintain and expand a neo-colonialist war machine instead of investing in the creation of a more just and sustainable national and international economic structure grounded in  solidarity and social economy principles.

The price we pay for being a military superpower with an interventionist agenda is unsustainable, both economically and politically. That needs to change. We want even greater increases in spending on public education, affordable housing and job creation, community-led economic development and fair global trade policies, rather than improved weapons systems and a bigger military force to keep the world in fear of us. We want a major step up in healthcare and renewable energy, rather than the build-up of fences on our borders.

Racial Justice

As this country experiences an economic recession, people of color are experiencing an economic  depression, with unemployment, stagnant wages and asset poverty that would be considered an epidemic if the country as a whole were experiencing similar dismal economic realities.

While some aspects of the President's budget attempt to address areas of concentrated poverty, isolated geographic areas, civil rights, and historically disfranchised populations, the attempts are sporadic. Virtually absent in the budget is the subject of race and its implications. If history is the litmus test of success, past federal policies that failed to systemically address the underlying racial disparities at best maintained these inequities and at worst exacerbated them nearly beyond repair. President Obama's budget inadequately addresses the issues of structural racial inequity.

This structural racism practiced during the recent economic bubble and bust - including  discriminatory policies of the financial industry  - led to the largest loss of wealth in modern history for people of color. The President's budget does not address the resulting economic crisis.

Further, Obama promotes "race-neutral" policies such as the increase in green technology to the tune of $34 billion, which, while important, lack a clear directive to concentrate such resources and jobs where they're needed most: struggling communities that are disproportionally the communities of color.

Understanding that Latinos are the least likely to have medical insurance, that Blacks are the most likely to live in areas of concentrated poverty, that Native Americans have some of the highest drop-out rates compared to the rest of the population and that APIA (Asian Pacific Islander Americans) are not even counted in a wide variety of disparity data, allows us to understand that not all people in this country are entering this 21st century economy equally.

This budget has the potential to both symbolize progress and address some of the persistent structural racial inequalities through adequate funding for the  enforcement of anti-discriminatory policies, new initiatives on inequality and improved data collection. As of yet, President Obama has not demonstrated a clear commitment to addressing the vast and growing racial inequalities in our nation.   Some have said, "if you are not using the race card, you are not playing with a full deck." As we enter a new chapter of American history, let us create a 21st economy that works for everyone. This is only possible by dealing with race, not ignoring it.

Federal Tax Policy

President Obama's budget proposes many changes in tax policy. Together, these changes make tax law somewhat more progressive, but they fail to raise greatly needed revenue. We would prefer tax changes that result in a steeply progressive tax system, and raise enough revenue to accomplish national goals.

We support the President's efforts to:

  • repeal the Bush tax cuts on those earning above $250,000
  • limit deductions for people in the top 5% of income
  • return the tax on investment income back to 20%
  • tax the compensation of hedge fund and private equity managers at the same rate as earned income
  • increase international corporate taxes
  • eliminate numerous oil company tax breaks, and
  • establish a "cap and trade" system to limit carbon emissions and reduce pollution.

We disagree with Obama's proposal to permanently reduce the Alternative Minimum Tax, which mostly benefits the wealthiest 10%. And we believe that, given our nation's massive deficit, this is not the time to hemorrhage revenue by cutting taxes for families earning less than $250,000 and extending business tax cuts, as Obama's budget does.

A particularly big disappointment is the President's handling of the estate tax. He proposes to make permanent President Bush's reduction in the estate tax with an exemption of $3.5 million per spouse and a tax rate of 45% on the amount above the exemption, which will cost $166 billion over 10 years. This benefits only people in the top 1% of income. Instead, United for a Fair Economy proposes an estate tax with a $2 million exemption per spouse and up to 55% rate over the exemption, which would bring in billions more over 10 years.

Obama missed his chance to introduce other new taxes that primarily affect wealthy people and corporations, and which would have made the tax system more fair, raised significant revenue, and created disincentives for some of the financial speculation that contributed to the economic meltdown. We support the Institute for Policy Studies' excellent  package of tax proposals, which could raise up to $422 billion per year more than Obama's proposals. In addition to a strong estate tax, the proposals include an income surtax on people earning over $5 million/year; a tax on speculative financial transactions; taxing investment income at the same rate as earned income; closing overseas tax havens; and ending subsidies for excessive executive compensation.

Here are some charts that show:

Where federal revenue comes from:
http://www.taxpolicycenter.org/briefing-book/background/numbers/revenue.cfm  

and what it is spent on:
http://www.taxpolicycenter.org/briefing-book/background/numbers/expenses.cfm
http://www.nationalpriorities.org/node/6916
http://www.nationalpriorities.org/FY2008%20total%20outlays%20as%20proposed

Without strategic tax changes and policies that reduce military spending and explicitly advance racial justice, our nation's economic inequality will not be reversed, and Obama's investments in health care reform, clean energy, and education will falter.

Again, please let your US Representative and both Senators know your opinions.  Find your legislators here.

If you have questions or comments about UFE's critique of President Obama's budget proposal, please contact:

Military Spending:  Adrian Boutureira, adrian@faireconomy.org

Racial Justice:  Amaad Rivera, arivera@faireconomy.org

Federal Tax Policy:  Lee Farris, lfarris@faireconomy.org


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