In the Next Ten Years, the Biden Budget Would Reduce the Deficit by $3 Trillion
On Thursday, President Joe Biden unveiled his budget, promising to reduce the federal debt by $3 trillion over the following ten years, in part by imposing a 25% minimum tax on the wealthiest Americans.
By raising taxes on oil and gas firms, raising the corporate tax rate from the 21% enacted under the previous administration of Donald Trump to 28% (still below the 35% tax enacted prior to 2017), and allowing Medicare to negotiate prescription costs, Biden’s budget would also generate extra income.
Given that Biden is expected to seek for reelection in 2024, his budget also serves as a sneak peek into his platform and sales pitch for the upcoming election season. It’s doubtful that many of the recommendations will be adopted in their current form because of the Republican – controlled House. The president presents a budget to Congress detailing the government’s goals for the following year, but ultimately it is Congress that determines how the money is spent.
Reasonable Compensation
Shalanda Young, director of the White House Office of Management and Budget, told reporters that the government can reduce deficit spending by “asking the wealthy and big corporations to begin paying their fair share and by cutting wasteful spending on Big Pharma, Big Oil, and other special interests.”
According to Young, “it accomplishes this in part by overhauling our tax structure to reward effort, not money, particularly by ensuring that no billionaire pays a lower tax rate than a teacher or fireman, and by quadrupling the tax rate on corporate stock buybacks. “That’s in stark contrast to congressional Republicans,” someone said.
The Stock Buybacks Tax expands on a bill that Biden signed into law last year to lessen the difference in treatment between buybacks and dividends under the tax code. The intention is to persuade companies to spend money on expansion rather than on stock buybacks. The tax will increase from 1% to 4%, quadrupling under the proposed budget. According to a February Data for Progress study, 58% of Americans favor raising the stock-buyback tax.
The Covid-19 epidemic, which the White House acknowledged requires less emergency aid as the outbreak enters a new phase due to extensive immunizations, lends some support to Biden’s fiscal year 2024 budget. Increasing financing for early childhood education and childcare, extending the $35 ceiling on insulin pricing to all Americans, and expanding access to free community college are among the president’s top spending goals. He is attempting to “provide American families a bit more breathing room” with all of his initiatives. The fiscal year of 2024 starts on October 1 and ends on September 30, 2024.
Social Services
The administration’s belief that the social initiatives contained in the White House budget will genuinely stimulate the economy was expressed by Cecilia Rouse, chair of the Council of Economic Advisers.
Policies like paid leave and child care will increase the number of employees in the labor force and boost productivity, according to Rouse. “Investments in early education, mental health, and community college not only increase the productive capability of our economy, but also provide benefits for future generations.”
The budget provides significant money for defense in addition to social spending. With a budget of more than $835 billion, the defense budget is among the biggest in American history during a period of peace.
The president has been pleading with House Republicans to propose their own budget ideas rather than simply criticize his plan for weeks. When the White House mentioned GOP ideas to cut back on programs like Social Security and Medicare, House Republicans sneered and vowed to present a balanced budget. The GOP budget should be completed by the second week of May, according to House Budget Committee Chair Jodey Arrington, who spoke to CNN on Wednesday.
‘Fight it out’
Speaking to reporters on Thursday in Philadelphia, Pennsylvania, Biden said that he and House Speaker Kevin McCarthy, who the president described as “a pretty conservative person” with “a very conservative caucus” of members, had already made plans to meet after they had introduced their budgets.
“We’ll sit down and we’ll go line by line, and we’ll go through it and see what we can agree on, what we disagree on, and then fight it out in the Congress,” Biden recounted telling McCarthy. “I’m ready to meet with the Speaker anytime, tomorrow if he has his budget. Lay it down, show me what you want to do, I’ll show what I want to do. We can see what we can agree on, see what we don’t agree on and we vote on it.”
The White House‘s budget proposal dedicates a whole section to strengthening Social Security and Medicare, with funding coming from a minimum 25% wealth tax on people with a net worth of at least $100 million. The proposed budget will prolong “the stability of the Medicare Trust Fund by at least 25 years” without reducing benefits or rising expenses. Moreover, it promises an increase in financing for Social Security of $1.4 billion in order to enhance services.
Debt Limit Discussion
Benefit reductions are not an option, according to Young.
The ongoing impasse over whether to raise the debt ceiling hangs over the unveiling of the budget. The White House has said it won’t engage in debt ceiling negotiations, saying Congress should act to raise it as it has multiple times in the previous decades. Speaker Kevin McCarthy and the House Republicans have made an effort to link raising the debt ceiling to future spending cuts, claiming they won’t bend until such commitments are made. Yet, the debt cap only applies to current spending. House Republicans have not yet been clear about the spending they want to see reduced.
The Affordable Care Act, Social Security, Medicare, and Medicaid have all been attempted to be repealed by The Republicans in Congress. “Let’s see what the MAGA Republicans offer and let’s be clear where I stand: I will not accept cutbacks to the requirements of the intelligence community or military that help keep us secure,” the president said. “My budget makes substantial expenditures in military defense.”
‘Back to work’
Rouse praised the administration’s achievements on the economy, pointing out that unemployment has decreased under Biden’s leadership strangely – even as the rate of inflation has slowed. She said that few economists could have anticipated that the labor market would recover as quickly as it has since he assumed office.
The unemployment rate in January was 3.4%, which is 0.2 percentage points lower than it was, according to Rouse, who noted that February’s unemployment rate will be released on Friday. “I think if you told most conventional macro economists last June that we were about to get seven straight months of declining annual CPI inflation, they would have told us that the unemployment rate would rise over that time,” Rouse said. “In some respects, too, the economy appears to be doing better now than it was.”
Rouse elaborated on that in an effort to allay recession worries by highlighting economic progress already made under the administration’s direction.
The robustness of our recovery has given us a strong foundation to withstand economic shocks, according to Rouse. People are back to work, and the economy is better than anybody could have predicted when President Biden started office, including the federal government and private analysts.
