Biden budget highlights: Lots of spending, taxing the rich
WASHINGTON (AP) — President Joe Biden’s $6 trillion budget proposal offers major new initiatives like child and elder care subsidies, generous tax credits for families and the working poor, and free community college. It also promises politically freighted tax increases on the wealthy and corporations and would give domestic Cabinet departments significantly bigger budget increases than the Pentagon.
But like all presidential budget plans, Biden’s proposal needs the approval of lawmakers, who can change the allotments and dollar figures.
Here are some other things to keep in mind about Biden’s budget:
LOTS OF SPENDING
This year’s $6 trillion spending total — fueled by ongoing COVID-19 relief efforts — is actually down from a projection of $7.2 trillion for the budget year ending in September. But it’s sharply higher than the pre-pandemic $4.4 trillion tally of 2019 and fueled by promises of government help for crushing child care, college, health care and elder care costs. But the nation’s huge defense budget would get minimal increases, angering Republicans whose votes Biden needs.
TAXING BUSINESS AND THE RICH
Biden promises $2 trillion in corporate tax hikes, including an increase from 21% to 28% in the corporate rate and restoring the top individual tax bracket from 37% to 39.6%. Capital gains taxes would increase for wealthier investors, and inherited capital gains would no longer be tax-free. It would extend Democrats’ generous increase in the per-child tax credit from $2,000 to $3,600 for children up to 6 years old and $3,000 for older children. It would also crack down on unpaid taxes by boosting reporting and enforcement.
BARRELS OF RED INK
Several rounds of pandemic relief swelled last year’s deficit to $3.1 trillion, and the U.S. is on track for a $3.7 trillion deficit this year, which means a total national debt exceeding $30 trillion within a few months. While deficits would be cut roughly in half, to $1.8 trillion, in the budget year starting in October, they would remain well above levels that mainstream economists have believed to be sustainable. Annual interest payments on all of that Treasury borrowing would almost double in the next five years from about $300 billion now to $581 billion in 2027.
IFFY PROSPECTS IN CONGRESS
Democrats control Congress by the narrowest of margins and could theoretically pass Biden’s tax increases and many of his bold spending plans under special budget rules that prevent a GOP Senate filibuster. But it only takes a single Democratic defection to mess things up, and there’s ample resistance to Biden’s full corporate tax increase and higher taxes on capital gains. Smaller tax increases would mean Democrats would have to scale back their ambitions on spending. And Senate Republicans are sure to bring Biden’s high-flying hopes for annual nondefense appropriations back to Earth by insisting on spending increases for the Pentagon that are comparable to domestic agencies.
CAUTIOUS ECONOMIC PROJECTIONS
Some of Biden’s predecessors, including former President Donald Trump, were guilty of juicing economic projections to make their budget numbers work. But the Biden team appears more cautious, projecting long-term economic growth of about 2% after a 5.2% boost this year and a 3.2% increase in 2022. Consumer prices, which are currently spiking, are seen as remaining in check, at about 2% inflation each year.
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