These troubled fiscal times are characterized by a few big problems:
-too much fiscal drag from misplaced emphasis on deficit reduction in what's still a weak recovery (with said weakness intimately related to said fiscal drag);
-cuts that are too deep in non-defense discretionary programs that invest in everything from upward mobility for disadvantage kids, to medical research, to education and worker training to needed infrastructure;
-cuts to entitlements that threaten to undermine retirement and health security for economically vulnerable elderly.
To their credit, the Obama administration released some early information on two broad ideas in their forthcoming budget, due out in the first week of March, both of which aspire to reduce the risks articulated above.
First, while their official budget numbers will fully adhere to the Murray/Ryan deal struck at the end of last year, whichslightly relaxed sequestration's cuts, the administration recognizes that even these agreed-upon spending levels are inadequate to meet the needs of the nation. As such, they're suggesting that discretionary spending be raised for both 2015 (by $56 billion, which would bring non-defense discretionary spending back to pre-sequestration levels and help to restore much-needed funding to the critical functions noted above) and 2016. The latter year's increase is especially necessary: since it is not covered by the Murray/Ryan budget, spending caps are scheduled to revert back to sequestration levels in 2016 and will thus become particularly tight.
The new spending they're proposing would be offset by half new revenues and half spending cuts from the mandatory side of the budget.
Second, unlike recent budgets, this one will not include the recommendation to switch to the chained CPI. Past budgets included savings generated by this change, which would lead to slower rising benefits in programs indexed to prices, most notably Social Security (note: the administration also proposed measures that would protect low-income elderly from these cuts), and higher taxes, as nominal income growth would more quickly pass into higher tax brackets.
Prior administration budgets included this change, but did so specifically in the context of negotiations over a "Grand Bargain," trading entitlement cuts for tax increases. Whether the chained CPI belonged in the budget in the first place is an open question (I'd say "no"), but with such negotiations far from the table, it makes sense for the administration to drop this idea.
This post originally appeared at Jared Bernstein's On The Economy blog.