Friday, February 27, 2009

How Obama's budget proposal affects California: SF Chronicle

How Obama's budget proposal affects California

Friday, February 27, 2009

(02-27) 04:00 PST Washington - --

California will see a sweeping commitment to addressing climate change, a huge tax hit for its wealthiest taxpayers and a major benefit to Silicon Valley's tech industry in President Obama's first budget proposal.

As in all presidents' budget plans, there are winners and losers.

California college students could benefit from a proposal to tie increases in Pell Grants to inflation for the first time in the program's history.

University of California President Mark Yudof said the plan could raise the maximum Pell Grant, intended to foster educational opportunity, by $200 next year, yielding an extra $10 million in aid for UC undergraduates. He said Obama's budget also would help students and their parents with an expanded $2,500 tax credit for college expenses.

The plan "will help ease the economic burden for many students and families in California and across the nation," Yudof said.

California's plans for a high-speed rail system could take another leap forward with Obama's pledge to add $5 billion for nationwide super-fast rail programs over five years on top of the $8 billion approved in the stimulus package. The state could get a big share because voters have approved $10 billion in state bonds for bullet trains between San Francisco and Los Angeles and from the Central Valley to the East Bay.

Losers in Obama's budget include large-scale California farm operations. Farmers making more than $500,000 a year could face deep cuts in subsidies for rice, cotton and other commodity crops, part of Obama's effort to direct aid to smaller farms.

The budget plan, totaling $3.55 trillion for 2010, represents the most detailed blueprint yet of Obama's priorities for the country. And for the most part, his budget implements the agenda that he ran on during last year's campaign.

His tax proposal amounts to a reversal of President George W. Bush's policies: Obama's budget would allow the Bush tax cuts for the nation's wealthiest 2 percent to expire in 2011. Couples earning more than $250,000 a year would see their tax rate rise from 36 percent to 39.6 percent.

Wealthy tax filers would also face new limits on what they can deduct for mortgage interest, state and local taxes, and charitable donations - which could limit giving to nonprofits. Hedge fund managers and oil and gas firms would see major tax increases. The top capital gains tax rate climbs from 15 percent to 20 percent.

Tilting the system

Obama would tilt the tax system in favor of lower-paid workers, extending the payroll tax cuts approved in the stimulus bill - $400 for individuals making less than $75,000 a year and $800 for couples earning less than $150,000.

Obama's budget also includes a provision dear to Silicon Valley: a proposed 10-year, $74 billion extension of the research and development tax credit. Tech companies say the credit gives them incentives to spend billions on research, creating jobs and motivating new technologies.

Betsy Mullins, vice president for government and political affairs at TechNet, a trade group of tech CEOs, said she was also enthused about the president's proposal to triple the number of graduate student fellowships.

"Think of all the things that have been done by graduate students - from Google to the work Marc Andreessen (founder of Netscape) did as a graduate student," Mullins said.

Obama's budget also makes a firm commitment to fighting global warming, setting the goal of cutting greenhouse gas emissions by 14 percent below 2005 levels by 2020 and 83 percent below by 2050.

The president's plan is modeled on California's cap-and-trade program, capping emission levels and allowing power plants and other emitters to buy and sell credits to release carbon dioxide. Obama is counting on revenue, estimated at $645.7 billion over a decade, to fund investments in renewable energy and other programs.

Critics call it a tax on energy firms, which could pass the added costs on to consumers. House Minority Leader John Boehner, R-Ohio said, "Let's just be honest and call it a carbon tax that will increase taxes on all Americans who drive a car, who have a job, who turn on a light switch."

But California Gov. Arnold Schwarzenegger praised the proposal, saying it would spur economic growth by fostering the development of clean energy technologies.

"In California, we know that the environment and the economy go hand in hand," he said.

Farmers face impacts

California farmers face a series of impacts from Obama's efforts to trim subsidies for agriculture. He's seeking to cut crop insurance subsidies, which would mostly affect Midwest farmers, but also California nut, citrus, avocado or raisin growers who insure against late-season freezes or unseasonable rain.

Obama also would cut a program that shares the costs of promoting exports. Major nut growers, like Blue Diamond and Sunkist, use it to promote their almonds and pistachios in overseas markets, said Jack King, national affairs manager of the California Farm Bureau Federation.

Bush attempted similar cuts to farm subsidies, only to be rebuffed by Congress. Obama, who voted for a farm bill last year that extended most crop subsidies, could face similar resistance. King said, "There will be lots of opposition from the farm community generally, and it will be bipartisan opposition."

The blueprint for California interests

President Obama's $3.55 trillion budget proposal for 2010 would have far-reaching implications for the state:


Wealthy filers - couples making more than $250,000 a year - would see their tax rate rise from 36 percent to 39.6 percent and would see a cutback in their deductions for charitable giving.

Climate change

Obama's pledge to address climate change could make California's cap-and-trade plan to cut greenhouse gases a national model.

High-speed rail

The budget pledges $5 billion more for high-speed rail nationwide on top of the $8 billion approved in the stimulus package, which could speed plans for a network of bullet trains linking the Bay Area, the Central Valley and Los Angeles.

Health care

Obama's $634 billion, 10-year down payment for health care is likely to set off a fierce debate with profound effects for doctors, hospitals and the state's 6.6 million uninsured.


A plan to extend the research and development tax credit for 10 years could entice Silicon Valley companies to spend billions more on research.


Obama's plans to cut subsidies for farmers earning more than $500,000 a year could hurt big California rice, cotton and wheat growers.

For a complete look at the budget, go to

Budget highlights: A look at some of the details of President Obama's proposed 2010 spending plan

Health and Human Services

Proposal: $821.7 billion

Up 7.5% from 2009 estimate

Highlights: Medicare and Medicaid would grow more slowly. Obama wants to squeeze Medicaid and Medicare spending to help create a 10-year, $634 billion "down payment" to provide coverage for all.



$10.5 billion

Up 34.6% from 2009

Highlights: Budget would give the biggest increase for the agency in eight years. It would nearly triple funding for states, local governments and tribes, allowing them to use the money to improve sewage treatment plants and drinking water systems. Starting in 2012, the budget proposes to invest $15 billion a year in clean energy.



$46.7 billion

Up 12.8% from 2009

Highlights: Would tie the Pell Grant program to inflation for the first time. Also would end government-guaranteed loans and boost the government's own direct lending in an effort to insulate students from turmoil in financial markets.


Proposal: $26 billion

Up 8.8% from 2009

Highlights: Big farms that receive large government subsidies would lose some of that money. Nutrition would get a boost, with $1 billion more each year to improve child nutrition programs and enhance the nutritional quality of school meals.



$533.7 billion

Up 4% from 2009

War spending (addition to annual budget): $130 billion for 2010, $75.5 billion for 2009

Highlights: Only a modest increase in defense spending for 2010; Obama's proposal of at least $533.7 billion is only a 4 percent increase from estimated 2009 spending. Also requested is a separate $205.5 billion for the wars in Iraq and Afghanistan between now and fall 2010.

Veterans Affairs


$52.5 billion

Up 10% from 2009

Highlights: The Veterans Affairs budget takes a step toward expanding health care access to nondisabled veterans whose incomes exceed about $30,000 annually. His budget also would provide extra funding for veterans who are homeless and those in rural areas.

Homeland Security


$42.7 billion

Up 1.2% from 2009

Highlights: Air travelers likely would have to pay more in three years to have their shoes inspected at airports; starting in 2012, the airlines would cover most of the costs of passenger and baggage screening through increased fees.

Foreign affairs

Proposal: $51.7 billion

Up 9.5% from 2009 (Change is because $10.5 billion in supplemental nonmilitary funding for Afghanistan and Pakistan was added to the initial $36.7 billion 2009 estimate)

Highlights: The proposal includes money to meet Obama's campaign pledge to double foreign aid and boost counter-terrorism and non-military assistance to Pakistan and Afghanistan. It would also retain President George W. Bush's hallmark global HIV/AIDS initiative.

Source: Associated Press

E-mail Zachary Coile at

Comment: We should have a general understanding of these items and have an eye for details. Plus, be capable of explaining these issues to others in our circles. We are in the Great Depression of 2009!

Education for Liberation! Join Up!
Peter S. Lopez aka: Peta

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