Thursday, March 26, 2009

Obama Goes for It All in Budget ~ Wall Street Journal

MARCH 27, 2009

Obama Goes for It All in Budget

In poker, there's a maneuver called "all-in," in which a player pushes all his chips to the center of the table in one big bet.

By that standard, President Barack Obama is conducting an all-in presidency.

The big bet is Mr. Obama's first budget, which he has spent this week selling hard, from closed rooms on Capitol Hill to open forums on the Internet. It's an all-in policy statement.

The budget attempts to launch at the outset most of the big policy initiatives the president has in mind for his term. It has money for a new health plan, envisions a cap-and-trade system for limiting so-called greenhouse gases, invests big money in alternative energy, and continues the flow of dollars into education started in the economic-stimulus package.

Its sweep is striking, which cheers Obama partisans who want bold strokes. But it also is a real gamble. It has scared some important constituencies, including moderate Democrats who fear the deficits it could create, and business backers such as Warren Buffett, who worry its broad ambitions will divert attention from core economic problems. It has drawn new attention to deficits, united Republicans in opposition, and made it easier for critics to paint the president as a traditional big-spending liberal.

The Obama team could have made another choice; it could have been incremental, seeding in some items now, while promising to launch others over time. The trillion-dollar deficit already created by war costs, economic bailouts and stimulus spending would have been reason enough for caution.

But that isn't the path taken. So why run the risks inherent in this approach?

To understand the answer, it's necessary to understand how the president and his team see this moment in history, and their place in it. Their strategy is to shock the system at the outset, much as Ronald Reagan did in 1981 with his first budget, which sharply increased defense spending and squeezed budgets elsewhere. This administration's goal is to use the budget as an instrument to alter the very shape of the economy that emerges from recession. Details can sort themselves out later; the goal now is to put down markers.

In this view, the economic crisis has so shaken the nation that it has opened the door for a big change of economic direction. The administration is simply walking through.

"We have fundamentally shifted the center of gravity in this budget, in the same way Reagan did," Rahm Emanuel, the president's chief of staff, said in an interview. "We are going to use this time and this moment to do what needs to be done."

Mr. Obama himself summarized his thinking at an appearance Wednesday night: "It's more than just a budget; it's a blueprint for our economic future. It's a vision of what the Democratic Party stands for -- that boldly and wisely makes the choices we as a nation have been putting off for too long."

What are the choices he is talking about? There are three big ones.

The first is a big federal push, rather than smaller incentives, behind the search for alternative energy sources.

The second is to follow on the education-testing culture the Bush administration created with an aggressive federal role in rewarding teachers, wiring and revamping schools and helping pay for college.

And the third is to put many billions of federal dollars into spreading health coverage, while hoping that spending a few billion of them improving the system's efficiency will keep down the ultimate price tag. The president has made it clear he is willing to raise taxes on upper-income Americans to do that.

It's an article of faith within the Obama team that movement in these three areas actually will create new energy jobs and a health system that isn't such a drag on the economy. "Anyone who thinks we view these things as separate and apart from our economic policy doesn't get our thinking," says one senior Obama adviser.

So the initial Obama budget is an attempt to push the envelope on all those fronts, knowing that Congress is likely to pull back somewhat. And pulling back is exactly what the House and Senate budget committees are doing as they craft their budget bills, trimming the spending Mr. Obama sought in such areas as health, putting aside for now his cap-and-trade system, and leaving in doubt the future of his middle-class tax credits.

Actually, this scenario turns the usual Washington game on its head. The more traditional approach by a White House is to low-ball its programs, knowing that Congress's inclination usually is to pump in more money and add programs. This president has created the opposite dynamic; Congress's role, which it played in the debate this week, will be to pull back.

The risks for Mr. Obama are that there will be no way to pay for it all without taxing the 95% of American taxpayers he has vowed to protect, and that the budget will open a lasting split with his own party's moderates. More broadly, if the economy doesn't start growing as soon and as fast as the administration expects, deficits could rise up and consume the very agenda the budget is meant to launch.

This week, though, it became clear that's a gamble the president is willing to take.

Write to Gerald F. Seib at

Comment: It is beginning to become more clear now what Obama is trying to do. I just hope he is good at poker!

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Peter S. Lopez aka: Peta

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