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Obama Budget Proposal Sets Up Debate on Poverty

Washington — The Obama administration budget to be released today will set the stage for an election-year debate over government’s role in creating economic opportunity, with President Obama calling for more federal spending to help the poor and Republicans charging that such programs waste money and foster dependency.

In his latest request to Congress, Obama plans to seek $56 billion in fresh spending to expand educational offerings for preschoolers and job training for laid-off workers, among other priorities — the very types of programs that Republicans say have been proved ineffective.

Meanwhile, House Budget Committee Chairman Paul Ryan, Wis., is at work on a GOP budget plan that aims to overhaul the nation’s welfare system, in part by cutting spending on programs that Ryan argues have locked people into poverty.

The dueling blueprints are unlikely to produce much immediate legislative action, but they provide road maps for Democrats and Republicans heading into this fall’s midterm elections. And while the policy prescriptions are vastly different, both sides seek to tap into powerful anxieties about how hard it is for the average person to get ahead in today’s economy.

“The two sides have converged in terms of the problems they’re diagnosing,” said Alan Viard, a resident scholar at the right-leaning American Enterprise Institute. “But the solutions are very far apart. It’s not clear that either party is going to go too far away from the policies they’ve traditionally emphasized.”

The bipartisan focus on economic opportunity reflects the nation’s changed economic and political circumstances: The Great Recession is long over. The annual budget deficit is shrinking. And both parties have concluded that they would benefit from taking a break after three years of near-constant confrontation over the budget.

During this lull, Obama and Ryan are working to change the conversation, laying out competing priorities that are likely to occupy lawmakers in earnest once the midterm elections are decided and Obama enters the final two years of his presidency.

“I view both the Obama budget and the Ryan budget as laying out proposals and guideposts for what’s going to be a year-long discussion and debate,” said Bob Greenstein, president of the left-leaning Center on Budget and Policy Priorities. “Some of it will make it into the campaigns. And the bigger decisions are going to come in 2015.”

With his budget request, Obama is returning to the populist, bread-and-butter themes that helped him win reelection and have played to Democrats’ advantage for years. He will propose $28 billion in new spending on education, manufacturing and job training, as well as $28 billion for defense programs. He will endorse the idea of overhauling the corporate tax code to boost U.S. competitiveness and generate additional revenue to rebuild roads and bridges and create jobs.

In a nutshell, Obama will make the case that government has the potential to help millions of Americans prosper.

Ryan, meanwhile, is trying to shift his party away from the relentless focus on spending and deficits that has dominated GOP thinking in recent years. In its place, he is working to identify conservative policies that offer a helping hand to poor and working-class families.

Ryan says he sees a role for government, but he also wants to get parts of it out of the way so Americans can advance on their own. On Monday, for example, he released a blistering 204-page critique of the nation’s vast array of social programs. The document serves as a precursor to a GOP budget that would fundamentally reweave the social safety net and - if past is prologue - shrink federal spending on it dramatically.

With his budget still being drafted, Ryan declined to say which programs would get the ax. But his report argues that the nearly $800 billion the federal government spends on anti-poverty programs each year should be trimmed.

In last year’s GOP budget blueprint, Ryan proposed to sharply slow spending on domestic social programs, such as Medicaid, food stamps and Pell grants for college students. Of nearly $5 trillion in non-defense cuts identified in his most recent budget, nearly two-thirds came from programs designed to support the poor, according to the Center on Budget and Policy Priorities.

GOP leaders are applauding Ryan’s work, after expressing concern that the White House’s emphasis on economic mobility and inequality could be a threat to Republicans running in competitive low-income areas.

Meanwhile, a growing cadre of young conservatives in Congress, including Sen. Mike Lee, Utah, is also shifting its focus to mobility and poverty — a political battleground that has not animated the GOP in a significant way since the mid-1990s, when Republicans worked with President Bill Clinton to pass welfare reform.

The push has met with mixed reaction among anti-poverty advocates. Some scoff at the notion that Republicans can help the poor while cutting spending. And even sympathetic advocates concede that Ryan’s prescriptions are not fully formed.

“He may need to temper his analysis from time to time,” said Bob Woodson, a veteran community organizer who has toured poor, urban neighborhoods with Ryan. “Things won’t change overnight. No program is beyond criticism, but you’ve first got to find out what’s working and what’s not working.”

Ryan and Obama are not in complete disagreement. For instance, they both support the earned-income tax credit (EITC), a kind of cash bonus for working families that provides support without discouraging employment.

Since its introduction during the Ford administration, the EITC has become one of the largest and most important federal poverty-fighting programs.

“The consensus among studies on the EITC is that it is an effective tool for encouraging and rewarding work among lower-income individuals, particularly single mothers,” Ryan’s report states.

Obama echoed that thinking in his State of the Union address. In his budget, Obama plans to call for an expansion of the EITC so that childless adults receive more-generous benefits. He will also seek to expand other tax breaks, including the child tax credit, that benefit lower- and middle-income Americans.

Administration officials said they would cover the cost of the proposals by closing tax loopholes that benefit the wealthy, including the “carried interest” provision, which benefits hedge-fund managers, and a loophole that permits self-employed professionals to avoid payroll taxes on the bulk of their earnings.

Another area of agreement: Taxing the accumulated overseas profits of multinational corporations to finance an increase in spending on infrastructure projects.

Last week, Rep. Dave Camp, R-Mich., the chairman of the House Ways and Means Committee, released a proposal for a tax-code overhaul that would cut the corporate tax rate, wipe out most corporate deductions, and force corporations to pay taxes on profits squirreled away overseas to fund construction of roads and bridges.

Obama has made a similar proposal, though the White House opposes the far-reaching rewrite of the individual tax code that forms the heart of Camp’s legislation.

For the most part, the contrasting visions of Obama and congressional Republicans reflect a profoundly different understanding of how government has performed over the past 50 years.

Ryan, for instance, argues that the war on poverty has failed. He notes that, by official census estimates, the poverty rate has declined from 17.3 percent in 1965 to 15 percent today - meager progress, given the trillions that have been spent to lift people out of poverty.

But White House officials - along with many independent economists and poverty researchers - point out that the official measure of poverty is deeply lacking. For example, it does not take into account food stamps and a wide array of other government benefits.

When the full range of benefits is taken into account - along with the full array of costs faced by poor Americans - the picture is much different, suggesting that poverty has declined significantly. One well-respected study by researchers at Columbia University found that the portion of Americans living in poverty fell from 26 percent in 1967 to 16 percent in 2012.

Ryan is unlikely to be persuaded. The report he released Monday singles out Head Start, the federal program for poor preschoolers, and Medicaid, the federal health insurance program for the poor, as particularly flawed.

In his budget, Obama will call for more money for Head Start - and his Affordable Care Act calls for expanding Medicaid coverage in every state.

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