Making A Budget Without Making Choices

For pure wishful thinking, or maybe pure silliness, it is going to be tough to top President Obama’s call this week for a federal budget “free of any party’s social and political agenda.”

Oh, and the president declared at the same time that the budget should cut spending and reduce deficits “without damaging economic growth or gutting investments in education, [or] research and development that will create jobs and secure our future.” In other words, it should be free of any party’s agenda except that of Obama’s fellow Democrats. But the president nonetheless insists that a budget be bipartisan – nothing else could get passed anyway – and that it be passed “without delay.”

Sure, Mr. President. Where would you like us to start?

Budgets are about making tough choices. If you can afford everything you want, you don’t need a budget. This president, however, treats tough choices as though they are poison-tipped darts. He refuses to touch them unless somebody else goes first.

He called for health care reform but waited for Congress to write a plan before announcing which elements he favored. He appointed a commission to address federal deficits but ran from its clear-eyed recommendations. He was for oil drilling in the deep Gulf of Mexico, then he was against oil drilling in the deep Gulf of Mexico, then for months (as gasoline prices have moved steadily higher for unrelated reasons) he has had nothing whatsoever to say about oil drilling in the deep Gulf of Mexico. When he finally produced a plan to deal with the government-sponsored mortgage entities Fannie Mae and Freddie Mac, he offered three options, made no recommendation and told Congress to pretty much do whatever it wants.

On and on it goes. While his party waits for him to take the lead on budget negotiations, as it has in many areas before, the president is about as eager to move as a burro looking up at the Grand Canyon’s cliffs on a hot summer day.

Political parties exist because the people who belong to them tend to make choices similar to one another, and different from the choices made by people who belong to other parties. Any budget necessarily reflects an “agenda,” because a budget reflects the priorities of whoever makes it. It might be a single party’s agenda if that party is dominant, as the Democrats were during Obama’s first two years in office. It might be a compromise if the two parties are in closer balance, as they are now after Republican gains in the last election. We should not even be talking about a budget for a fiscal year that is now nearly half over, but Democrats could not bestir themselves to enact a budget when they had overwhelming control of Congress last year.

The good news, such as it is, is that the federal government will not run out of spending authority at midnight tonight. (It would be inaccurate to say that it might have run out of money. There is plenty of cash in the till, thanks to massive borrowing. If you don’t count borrowed funds, the government ran out of money a long time ago.) Obama signed legislation a couple of days ago to keep the government operating for two more weeks. House Republicans got the $4 billion in immediate spending cuts they wanted by focusing on areas that Obama himself had proposed to cut when he submitted his own spending plan, the one a Democratic Congress ignored, 13 months ago.

But the Republicans are coming back for $57 billion in additional spending reductions for the current fiscal year, which runs through Sept. 30. Congressional Democrats now see many of their favorite programs targeted by Republican budget hawks. They are looking to the president for leadership, and they are not getting much of it.

The president, who needs support from independent voters in next year’s election, says he too wants spending cuts – but he says nothing about what to cut.

He says he wants to reduce deficits – a phrase, when uttered by someone in Obama’s party, which is code for raising taxes on businesses and upper-income taxpayers. Just three months ago, Obama signed on to a two-year extension of the Bush-era income tax cuts and a revival of estate and gift taxes at the least onerous rates in decades. Obama could portray this as deficit cutting if he believed, as Republicans do, that lower tax rates and reduced federal spending promote economic growth. But in his comments about “gutting” his favored “investments” in R&D and the teachers’ unions (which is what he means when he says “education”), he hews to Democrat orthodoxy about the economic benefit of higher federal spending.

So does Obama want a bipartisan budget to reflect the agenda of the Republicans or of the Democrats? The apparent answer is yes, he does. He just doesn’t want to say out loud which one, even though it is hardly a secret. Saying it would be making a choice.

This president doesn’t like making choices.

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About Larry M. Elkin 564 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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