President Obama’s Budget Proposal: Focus on Middle Class and Budget Expansion

U.S. President Obama submitted his budget proposal for fiscal year 2016 (October 2015 – September 2016) to Congress on Feb. 2. In an address held in Washington, D.C. concerning the budget proposal, the president appealed for a budget expansion policy that would emphasize support for the middle class. He expressed a desire to reduce America’s deeply rooted economic disparities. On the other hand, Republicans — who occupy the majority and wield the right to make changes to the budget proposal — are strongly opposed to budget expansion, and an intense, heated discussion is unfolding focused on the 2016 presidential election.

Mr. Obama called forcefully for economic policies supporting the middle class that he had also proposed in his State of the Union address in January, asking “…are we going to build an economy where everyone who works hard has a chance to get ahead?”

Mr. Obama included several support measures for the middle class in his $3.9 trillion — roughly 470 trillion yen — budget proposal, such as the establishment of a $500 tax credit for working married couples. At the same time, he outlined a liberal-style tax policy toward the wealthy that would strengthen the taxation of dividends and capital appreciation from investments, while redistributing the funds collected from the rich to the middle class.

The promise of the U.S. economy has been apparent since last year, but economic disparities are thought to be on an expanding trend. In a report released by the U.S. Federal Reserve Bank last September, although the annual household income of the top 10 percent increased in net assets by 13 percent between 2010 and 2013, the annual income of the bottom 25 percent fell by 10 percent. This shows a phenomenon in which the income level of the rich is continuing to increase.

For Mr. Obama, who has produced economic recovery since the recession following the financial crisis, reducing income disparity is the remaining issue. This time, he presented the budget proposal as a prescription for it.

However, Congress — held by the Republicans — is emphasizing Mr. Obama’s limitations, especially his inability to resolve income disparities. House Ways and Means Chairman Paul Ryan criticized Mr. Obama’s Feb. 2 address based on shortcomings, such as the weakness of a wage increase in the U.S. economy, saying, “We’re six years into the Obama economic policies, and he’s proposing more of the same, more tax increases that kill investment and jobs, and policies which are hardly aspirational.”

On the other hand, Mr. Obama and Republicans also share some common interests. Both Mr. Obama — who wants to expand the budget — and Republicans — who would like to guarantee the defense budget — would like to avoid in fiscal year 2016 a return of the forced budget cuts that they were able to mitigate in fiscal years 2014 and 2015.

The policies of both parties are similar, even on strengthened infrastructure investment and expansion of tax deductions for low-income earners with no children, and The New York Times (online edition) stated that “buried in the document are kernels of proposals that could take root even with a hostile Republican Congress.”

However, precisely because the debate over the 2016 budget is directly connected to economic policy issues in the 2016 presidential election, neither side can show any weakness. There will no doubt be intense sparks in the future over points of contention concerning the scale of the budget and deficit.