Written by Josh Buk
WASHINGTON (AP) – President Joe Biden announced on Monday a draft budget calling for higher taxes for the rich, lower federal deficits, more money for police and more funding for education, health care and housing.
Speaking at the White House with his director of budget Shalanda Young, Biden said the proposal gives a clear message to the public about “what we value.” He outlined the emphasis on fiscal responsibility, security and safety and investment to “build a better America”.
The document, in fact, seeks to tell voters what the diverse and sometimes fragmented Democratic Party is up to in the run-up to the midterm elections, which could decide whether Congress remains under party control.
Bottom line: Biden is proposing a total of $ 5.8 trillion in federal spending in fiscal year 2023, which will begin in October, slightly less than planned to be spent this year before the additional spending bill was signed this month. The deficit will be 1.15 trillion.
There would be $ 795 billion in defense, $ 915 billion in domestic programs, and the rest will go to mandatory spending such as Social Security, Medicare, Medicaid and net interest on public debt.
Higher taxes, outlined on Monday, will bring in $ 361 billion in revenue over 10 years and apply to 0.01% of the highest households. The proposal lists another $ 1.4 trillion in revenue over the next decade from another tax increase, which is designed to keep Biden’s promise not to raise taxes for people earning less than $ 400,000.
The 156-page plan also shows the divisions that persist in Biden’s coalition, and possible gaps between the promises of what is being proposed and the realities of what is ultimately revealed. Biden had supported many of these ideas before, not necessarily receiving full support from Congress.
The proposal includes a minimum 20% tax on household income of $ 100 million or more, similar to an earlier proposal that Democrats in Congress began discussing late last year to pay for Biden’s domestic spending plans. But those spending plans were postponed after talks with West Virginia Senator Joe Manchin failed.
More money will go to support law enforcement, but the two parties’ efforts to reform the police have failed. The budget assumes – with a high degree of uncertainty, based on forecasts made last November – that inflation at its 40-year peak will return to normal next year.
“Budgets are statements of value,” Biden said in a statement, “and the budget I’m publishing today gives a clear message that we value fiscal responsibility, security and safety at home and around the world, and the investment we need. to preserve our justice. grow and build a better America. ”
This is a by-election for a nation that is still unbalanced after several chaotic years caused by the pandemic, economic recession, recovery, challenges to American democracy and the war in Ukraine. Biden’s budget calls for a reduction in the annual deficit of more than $ 1 trillion over the next decade. These reductions will be largely due to tax increases and ending aid costs associated with the coronavirus outbreak that began in 2020.
But, like most presidential budgets, it is a proposal and a set of ideals, not a country law. Congress is responsible for budget execution through tax and expenditure legislation and annual agency funding.
The proposal was immediately criticized by Republican lawmakers. They noted that the deficit, well in excess of $ 1 trillion a year, will persist, said higher taxes could hurt growth and argued that additional government spending would contribute to inflation.
“This budget shows that President Biden values more spending, more debt, more taxes and more pain for the American people,” said Jason Smith of Missouri, a senior Republican on the House Budget Committee.
As for the tax front, it is unclear how Biden will get his police through Congress. He had previously agreed to cut the proposed corporate tax rate by 28%, and his new minimum tax on the super-rich would include “unrealized profits,” which are potential profits that exist on paper because the underlying asset has not yet been sold.
The result is that a special tax on people worth more than $ 100 million is unlikely to become law any time soon, said John Gimigliano, head of KPMG’s federal legislative and regulatory services.
“It’s like a slow-burning offer, for example, let’s continue this conversation for months or maybe years,” Gimigliano said.
Although the budget will increase funding for education, health care and allocate $ 48 billion to increase the supply of affordable housing, it does not say what will be a broader successor to Biden’s program, which stalled “Back Better”. This proposal from last year included money for childcare, preschools, clean energy and smaller health care bonuses, but it was blocked by Manchin, a decisive vote from the Democratic Party.
White House Budget Director Shalanda Young told reporters that the plan did not include items related to this possible bill because “discussions with Congress are ongoing.” But the budget plan includes a “neutral deficit reserve fund” to account for a possible agreement.
The Biden administration looked at tax increases last year, reminiscent of at least 20% of the total income of people worth $ 100 million or more. But Manchin dismissed the idea as divisive. What the Biden administration outlined on Monday will raise $ 361 billion in 10 years and will cover 0.01% of the best households. The proposal lists another $ 1.4 trillion in revenue generated over the next decade through other tax changes.
Among the tax changes are the corporate tax rate of 28% and the highest rate for individuals of 39.6%, both of which are rising.
At the heart of the plan is a forecast that the economy will return to normal next year after unprecedented costs associated with the pandemic and inflation. The budget forecasts inflation at 4.7% this year and 2.3% in 2023, down from 7% in 2021. However, prices continued to rise in the first two months of 2022, and Russia’s invasion of Ukraine pushed oil, gasoline and natural gas prices to rise in ways that could spread across the economy.
Cecilia Rose, chairwoman of the White House Council of Economic Advisers, said the administration expects the economy to normalize as the country operates through a pandemic wave, easing supply chain pressures and “emergency measures” to support the coronavirus. from the budget. This normalization will mean that inflation will return to more typical levels, “but there is a huge uncertainty,” Rose said.