On Thursday, President Biden unveiled a $6.8 trillion budget proposal that aims to reduce the deficit, increase taxes on the wealthy, boost military spending, and intensify competition with China. Although the plan is expected to face strong opposition from Republicans, who control the House, it serves as a starting point for lawmakers as they grapple with raising the debt limit and develop policy plans for the President’s re-election campaign.
During his speech in Philadelphia, President Biden stated that his budget was intended to “lift the burden on hard-working Americans” and highlighted the stark differences between his proposals and those offered by the Republicans, which he argued would threaten the country’s social safety net programs and favor the wealthy. The President’s budget calls for a return to a progressive tax policy, including a new 25% minimum tax on billionaires, an increase in the corporate tax rate from 21% to 28%, and a quadrupling of the tax on stock buybacks from 1% to 4%. Additionally, the budget would eliminate the tax treatment of “carried interest,” which enables private equity and hedge fund executives to pay lower tax rates than their salaried employees, and block billionaires from using retirement savings accounts as tax shelters. The President’s budget aims to bring about $5 trillion in tax increases over the next decade, primarily targeting the wealthiest Americans and large corporations.
While Republicans have insisted that they will allow the government to borrow more money to pay its bills only if there is an accompanying plan to reduce the federal deficit, the President’s plan makes clear that he and the Democrats want to use tax increases, enforcement of the tax code, and the closing of tax loopholes to reduce America’s reliance on borrowed money. Furthermore, the President is proposing new savings for the government through more aggressive negotiation over prescription drug prices, which the White House estimates would save the government an additional $200 billion over ten years, with the aim of directing the savings to the Medicare trust fund. According to White House estimates, the plan would reduce federal budget deficits by almost $3 trillion over the next ten years.
Although the President’s plans for reducing the deficit have drawn criticism from Republicans, his budget does include some spending plans that they might find acceptable. For example, the budget requests $842 billion for the Defense Department, a 3.2% increase from 2023, which would be used to modernize America’s nuclear deterrent capabilities and allocate more than $6 billion to support Ukraine. Additionally, the budget allocates $753 million to counter “Russian malign influence” and related needs, such as cybersecurity. President Biden also takes a tough stance on China, which is one of the few issues that tends to garner bipartisan agreement in Washington. The budget explicitly states that the Biden administration wants to invest in new ways to “out-compete” China and proposes $9.1 billion in investments next year through the Pentagon’s “Pacific Deterrence Initiative,” including expenditures on new weapons systems to protect allies and defend US interests in the region.
Moments after the President released his budget, Republicans were quick to criticize it. Senator Chuck Grassley of Iowa, the top Republican on the budget committee, said, “President Biden’s FY2024 budget proposal is a roadmap to fiscal ruin” and argued that the President “doesn’t seem to give a rip about keeping his promises or securing the fiscal health of our nation.” Speaker Kevin McCarthy was similarly unimpressed, describing the budget as “completely unserious” and making it clear that Republicans would not support reducing the deficit through tax increases. “Mr. President: Washington has a spending problem, NOT a revenue problem,” Mr. McCarthy said on Twitter.