Obama's budget

Obama just presented his budget.
Paul Krugman discusses its main positive points, such as investments in health care reform. Krugman is very upbeat about the budget and says it's much more progressive than ender Bush. But it remains to be seen how much of this Obama will be able to pass through Congress.

The NYT notes that Obama is raising taxes to reduce the deficit, but that "all of the proposed [tax] increases apply to couples making more than $250,000 ($200,000 for single taxpayers) — about the top 3 percent of taxpayers." Further, "To combat deficits, Mr. Obama proposes to let Mr. Bush’s high-end tax cuts expire in 2011, raising the top rate from 35 percent to as high as 39.6 percent. He would also impose a 20 percent rate on investment income, up from the current super-low 15 percent. And he would reinstate a tax provision enacted by the first President Bush, but undone by his son, that limited tax write-offs by high-income taxpayers for dependents and other expenses, like mortgage interest on vacation homes."

NYT again notes that taxes will be raised for the rich and reduce taxes for everyone else: "The Obama budget — a bold, even radical departure from recent history, wrapped in bureaucratic formality and statistical tables — would sharply raise taxes on the rich, beyond where Bill Clinton had raised them. It would reduce taxes for everyone else, to a lower point than they were under either Mr. Clinton or George W. Bush. And it would lay the groundwork for sweeping changes in health care and education, among other areas.More than anything else, the proposals seek to reverse the rapid increase in economic inequality over the last 30 years."
It also makes a significant point about the rise of inequality in the US over the last 30 years: "Over the last three decades, the pretax incomes of the wealthiest households have risen far more than they have for other households, while the tax rates for top earners have fallen more than they have for others, according to the Congressional Budget Office... Before becoming Mr. Obama’s top economic adviser, Lawrence H. Summers liked to tell a hypothetical story to distill the trend. The increase in inequality, Mr. Summers would say, meant that each family in the bottom 80 percent of the income distribution was effectively sending a $10,000 check, every year, to the top 1 percent of earners."
The tax code will therefore become more progressive: "Budget experts were still sorting through the details on Thursday, but it appeared that various tax cuts and credits aimed at the middle class and the poor would increase the take-home pay of the median household by roughly $800.

The tax increases on the top 1 percent, meanwhile, will most likely cost them $100,000 a year.

“The tax code will become more progressive, with relatively higher rates on the rich and relatively lower rates on the middle class and poor,” said Roberton Williams, a senior fellow at the Tax Policy Center in Washington. “This is reversing the effects of the Bush policies,” he added, and then going even further."

On the military spending side, Obama is increasing expenditures relative to Bush (believe it or not): as this good article mentions: " Total spending on the Pentagon and the wars would reach nearly $664 billion in fiscal 2010, if the plan is approved by Congress, up slightly from $656.3 billion in 2009." However, this remains to be seen, as the costs of the Iraq and Afghanistan campaigns will most probably be adjusted depending on what happens there.