Biden's $9.2 trillion budget challenges Republicans, raises taxes on rich

WASHINGTON – US President Joe Biden has unveiled plans for government spending and higher taxes on the wealthy, choosing the swing state of Pennsylvania to reveal his playbook for

an expected 2024 re-election bid.

Overall, the budget will increase federal spending in the 12 months starting in October to US$6.8 trillion (S$9.2 trillion) from the US$6.2 trillion spent in the current fiscal year.

Speaking at a Philadelphia union hall on Thursday, the Democratic President challenged his Republican opponents on fiscal responsibility, highlighting plans to cut the US deficit by nearly US$3 trillion over 10 years by raising taxes on those earning more than US$400,000 a year.

“For too long, working people have been breaking their necks, the economy’s left them behind – working people like you – while those at the top get away with everything,” Mr Biden told Pennsylvania blue-collar workers, a group he also targeted in his 2020 presidential campaign. 

Mr Biden’s budget proposal faces stiff opposition from Republican lawmakers, emboldened by winning control of the House of Representatives in November’s midterm elections. Large parts of his agenda are unlikely to be enacted by this Congress. 

The plan, however, is a political statement that clearly challenges Republican House Speaker Kevin McCarthy’s threats to block a hike in the US$31.4 trillion limit on federal borrowing unless Mr Biden agrees to rein in federal spending.

“I want to make it clear I’m ready to meet with the Speaker any time – tomorrow, if he has his budget. Lay it down, tell me what you want to do. I’ll show you what I want to do, see what we can agree on,” Mr Biden said. 

Mr Biden, when asked for areas of possible compromise with Republicans, told reporters at the White House: “We’ll see what their budget is.”

His message to Republicans who say the budget is dead on arrival was: “Watch me.” 

Mr McCarthy and other Republicans on Thursday described Mr Biden’s budget plan as “reckless”.

The President seeks to fund higher spending and narrow the deficit by imposing a 25 per cent minimum tax on billionaires and doubling the capital gains tax from 20 per cent, the White House said.

He also wants to quadruple a 1 per cent stock buyback tax, picking a fight with many of the investors he would need to call on to finance any re-election campaign.

The measures would roll back some corporate tax breaks enacted in 2017 under Republican former president Donald Trump. 

Political messaging aside, the Biden budget makes clear one thing – the ageing US population means that legally mandated spending on social programmes will continue to be a long-term drag.

One in five Americans will be of retirement age or older by 2030, the US Census predicts.

The budget projects more than US$1 trillion deficits every year over the next 10 years, even if Mr Biden gets his requests for higher taxes and cost-cutting measures.

Total US debt will rise to nearly 110 per cent of annual gross domestic product in 2033, a figure that rivals the peaks during the country’s mobilisation for World War II. 

The administration based its budget on a muted 0.6 per cent inflation-adjusted growth forecast for the current calendar year.  It sees unemployment creeping up to 4.6 per cent in 2024 as the Federal Reserve engineers a slowdown to fight inflation and predicted that effort will succeed in getting consumer prices down by nearly two-thirds from current levels by next year.

In each case, the assumptions closely track the projections of economists polled by Refinitiv.

“President Joe Biden’s budget is a reckless proposal doubling down on the same far-left spending policies that have led to record inflation and our current debt crisis,” Mr McCarthy and other Republicans said in a statement.

Ms Maya MacGuineas, president of the Committee for a Responsible Federal Budget advocacy group, said the budget did not go nearly far enough to rein in dangerous debt levels. “When it comes to fixing the debt, this is by no means an award-winning budget, but the President deserves at least a participation trophy,” she said in a statement.

Republicans are already preparing US$150 billion in cuts to non-defence discretionary programmes, including about US$25 billion from the Department of Education and cuts in foreign aid and programmes aimed at preventing sexually transmitted diseases. They say that will save US$1.5 trillion over a decade.

Mr Biden’s proposals, meanwhile, are a sweeping endorsement of the power of the federal government to solve big problems. 

He will boost military spending to stop China and Russia from pushing beyond their borders.

He will extend healthcare subsidies for the ageing population while funding cancer research to cut the death rate from that disease in half, support down payments for first-time home buyers, improve rail safety after recent accidents and guarantee pre-school for all the country’s four million four-year-olds. 

Mr Biden requested US$886 billion in spending for national defence, a 3.2 per cent increase over the number enacted for the 2023 fiscal year.

Aides see most of the proposals enjoying strong bipartisan support in the country, hoping they could lift the President’s low approval ratings as he gears up to announce his re-election bid as soon as April. 

Mr Biden also proposed increases in funding for crime prevention and border patrol, a nod to issues Republicans often use in barbed attacks on the administration. 

The Committee for a Responsible Federal Budget, a non-partisan Washington think-tank, said Mr Biden deserved credit for putting forward US$3 trillion in deficit reduction. But it added that “deficit reduction will ultimately need to be nearly three times that large, and it is disappointing the budget has put forward so many costly proposals”.

Mr Josh Bivens, director of research at the progressive Economic Policy Institute, praised the measures on paid leave, climate and funding for schools in high-poverty neighbourhoods. 

“If there’s a quibble on the tax side, it’s that it doesn’t ask enough of plenty of American households who could afford to pay more,” he wrote on Twitter.  REUTERS