Biden to propose $7.9 trillion budget to make US more competitive

WASHINGTON • President Joe Biden will propose a US$6 trillion (S$7.9 trillion) budget that would take the United States to its highest sustained levels of federal spending since World War II as he looks to fund a sweeping economic agenda that includes large new investments in education, transportation and fighting climate change.

Documents obtained by The New York Times show that the budget request, the first of Mr Biden's presidency, calls for total spending to rise to US$8.2 trillion by 2031, with deficits running above US$1.3 trillion throughout the next decade.

The growth is driven by Mr Biden's two-part agenda to upgrade the nation's infrastructure and substantially expand the social safety net along with other planned increases in discretionary spending.

The proposal for the 2022 fiscal year and ensuing decade shows the sweep of Mr Biden's ambitions to wield government power to help more Americans attain the comforts of a middle-class life and to lift US industry to better compete globally.

It includes money for roads, water pipes, broadband Internet, electric vehicle charging stations and advanced manufacturing research. It also envisions funding for affordable childcare, universal pre-kindergarten and a national paid leave programme - initiatives Republicans have baulked at bankrolling. Military spending would also grow, although it would decline as a share of the economy.

"Now is the time to build the foundation that we've laid, to make bold investments in our families, in our communities, in our nation," Mr Biden told a crowd in Cleveland on Thursday. "We know from history that these kinds of investments raise both the floor and the ceiling of an economy for everybody."

Mr Biden plans to finance his agenda by raising taxes on corporations and high earners.

Under Mr Biden's proposal, the federal budget deficit would hit US$1.8 trillion in 2022, even as the economy rebounds from the pandemic recession to grow at what the administration predicts would be its fastest annual pace since the early 1980s. The deficit would recede slightly in the following years before growing again to nearly US$1.6 trillion by 2031.

Total debt held by the public would more than exceed the annual value of economic output, rising to 117 per cent of the size of the economy in 2031. By 2024, debt as a share of the economy would rise to its highest level in US history, eclipsing a World War II-era record.

Republicans warned on Thursday that Mr Biden's spending and tax plans would saddle the economy with dangerous levels of debt and accused him of abandoning his pledge not to raise taxes on the middle class.

Representative Kevin Brady of Texas, the top Republican on the Ways and Means Committee, noted: "Lower-and middle-income families are already suffering under the stealth tax of higher prices. Now the President wants their income taxes to go up as well."

Some fiscal hawks also sounded a cautious note, welcoming Mr Biden's commitment to pay for new spending but warning that the nation faces daunting fiscal challenges.

The budget is simply a request to Congress, which must approve federal spending. But with Democrats in control of both the House and Senate, Mr Biden faces some of the best odds of any president in recent history in getting much of his agenda approved.

Still, with Republicans and the White House far apart on the President's infrastructure proposal, Mr Biden will most likely need to secure votes from every Democrat in the Senate to get his spending plans through.

The forecasts continue to show his administration has little fear of rapid inflation breaking out across the economy, despite recent data showing a quick jump in prices as the economy reopens after a year of suppressed activity amid the pandemic.

The budget projects that consumer prices will never rise faster than 2.3 per cent per year and the Federal Reserve will only gradually raise interest rates from their current rock-bottom levels in the coming years.

Mr Biden has pitched the idea that now is the time, with interest rates low and the nation still rebuilding from recession, to make large upfront investments that will be paid for over a longer time horizon.

His budget shows interest costs for the federal government remaining below historical averages for the course of the decade. Interest rates are controlled by the Federal Reserve, which is independent of the White House.

Even if interest rates stay low, payments on the national debt would consume an increased share of the federal budget. Net interest payments would double, as a share of the economy, from 2022 to 2031.

If Mr Biden's plans are enacted, the government would spend what amounts to nearly a quarter of the nation's total economic output every year over the course of the next decade. It would collect tax revenues equal to just under one-fifth of the total economy.

In each year of Mr Biden's budget, the government would spend more as a share of the economy than all but two years since World War II - 2020 and 2021, which were marked by trillions of dollars in federal spending to help people and businesses endure the pandemic-induced recession.

By 2028, when Mr Biden could be finishing a second term in office, the government would be collecting more tax revenue as a share of the economy than almost any point in the last century; the only other comparable period was the end of president Bill Clinton's second term, when the economy was roaring and the budget was in surplus.

The documents suggest Mr Biden will not use his budget to propose major additional policies or flesh out plans that the administration has thus far declined to detail. For example, Mr Biden pledged to overhaul and upgrade the nation's unemployment insurance system but such efforts are not included in his budget.

"What the budget will reflect is that he is going to continue to deliver on his priorities," Ms Jen Psaki, the White House press secretary, told reporters on Thursday. "And those proposals - the American Jobs Plan, the American Rescue Plan, the American Families Plan - will put us on better financial footing over time."

Mr Biden's spending requests also do not include money for a so-called public option for healthcare, which would allow Americans to choose to enrol in a public health insurance plan like Medicare instead of a private plan. But Mr Biden will call on Congress to create such a public option as part of his budget proposal, a document obtained by The Times shows.

NYTIMES