Friday, February 27, 2009

A Bold Plan Sweeps Away Reagan Ideas

It is a happy day in America once again. The ghost of the Gipper has been purged.

Copies of the president’s budget, “A New Era of Responsibility.”


The budget that President Obama proposed on Thursday is nothing less than an attempt to end a three-decade era of economic policy dominated by the ideas of Ronald Reagan and his supporters.

And two weeks ago some of us were worrying that President Obama was being bested by Mitch McConnell. Nah!

After Mr. Obama spent much of his first five weeks in office responding to the financial crisis, his budget effectively tried to reclaim momentum for the priorities on which he campaigned.

Paul Krugman was quite complimentary.

His efforts would add to a budget deficit already swollen by Mr. Bush’s policies and the recession, creating the largest deficit, relative to the size of the economy, since World War II. Erasing that deficit will require some tough choices — about further spending cuts and tax increases — that Mr. Obama avoided this week. But he nonetheless made choices.

That agenda starts with taxes. 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.

“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.

Mr. Obama would try to lift the incomes of the middle class and poor through two main channels, administration officials said. The first is an overhaul of health care, meant to reduce the insurance premiums now taking a large bite out of many families’ paychecks.

The other channel is education. Over the last three decades, the pay of college graduates has risen significantly faster than the pay of less-educated workers. Mr. Obama aims to move workers into the first category by increasing federal financial aid and simplifying the myriad of aid programs. In recent years, the United States has lost its standing as the country in which the largest share of young adults graduates from college.

We as a nation simply accepted these trends, out of self-interest, or resignation. Now we have a President who is showing leadership in trying to balance things a bit better for those who are not wealthy and influential.

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