Obama's FY17 Budget (Feb. 9)

Mike & Co. —

Today, President Obama submitted his eighth and final budget proposal to Congress.  It tops the $4 trillion mark for the first time.   Despite the historical tendency for lame duck presidential budgets to be treated as scrap paper — this one won’t even be accorded the courtesy of a hearing in House Budget — there are a few noteworthy proposals and initiatives which, if nothing else, are likely to generate discussion on the Hill and off.  

That’s the real purpose of this budget — to help frame the debate in 2016 about where America is headed what the nation’s priorities should be.  A number of the proposals in this budget resonate with issues and themes already being debated.  Candidates in particular seeking to emphasize support for or opposition to the President have a new set of proposals at their disposal. 

What is new and noteworthy in the White House budget and what’s next for it?  Detail below. 

Special thanks to those of you in NH tonight.  Fingers crossed and stay tuned this way:   http://politi.co/20n5W2w 




The Obama Administration put forth a myriad of budget proposals revolving around a variety of issues.  Below are thoughts on some of the most significant of these from a fiscal and financial regulatory perspective:

  •  $10/Barrel Transportation Tax

A perennial favorite of Democrats has made a return in the Obama budget:  a $10.25 per barrel tax on oil, $319 billion in revenue from which will go toward funding “a 21st Century Clean Transportation Plan to upgrade the nation’s transportation system, improve resilience and reduce emissions.”  The proposed tax is a simplified version of “carbon taxation” policies, which aim to tax energy producers and oil companies based on the level of pollution they produce; “cap and trade” was a similar policy idea but with more complicated implementation.

The tax will be phased in over five years and levied against oil companies, with the revenue to help fund clean energy initiatives like expanding high-speed rail systems and also to increase national infrastructure spending.  The appeal of this flat-tax on oil is its simplicity –- there is nothing complicated about charging oil companies $10.25 per barrel of oil, meaning there’s no way for them to shirk the charge.

Supporting the tax would lend candidates some environmental bonafides, but might be seen as a backdoor  tax on the middle-class. Though paid for by oil companies, the  price is expected to be passed along to consumers through higher prices.  The tax is expected to increase the price of gasoline by 25 cents per gallon.

  •  Funding Fin. Reg. Like it Matters

Obama proposes to double the budget for Wall Street regulators SEC and CFTC over ten years, beginning with an 11 percent increase for SEC and 32 percent for CFTC in 2017.  Clinton has a lot to like in this particular section – she’s the only candidate who has defended Dodd-Frank and is campaigning on proposals to strengthen current regulations, including through greater budgets for regulatory agencies.  Leaders for both regulators have complained that their responsibilities far outstrip their budget.

The proposal is more realistic than the oil tax, although not necessarily something that will definitely be enacted.  The SEC has called for increased funding recently.  SEC chairman Mary Jo White asked at a House Financial Services Committee hearing in November for $1.8 billion in funding for fiscal 2017.  In a time when Republicans are looking to reduce regulatory burdens against banks, an increase in regulators’ budgets highlights the difference in priorities on Wall Street.

  •  Boosting R and D

The budget increases R&D funding by four percent for a total of $152 billion in 2017; among changes are a doubling of clean energy research and funding a $1 billion cancer “Moonshot” research program aimed at eliminating the disease.

  •   Apprenticeship Training Fund

The budget establishes a $2 billion mandatory Apprenticeship Training Fund – meant to double the number of apprenticeships across the United States.  Only HRC has talked about the need for increasing the number of apprenticeships in the country during the election, favoring a tax-credit policy rather than direct funding.

Congressional Prospects

Obama’s proposal is not only a prelude to battle.  Lawmakers and the administration will have to strike some sort of deal to keep the government running when the current fiscal year ends on Sept. 30 — most likely a continuing resolution to keep the lights on through the election and early into 2017.  In a sign that Obama isn’t looking for a knock-down spending fight this year, the president’s proposal abides by the discretionary caps for fiscal 2017 set by last year’s bipartisan budget deal.

Congressional leadership may have a fight on its hands even without Obama making waves – if the Freedom Caucus membership decides to make its displeasure on the budget known then it could cause rancor amongst the GOP.  In a year when the party is desperate to project an image of capable leadership, in part by passing a complete budget for the first time since 1997, a blow-up between Ryan and the back-benchers would amount to nothing less than catastrophe.

At a more granular level, Obama’s blueprint is a grab-bag of Democratic priorities.  The administration is once again calling for expanding early education in his 2017 budget, asking for more pre-K grants, a child care expansion and a small boost to Head Start.  The budget boosts spending for Obamacare Medicaid expansion by $2.6 billion over a decade, designed to be an enticement to the 19 holdout states that have yet to take effect.

Republicans and the Budget

The Republicans have a different plan for the budget this year, naturally.  Speaker Ryan has stated that he intends to pass the budget and all 12 appropriations through the house — a feat that hasn’t been accomplished in two decades.

The Republicans have a different plan for the budget this year, naturally.  Speaker Ryan has stated that he intends to pass the budget and all 12 appropriations through the house – a feat that hasn’t been accomplished since 1997.  Although Ryan and the GOP House leadership hope to gain the faith of the American people back by bringing about the return of regular order, they face a tight calendar and the political implications of an election year — not to mention internal opposition in the form of the Freedom Caucus.  Should the back-benchers feel their concerns aren’t being adequately addressed, they may try to disrupt the passage of appropriations bills.  The care and feeding of these members on budget matters may be turn out to be one of the toughest challenges Ryan will face this year.

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