7 Things to Know About Obama's Budget

Now that President Obama has unveiled his budget, some 65 days late, it’s worth remembering one of the ironies of history. One of the most corrupt presidents—Warren Harding—gave us one of the great reforms, the Budget and Accounting Act, that led to the creation of the Office of Management and Budget. After World War I, Republicans were eager to control government spending, and the idea of taming it with a department that would review proposals and set a deadline for the president to submit his own budget gained credence. Now, as then, we’re dealing with the budget woes caused by war. OK, we do have the additional cleanup from tax cuts and a financial crisis.

So what’s in this tome? Lots of programs get cut: The Environmental Protection Agency's state indoor radon grants? Gone! High-intensity drug-trafficking areas, Office of National Drug Control Policy? Pretty much gone. A bunch of math programs at the National Science Foundation get cut, as does the Presidio Trust that helps preserve and develop the beautiful park in San Francisco. Tons more programs get increases or instituted, from vocational ed programs to nine-figure sums to get state and local governments to cut electricity use. Do they really need to be bribed to spend less?

Because this budget is going to get worked over and taken apart by a Republican House and sclerotic, filibuster-happy Senate, the budget is pretty much a wish list, more useful for what it says about Obama than for predicting what we’re going to end up with. You’ll see a lot of stories about the aggregate size of $3.7 trillion. But here are the things that are really worth knowing:

1. Cigarettes helping kids grow. The president’s budget includes a big preschool initiative paid for by doubling the cigarette tax. Can the president get it through Congress? It’ll be tough. Tobacco taxes are high, and if Republicans are going to give on various deductions, this may be tough to handle.

2. Hiking taxes on wealthier folk. Well, after raising taxes on individuals making over $400,000 and families making over $450,000 earlier this year, Obama comes back trying to raise $580 billion for deficit reduction by limiting high-income tax benefits. Obama would implement the "Buffett Rule," requiring that households with incomes over $1 million pay at least 30 percent of their income (after charitable giving) in taxes. He’d limit the value of tax deductions and other tax benefits for the top 2 percent of families to 28 percent, reducing these tax benefits to levels closer to what middle-class families get.

3. There’s asteroid money! This gem from the NASA budget: "Pursues Innovative Approach to Visiting an Asteroid. The Budget includes $78 million for NASA to develop needed technologies and study alternative approaches for a robotic mission to rendezvous with a small asteroid—one that would be harmless to Earth—and move it to a stable location outside the Moon’s orbit." Would be surprised if this Bruce Willis movie doesn't get trimmed.

4. Remember Jack Kemp? The late Republican was the proponent of enterprise zones that sought to help poor areas by cutting taxes. Bill Clinton talked empowerment zones. Now Obama wants to create "promise zones" to rebuild high-poverty communities across the country by attracting private investment to build housing; improve educational opportunities; provide tax incentives for hiring workers and investing within the zones; reduce violence; and assist local leaders in navigating federal programs and cutting red tape. Republicans and Democrats love these policy approaches, so this one could get through.

5. That Social Security measure is big but not that big. $230 billion in savings from using a chained measure of inflation for cost-of-living adjustments throughout the budget. But that’s not until 2023. This year’s budget alone is $3.7 trillion, so such savings are a tiny number compared with the tens of trillions that will be spent over the next decade. Democrats are howling, but some version of this will get through.

6. Hillary didn’t do so well. Hillary Rodham Clinton may have been The Greatest Secretary of State Ever in Our History (according to some), but the State Department takes a 6 percent hit in its budget, although it contains some increases for embassy security, which she long championed during her stint as secretary. Eric Holder’s Justice Department sees a 3 percent hike, with more money for counterterrorism and for state and local crime-prevention programs.

7. TARP winds down.  It’s been more than two years since the Troubled Asset Relief Program has issued new loans and guarantees. Now it’s going out of business. Obama brags that "TARP’s banking programs have generated a positive return for taxpayers, with over $268 billion recovered for taxpayers as of December 31, 2012, compared to the $245 billion originally invested in banks. The progressing economic recovery and the Administration’s prudent management have resulted in an estimated lifetime TARP cost of $47.5 billion, significantly lower than the $341 billion cost originally estimated for the program in its first year." Hey, loan me a few billion and I'll get you a return. The rest of us weren't so fortunate.