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RON SIDER

Evaluating President Obama’s Budget

and families with three or more children receive a significantly larger tax credit. (Since the EITC is refundable, people receive this money even if they owe no federal income taxes.) The budget also seeks to raise the minimum wage. Improvement in the Child Tax Credit (CTC). Previously, this $1,000per-child tax credit was not refundable If a budget is a moral document, what for people earning less than $10,000 a year. should be said about the president’s pro- That meant the poorest workers got posed budget for 2010? I focus here on nothing. Now the CTC will be available what this budget proposal says about jus- to people earning as little as $3,000 (both tice for poorer Americans. this change and the increased EITC make A little history is essential. The US permanent what the stimulus bill had economy has grown enormously since done temporarily). the end of World War II. But there is a huge More assistance for college studifference in how that growing wealth dents from poorer families. This budget was distributed in the period from 1945- increases the dollar amount of annual 1980 and from 1981 to the present. In the Pell Grants (outright grants for lowfirst period, increasing wealth was widely income college students) and then indexshared and inequality dropped. In more es them to inflation for an extra $120 recent decades, the economy continued billion over 10 years. In addition, there is to grow but most of the benefits went to a new Access and Completion Incentive the richest 20 percent. Fund ($2.5 billion over five years) to In 1980, the richest 1 percent of help low-income college students comAmericans received 10 percent of all plete their degrees. The budget also US income. By 2006, that percent had seeks to save $54 billion in the student jumped to 22.1 percent. loan program by removing banks as the What happened to the rest of us? middlemen. From 1979-2005, the bottom 20 percent No farm subsidies for large farms, experienced a miniscule growth of pre- but more money for child nutrition. tax (inflation-adjusted) income of just 1 Large farms making more than $500,000 percent over all those 26 years. For the will no longer receive farm subsidies ($15 second-lowest 20 percent, income grew billion in savings). But there is an extra only 10 percent; for the middle 20 per- $10 billion for child nutrition.The highly cent, it grew only 15 percent. Even those successful nutrition program called in the next-to-the-top 20 percent only Women, Infants, and Children (WIC) is received 23 percent more income after also slated for expanded funding. In addi26 years. But the top 20 percent saw their tion, there is an additional $1 billion a income jump 75 percent. And the rich- year for the upcoming Child Nutrition est 1 percent received a whopping 201 reauthorization. percent increase. Pre-college education. The budget What President Obama’s new budget doubles the funding for charter schools seeks to do is to reverse this historic trend and creates an “innovation fund” to encourand provide more income and opportu- age better schools. There is also $4.2 nity for the people at the bottom. Here are billion in new spending for childcare, some key ways: Early Head Start, and Head Start. Making work work. The Earned Expanded health coverage. The Income Tax Credit (EITC) is increased, budget sets aside $634 billion over 10 PRISM 2009

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years to help move us toward the goal of universal health coverage. There are many other good things about this budget. It is far more transparent than President Bush’s budgets because it seeks to include all known costs (e.g., the cost of the wars in Iraq and Afghanistan). And it calls for a major program to reduce carbon emissions and thus help decrease the impact of global warming. Of course there are also things to question. Most of the increased taxes on those with incomes over $250,000 are quite justified, but reducing the tax deduction for charitable contributions is probably misguided. And the amount for economic foreign aid for poor nations should be higher. The size of the deficit is also of major concern. A large part of the present federal debt is because of President Bush’s invasion of Iraq and his tax cuts for the rich. But that does not mean we can continue indefinitely with high federal deficits. Large deficits during a bad recession are wise. Ongoing deficits mean putting current purchases on our grandchildren’s credit cards. The bottom line is that this budget represents a historic change. Jim Wallis told several of us in a recent call that he and others participated in a conference call with key government leaders around the time the new budget was released. The Obama folks wanted to show how their new budget would benefit lowincome Americans. Jim said the call left him in tears as he realized, first, that he had never experienced this kind of concern from top government officials before and, second, that the budget contained things that “some of us have gotten arrested for.” The battle, however, has just begun. Many voices in Congress will seek to cut spending for the poor. We must let our representatives know that we strongly support effective measures to empower poor Americans. n

Evaluating President Obama's Budget  

Ron Sider May 2009

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