President Joe Biden released his budget on Thursday, vowing to cut $3 trillion from the federal deficit over the next decade, in part, by levying a 25% minimum tax on the wealthiest Americans.
Biden's budget would also raise more revenue by increasing taxes on oil and gas companies, hiking the corporate tax rate to 28% from 21% imposed under former President Donald Trump but below the pre-2017 35% tax, and allow Medicare to negotiate drug prices.
With Biden likely to run for reelection in 2024, his budget is also a preview into his platform as a candidate and campaign pitch in the year ahead. Facing a Republican-controlled House, it's unlikely many of the proposals will be passed in their current form. The president submits his budget to Congress outlining the administration's priorities for the upcoming year, but ultimately Congress decides where the funds are allocated.
Fair share
White House Office of Management and Budget director Shalanda Young told reporters the administration is able to cut deficit spending "by asking the wealthy and big corporations to begin to pay their fair share and by cutting wasteful spending on Big Pharma, Big Oil and other special interests."
"It does this in part by reforming our tax code to reward work, not wealth, including by ensuring that no billionaire pays a lower tax rate than a teacher or firefighter and by quadrupling the tax rate on corporate stock buybacks," Young said. "That's a very clear contrast with congressional Republicans."
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The Stock Buybacks Tax builds upon a measure Biden signed into law last year reducing the differential treatment in the code between buybacks and dividends. The goal is to encourage business to invest in growth rather than spending on stock buybacks. Under the budget proposal, the tax would quadruple from 1% to 4%. A Data for Progress poll from February found 58% of Americans support increasing the stock-buyback tax.
Biden's fiscal year 2024 budget gets some help from the slowing Covid-19 pandemic, which the White House noted needs less emergency aid as the outbreak enters a new phase thanks to widespread vaccinations. The president's spending priorities include increasing funding for early childhood education and child care, expanding the $35 cap on insulin prices to all Americans and expanding free community college. These proposals are all part of his push to give American families "a little more breathing room." The 2024 fiscal year begins Oct. 1 and runs through Sept. 30, 2024.
Social programs
Cecilia Rouse, chair of the Council of Economic Advisers, explained how the administration believes the social programs outlined in the White House budget will actually boost the economy.
"Policies such as paid leave and child care will bring more workers into the labor force and improve productivity," Rouse said. "Investments in early education, mental health and community college not only expand our economy's productive capacity but pay dividends for generations to come."
In addition to social spending, the budget includes robust defense funding. At more than $835 billion, the defense budget would be among the largest peacetime expenditures in U.S. history.
For weeks the president has urged House Republicans to present their own budget proposals instead of just criticizing his plan. House Republicans have promised to propose a balanced budget and have scoffed when the White House pointed to GOP proposals to make cuts to programs like Social Security and Medicare. House Budget Committee Chair Jodey Arrington told CNN on Wednesday the Republican budget should be ready by the second week in May.
'Fight it out'
Speaking in Philadelphia, Pa. on Thursday, Biden said he and House Speaker Kevin McCarthy, who the president noted is "a very conservative guy" with "a very conservative group" of lawmakers, agreed early on to meet after they both introduce 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, in its budget proposal, includes an entire section dedicated to shoring up Social Security and Medicare, funded by the minimum 25% wealth tax on households with a net worth of $100 million or more. The proposed budget would extend "the solvency of the Medicare Trust Fund by at least 25 years" without removing benefits or raising costs. It also provides a $1.4 billion increase in funding for Social Security to improve services.
Debt ceiling debate
"Benefit cuts are not on the table," Young said.
Looming over the budget release is the unresolved standoff over whether to lift the debt ceiling. The White House has maintained it will not negotiate over the debt limit, arguing Congress should act to raise it as it has done numerous times over past decades. House Republicans, led by Speaker Kevin McCarthy, have tried to tie the debt ceiling to future spending, saying they will not budge without promises to cut expenses. The debt ceiling, however, pertains to existing spending. To date, House Republicans have been murky on what expenses they would like to see cut.
"MAGA Republicans in Congress have tried to repeal the Affordable Care Act, Social Security, Medicare, Medicaid — we're not going to let them folks," Biden said. "My budget makes robust investments on military defense, let's see what the MAGA Republicans propose and let's be clear where I stand: I will not allow cuts to the needs of the intelligence community or military that help keep us safe."
'Back to work'
Rouse touted the administration's economic track record, noting that unemployment has fallen somewhat inexplicably under Biden's watch — even as the pace of inflation has slowed. She said most economists couldn't have predicted the jobs market would rebound as strongly as it has since he took office.
"I think if you told most conventional macroeconomists 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, but instead the unemployment rate in January was 3.4%, or 0.2 percentage points lower than it was," Rouse said, noting that February's unemployment rate will be released Friday. "The economy looks healthier today than it did in other ways, too."
Rouse expanded on that, in an attempt to ease recession concerns by pointing to economic gains already seen under the administration's watch.
"The strength of our recovery has put us on solid ground to weather economic shocks," Rouse said. "Americans are back to work and the economy is stronger than anyone, including the federal government and private forecasters, imagined it would be when President Biden took office."