Published 10/03/2023 19:17 | Edited 03/11/2023 18:17
President Joe Biden released his budget on Thursday, pledging to cut $3 trillion from the federal deficit over the next decade, in part by levying a minimum 25% tax on the richest Americans.
Biden’s budget would also increase revenue by raising taxes on oil and gas companies, bringing the corporate tax rate to 28% from the 21% imposed by former President Donald Trump, but down from the pre-2017 35% tax, and would allow Medicare (the public health care system) to negotiate drug prices.
With Biden likely to run for re-election in 2024, his budget is also a preview of his platform as a candidate and campaign pitch in the coming year. Facing a Republican-controlled House, many of the proposals are unlikely to pass in their current form. The president submits his budget to Congress outlining the government’s priorities for the coming year, but Congress decides where the funds will be allocated.
Tax justice and financial speculation
White House Office of Management and Budget Director Shalanda Young told reporters the administration is able to cut deficit spending by “asking the rich and big corporations to start paying their fair share and cutting unnecessary 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 ensuring that no billionaire pays a lower tax rate than a schoolteacher or firefighter, and quadrupling the corporate share buyback rate,” Young said. . “That’s a very clear contrast to Congressional Republicans.”
Biden also wants to create the stock buyback tax, which builds on a measure signed into law last year, reducing the code’s differential treatment between buybacks and dividends. The aim is to encourage companies to invest in growth rather than spend on share buybacks. Under the budget proposal, the tax would quadruple from 1% to 4%. A Data for Progress poll from February found that 58% of Americans support raising the stock repurchase tax.
Biden’s fiscal 2024 budget gets some help from the slowdown in the COVID-19 pandemic, which the White House has 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 care, expanding the $35 cap on insulin prices for all Americans and expanding free community college. Those proposals are part of his effort to give American families “a little more breathing room.” The 2024 fiscal year begins October 1 and runs through September 30, 2024.
Social programs and weapons
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 like paid leave and child care will bring more workers into the workforce and improve productivity,” said Rouse. “Investments in early childhood education, mental health and community college not only expand the productive capacity of our economy, 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 rank among the largest peacetime expenditures in US history.
For weeks, the president has urged House Republicans to come up with their own budget proposals, rather than just criticizing his plan. House Republicans promised to propose a balanced budget and scoffed when the White House pointed to GOP proposals to make cuts in programs like Social Security and Medicare.
The White House, in its budget proposal, includes an entire section dedicated to bolstering Social Security and Medicare, funded by the minimum 25% wealth tax for families with 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 increasing costs. It also provides a $1.4 billion increase in Social Security funding to improve services.
Looming over the release of the budget is the unresolved impasse over whether to raise the debt ceiling. The White House has said it will not negotiate the debt limit, arguing that Congress should act to raise it, as it has done several times in recent decades. House Republicans, led by House Speaker Kevin McCarthy, have tried to tie the debt ceiling to future spending, saying they won’t budge without promises of spending cuts. The debt ceiling, however, concerns existing spending. So far, House Republicans have been unclear about what spending they would like to see cut.
“The MAGA Republicans [Make America Great Again] in Congress tried to repeal the Affordable Care Act, Social Security, Medicare, Medicaid – we are not going to allow it, folks,” Biden said. “My budget makes hefty investments in military defense, let’s see what the MAGA Republicans propose and let’s make my position clear: I will not allow cuts to the needs of the intelligence community or the military that help keep us safe.”
The Republican opposition faces a scenario in which Biden has benefited from the “inexplicable” drop in unemployment, in addition to the slowdown in the pace of inflation. The job market is recovering more strongly since he took office than the government itself expected.
There were seven consecutive months of decline in the annual CPI inflation, in which an increase in the unemployment rate was predicted that was not confirmed, instead, in January it was 3.4%, or 0.2 percentage points below what it was.
The health of the American economy does not point to a recession, as imagined. With this, the recovery helps to face external economic shocks.