Many of us are watching the next move in the political game of financial chess. Today, President Obama will submit his long-awaited budget proposal. Keeping focus on deficit reduction in the face of a slowly recovering economy and unemployment figures that hover in the upper end of the 7 percent level, the president’s proposal includes $1.8 trillion in deficit reduction over the next decade, which is expected to bring in total deficit savings to $4.3 trillion. The budget proposal also adds $580 billion in new revenues from closing tax loopholes, and it includes $50 billion in infrastructure spending. The budget also expands middle class tax credits for child care and reduces $200 billion from discretionary spending.
The total plan is for $3.77 trillion framework for increasing taxes further on the wealthiest taxpayers while simultaneously reducing programs such as Social Security. The budget will please nobody because it moves towards the middle — and that is where the chess game begins; political realities run all through the budget.
As Amitai Etzioni, University Professor at The George Washington University, said in a recent article:
There is more than may appear in President Obama’s plan to cut the social safety net in his new budget proposal. The offer, on the face of it, reflects a significant violation of a major liberal creed, discarding the strongest liberal political card and Obama’s peculiar negotiation style of making major concessions at the opening of a give-and-take session. But it also reflects the sad but true fact that the dynamics of American politics cannot be understood in terms of Democrats vs. Republicans. Party labels aside, the nation is still being ruled by what I call a majority “conservative party.”
Republicans will not be happy with the proposal because of proposed revenue increases. Progressives are upset about a proposal in the president’s budget which alters the calculation for the annual cost-of-living adjustment for Social Security recipients. The current method of measuring increases in the consumer price index would be modified to track a process known as chained CPI, which takes into account exchanges of goods with higher prices with products that have lower prices. The end result is a lower annual estimate for inflation and, therefore, lower benefits over time for Social Security recipients to the tune of $130 billion over 10 years. According to the Obama administration, using the chained CPI calculation method is favourable because approximately $100 billion in higher taxes will be reaped because the current CPI formula is used to adjust tax brackets each year, and lower inflation measures mean more money taxed at higher rates.
It’s a gamble on the president’s part. It reflects making tough choices that are alienating much of his base, ignoring other option for shoring up Social Security, and it simultaneously works within the unfortunate reality that he is not in control of the nation’s purse strings; all he can do is offer a blueprint and use the power of the bully pulpit to steer conversation. The budget proposal also reflects something that many on the left must acknowledge: the Republican party has been masterful at steering the nation’s fiscal conversations towards Social Security, which adds nothing to the federal deficit, and away from job creation, which would give the economy a much needed boost.
The president is making his move in this game in which the financial security of millions of Americans is on the table. The next move belongs to congress. And they’ve controlled much of the game for far too long.