What Obama's Budget Is Really About

With the release of its annual budget last week, the Obama administration threw nearly $4 trillion worth of birdseed to an agitated and generally unappreciative flock of congressional pigeons.
The ritual brought forth the predictable mix of intense squabbling and complete boredom. Those directly affected by the budget strut and squawk to secure the crumbs they are used to getting in past budgets. Meanwhile, most of the public gets lost in the details and quickly loses interest (if they were ever interested at all). Within moments of the birdseed hitting the pavement, all the seed is spoken for, though the pigeons continue to posture for dramatic effect.
This year’s budget has even less chance of changing things than most. With Republicans controlling both the House and the Senate, the budget is sure to see extensive modification before it gets anywhere near a vote.

But Obama is not fighting for a budget so much as he is fighting for a vision. With the economy growing at its best pace in years, he reminds us of three things: First, economic growth alone is not enough to make a good society. Second, keeping inequality within reasonable limits is essential. And third, government can and should play a strong role in reducing inequality. From his vantage point, it is less important to win now than to force a change in the conversation that helps Democrats win the 2016 presidential election.
Obama recognizes that the forces that kept inequality in check in the past are largely played out. The 1970s were something of a golden age as far as economic inequality was concerned, at least for white males. Labor scarcity and union power kept wages high. No longer. Meanwhile, marginal tax rates for corporations and wealthy individuals were far higher than today. Even President Ronald Reagan’s tax policy would be considered communist by many in today’s Republican party. But these high marginal rates ensured that money from the rich would be available to support programs and more for the middle class.
With the forces that have historically restrained inequality now gone, Obama wants to reframe the debate over what government can do to limit inequality. He wants to force Republicans to accept the premise that inequality is damaging in both moral and practical terms, and focus the debate on how to reduce inequality. In other words, instead of 2016 being about the virtues of promoting growth versus promoting equity (a battle the Republicans generally win), he wants the debate to be over Republican solutions to inequality versus Democratic solutions to inequality (a battle that Democrats generally win). Forcing Republicans to talk about inequality as a real issue (and not just as the whining of disgruntled lazy people) is central to this strategy.

Without labor shortages to drive up wages, what can the government do to reduce the gap between the richest and the rest? The government can’t influence wages directly, except for the federal minimum wage. And stimulating the economy with cheap money, the way the Federal Reserve has been doing for several years, seems to boost corporate profits far more than it boosts median wages. Pretty much all the government can do to help the middle class and those below is to funnel a bit more cash to them (via tax cuts and the Earned Income Tax Credit) and drive down the cost of fundamental goods and services – for example, free community college tuition, lower health care costs, and family leave.
Obama is daring the squawkers in Congress to ignore inequality. He knows that many Americans these days feel the lash of inequality at a personal level and they want something done about it. If Obama can shift the public debate away from aggregate growth and towards questions of equity, he will have won major victory — even if a fractious Congress does not enact a single item in his budget.