Budget 'freeze' won't stop investments in economy

As usual, there are those who are running around with their hair on fire on the reports that President Obama is going to propose freezing non-security discretionary spending for the next three budget years in his State of the Union address to Congress on Wednesday.  According to news reports, the non-security discretionary spending will be frozen at the current level of $477 Billion.  Of course, any scream-tastic reaction is unwarranted at this point, since we have not seen the President's budget nor heard his State of the Union address.  Yet, people on the reactionary left are running around calling this decision a massive mistake, calling Obama the equal of Hoover, and throwing tantrums.

So let's look at what we know of the proposal so far, whether the freeze closes the door for a robust domestic jobs agenda and additional assistance for the middle class and the poor, and if there are in fact examples of things that can be streamlined in our non-security discretionary spending.

What we know so far:

First, we will review what little we know of this proposal so far, scrapping things together from several news sources.  We know that:
  • Defense, the Veterans Administration, foreign aid, Iraq and Afghan wars, and Homeland Security will be spared from this freeze.
  • All non-security departments, such as Education, Agriculture, Transportation, etc. will be subject to it.
  • It is not a cut, it's a freeze at current levels.
  • Departments retain the flexibility to move funds around to support their most effective programs and away from the least effective ones.
  • Congress retains flexibility to move money around among agencies.  They may cut one agency and increase funding for another.
  • The freeze is estimated to save the taxpayers $250 billion over 10 years.
Is there assistance for ordinary folks despite the freeze in 2010?

Most of Recovery Act spending is scheduled for 2010: According to Recovery.gov, there are $204 billion still left to be spent this year on direct grants and contracts (most of the money spent so far has been spent on grants), and $123 billion left to be spent on entitlements such as education, health care and unemployment benefits.  That's $327 billion in direct federal spending to be done under the Recovery Act this year, plus another $195 billion in middle class tax breaks.

Here is what else we know: the freeze is not working alone.  The freeze does not mean that the President is turning away from helping middle class and poor families and individuals at a time of need.  The Los Angeles Times reports that President Obama and Vice President Biden unveiled the blueprints of some of the help on the way for ordinary Americans struggling in today's economy:
Under the proposals, the child-care tax credit would be nearly doubled for families earning less than $85,000, federal student loan repayments would be capped at a lower level, employers would be required to offer automatic payroll deductions for retirement accounts, and financing would be increased for families caring for elderly relatives.
These are proposals coming out of the Middle Class Task Force, chaired by Vice President Joe Biden, a lifelong public servant, and the equal of whose commitment to middle class priorities is a rarity.  If you are taking care of an elderly parent at home, the President's budget will help you.  If you are a family with children, the President's budget will help you.  If you  are repaying your student loans, the President's budget will help you.  If you are saving for retirement, this President's budget will help you.  Read more about what the middle class task force has been doing here.

Let's also note that this year, several other items including financial reform, an energy bill, a new jobs bill, are all on the President's domestic agenda for this year.
The priorities at home are equally pressing: tackling climate change, overhauling financial regulation, comprehensive immigration reform and restoring jobs in an economy emerging from its worst recession in decades are all priorities for Obama.
These items are not pie in the sky, either.  In an absolute testament to the leadership of Speaker Pelosi, the House also passed a massive $174 billion jobs bill before Congress wrapped up for the holiday recess back in December, as the Senate was still scattering on trying to put the votes together for health care.

The House of Representatives has already passed its climate change and energy overhaul bill - a bill that would reduce greenhouse gas emissions by 83% by 2050, and will result in unleashing a new innovative industry based on clean energy, creating new jobs and advancing our economy.  It would raise revenue by a cap-and-trade model that will incentivize the use of clean energy and discourage the use of polluting energy sources.

The Senate-passed health care bill, now pending in the House, has significant investment in small businesses in the form of tax credits to buy health care, available immediately.  This is part of stimulating the economy, too.

The president is also looking at other revenue measures.  We forget too fast that the President has already called for slapping a fee on the biggest banks to recover all of the taxpayer's money to prevent them from collapsing.  The Bush tax cuts on the super rich, including the estate tax cut, expire at the end of this year, and Democrats and this president are not likely to renew them.

All of these and more items on the President's agenda will spend the money required to get our economy back on track.  But this President and this Democratic leadership in Congress will spend money in a targeted fashion, instead of just throwing money at departmental budgets.

Knee-jerk reactions and realities.

There is another issue to address here.  The knee-jerk reactions to this report of freeze reminded me of the attacks that came fast and furious from the right accusing health insurance reform of "cutting Medicare" by $500 billion.  We know that the only people that 'cut' affects are the private insurance companies that charge the government 14% extra to provide Medicare-like coverage while screwing their customers over with higher copays and deductibles under the very Orwellian program of 'Medicare Advantage.'  The rest are found in efficiencies and eliminating waste and fraud in Medicare.  There are in fact no cuts in Medicare services in the health care bill (see the Medicare factsheet from the White House).

So, If the spending for these departments is frozen, and for one department to get increased funding, another has to lose some of its, can the cuts (that will be necessary to increase funding elsewhere) "target "duplicative," "ineffective" and "inefficient" spending withing government?"  Well, let's take a look at just some of the things our federal departments and agencies spend money on and how money can be/is being saved:
Let's face it.  There are wastes, inefficiencies and corporate giveaways in our government, and those can be safely eliminated without putting the economy in a tailspin.

On another note, consider this: throwing money at a department is not always the best way to deal with a problem we are facing.  Rising costs of college tuition cannot just be met by increasing direct federal assistance to students.  It also has to be addressed by  addressing the causes of the tuition hike.  We need to find a way to stop the tuition from rising, not just put up more money into the system.  A word about education here.  One of the things the stimulus package did was ease the burden on states on funding public education, saving the jobs of teachers who would otherwise be laid off due to their state's budget woes.

Of course, the items and the amount $477 Billion, is only  about one-seventh of the entire $3.5 Trillion federal budget.  There are two meanings to this: first, limiting total spending on a small part is not going to screw up the economy (especially when taken in concert with all the things described above).  Second, there are other parts of the federal budget that ought to be on the chopping block as well, especially bloated defense contracting.  That's true, and the President has already had some success with it, including the halt in building more F-22's.  But just like I agree that Defense spending should not be sacrosanct (especially contracting), others ought not get bent out of shape at the news of a limited freeze in other areas.

Democrats should be proud of our record on fiscal responsibility.  During his campaign for President, Obama promised go through the federal budget line by line, and that is what he is doing.  That is not indicative of Hooverism, or the lack of commitment to investing in the American people.  It is a testament to fiscal responsibility.  Democrats are the party of fiscal responsibility, and we should be proud of it.  The last president to balance the federal budget was a Democrat, and the Democrats instituted the pay-as-you-go rule as soon as they regained power in 2007.  This is not something we should apologize for.  As Howard Dean said, "Social justice can only be achieved through a balanced budget."