Audacious

I keep saying that I know that Obama's going to disappoint me at some point and then he keeps exceeding my expectations.  As I read his budget document this morning, I kept on finding more and more things that blew me away.  Here's some of them:

  • As Robert Reich said, this budget would substantially increase the progressivity of the federal income tax.  The very rich have gotten the lion's share of the gains in the US economy over the past few decades, while the tax system has gotten less progressive.  This would be a big step towards that.
  • I nearly shouted out loud when I read the section on carbon permits, and saw the phrase "100 percent auction."  This means that, unlike the Senate bill from last year, none of the permits would be given away to  industry.  This is key because giving away permits rewards polluters, and dramatically decreases the funds that are available to provide targeted assistance to low-income consumers and displaced workers.  And Obama's proposal to use some of the money to extend the Making Work Pay tax cut is essentially a version of Cap and Dividend.
  • I was also stunned at Obama's willingness to pick fights on things that aren't going to get headlines or win him any votes.  For example, he says that he will fully fund the Community Development Block Grant, but will seek to distribute the funds through a "more effective formula."  CDBG is one of the few federal programs that provides flexible funds to cities and other local governments, and the current formula is pretty poorly targeted — it provides a little bit of money to almost every local government, regardless of need.  I assume it's obvious why it's politically hard to change that.  It would have been easy for Obama to decide to let this one slide, given the major pieces of legislation he's trying to get through.  But he didn't.

8 Responses to “Audacious”

  1. dave.s. Says:

    I am 80 per cent happy about the carbon permits. All users should pay – yes! This does not give lots of subsidy to existing emitters. On the other hand, it puts a whole lot of administrative jobs into the carbon permit bureaucracy, where the Wall Streeters will go now that no one wants their collateralized debt obligations. And it is open to huge amounts of special pleading – ‘carbon permits for farms (ethanol plants, industry in depressed areas, cement manufacturing, you name it) should cost less per unit than carbon permits for…’
    So the proposal is loads better than give-away carbon permits, but in my view a lot less good than carbon taxes.

  2. Madeleine Says:

    Thanks for this analysis. As a non-policy expert, it seems like he’s still saying good things, but I need info like this to feel like I know what’s actually going on under the rhetoric.

  3. Andrea Says:

    Yeah, I was going to say something like Madeleine did–I’m so glad I have your blog to get this perpsective on US politics. This isn’t somethign I could get from reading the newspapers.

  4. bj Says:

    “a lot less good than carbon taxes.”
    Me too. Ben Stein had a opinion piece of some sort in the Sunday NY times favoring a carbon tax, too. His reasoning was that energy costs are already highly volatile and carbon trading is going to make that even worse. I think a semi-regulated carbon trading market has a non-zero probability of creating weird (think Enron-like) market failures.
    The carbon tax would be straightforward, and I’m still unsure about why it’s not the preferred solution. Is the problem political? (i.e. a “tax”?) Or is there some reasoned economic/environment/incentive opposition?
    (But, I’m too am highly pleased with Obama. My only real disappointment is some of DOJ’s continued support of secrecy arguments — for example, in the case of the Canadian who was “rendered” to Syria by the Americans).

  5. carosgram Says:

    The thing that has astounded me most about Obama is that he seems to be keeping everyone of his campaign promises. It blows me away.

  6. bj Says:

    If we’re feeling wonkish, there’s a nice summary of cap and trade from the Sightline Institute
    http://www.sightline.org/publications/reports
    Cap and Trade 101: A Climate Policy Primer
    09/17/2008
    In Cap and Trade 101: A Climate Policy Primer, Sightline sorts out the details on what’s emerging as the most popular and comprehensive policy solution to the enormous challenge of climate change.
    They’re quite fond of Obama’s plan, but also include some analysis of previous plans (the European system, which didn’t work at first, but seems like it’s improving) and a comparison to the carbon tax (which they think can be done in conjunction with cap & trade).

  7. trishka Says:

    elizabeth, would you care to say more about what might change about CDBG distribution? i’m interested because that is the primary source of funding that my municipality has to offer affordable housing developments. thanks, glad you understand this stuff and can explain it to us.

  8. Elizabeth Says:

    Trishka, I don’t know the specific proposal that Obama has in mind, but I assume that he’d target CDBG more strongly to communities with either high poverty rates or low per capita incomes (a lot depends on which one — DC is an example of a city with both a high poverty rate and a high per capita income). One possibility would be to make the grants to more affluent areas competitive, so there would still be some money available, but it wouldn’t come automatically.
    Cap and trade vs. carbon taxes deserves a post of its own.

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