The 2016 Budget

President Obama released his 2016 budget yesterday and, in just about every way, it represents everything the Democrats stand for and everything the Republicans stand against. Here is a breakdown of some of the highlights. In my view, it's the best budget he has put out since he became president. This one jumped out at me right away...

-Provides Tuition-Free Community College for Responsible Students. The President's America's College Promise proposal creates new federal-state partnerships to provide two years of free community college to responsible students, while promoting key reforms to improve the quality of community college offerings to ensure that they are a gateway to a career or four-year degree. If all states participate, an estimated 9 million students could benefit from this proposal.

A big reason why our country was so successful after World War II is the GI Bill. This echoes that legislation and is a great example of middle class economics. An investment in these students now will pay dividends in our economy's future.


Other highlights...

—Spending of $4.0 trillion and receipts of $3.5 trillion would combine for a $474 trillion deficit. For the budget year that ended Sept. 30, the actual deficit was $483 billion. That was a marked improvement from the $1 trillion-plus deficits during Obama's first years in office, when the country was struggling to emerge from a deep recession. 

—A six-year, $478 billion public works program would pay for highway, bridge and transit upgrades. About $238 billion would come from a one-time, 14 percent mandatory tax on the up to $2 trillion in estimated U.S. corporate earnings that have accumulated overseas. That rate is significantly lower than the current top corporate rate of 35 percent. The top corporate rate for U.S. earnings would drop to 28 percent; foreign profits would be taxed at 19 percent, with companies getting a credit for foreign taxes paid. The remaining $240 billion would come from the federal Highway Trust Fund, which is financed with a gasoline tax.

 —The capital gains rate on couples making more than $500,000 per year would increase from 24.2 percent to 28 percent. Obama wants to require estates to pay capital gains taxes on securities at the time they are inherited. He is trying to impose a 0.07 percent fee on the roughly 100 U.S. financial companies with assets of more than $50 billion. 

 —Obama would take the $320 billion that those tax increases would generate over 10 years and funnel them into low- and middle-class tax breaks. His ideas: a credit of up to $500 for two-income families, a boost in the child care tax credit to up to $3,000 for each of up to two children under age 5, and overhauling breaks that help pay for college. 

 —Painful, automatic cuts to the Pentagon and domestic agencies would be eased, with a 7 percent increase in annual appropriations. For 2016, Obama wants a $38 billion increase for the Pentagon. All told, agency budgets would go up $362 billion over the next six years above caps mandated by automatic spending cuts. 
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The one that jumps out at me here is the alteration in corporate tax code and foreign profits. Corporations that are keeping their profits abroad should be taxed more and given the incentive, through a lower overall rate, to come back home.

The president has finally gotten smarter on dealing with the GOP. Start with a proposal that is firmly on the left side of the field (at least by today's standards:)) and force the Republicans to compromise on a more moderate approach. Don't begin with a compromise that results in something in the middle on the right side of the field.