Republican foes of Biden’s tax proposal could face big capital gains bills if it passes
Rich GOP senators like Ron Johnson, Rick Scott "are the ones with the most to lose," says liberal advocacy group Ron Johnson (R-WI) Samuel Corum/Getty Images
WASHINGTON (AP) — President Joe Biden is proposing a $6 trillion budget for next year that’s piled high with new safety net programs for the poor and middle class, but his generosity depends on taxing corporations and the wealthy to keep the nation’s spiking debt from spiraling totally out of control.
Biden inherited record pandemic-stoked spending and won a major victory on COVID-19 relief earlier this year. Friday’s rollout adds his recently announced infrastructure and social spending initiatives and fleshes out his earlier plans to sharply increase spending for annual Cabinet budgets.
Biden budget expands government's role in economy
President Biden's budget proposal sets the government to take on an expanded role in the economy for years to come, underscoring the White House's desire to push forward with progressive policies that would reform taxes and the social safety net.The plan, due out Friday, will increase the share of the economy taken up by government spending to nearly 25 percent, according to a report in The New York Times, the highest sustained level of government spending since World War II, when it spiked to 40 percent. In the decades since, it has largely hovered between 15 and 22 percent, with exceptions around major economic catastrophes.
This year's projected deficit would set a new record of $3.7 trillion that would drop to $1.8 trillion next year — still almost double pre-pandemic levels. The national debt will soon breach $30 trillion after more than $5 trillion in already approved COVID-19 relief. As a result, the government must borrow roughly 50 cents of every dollar it spends this year and next.
With the deficit largely unchecked, Biden would use proposed tax hikes on businesses and high-earning people to power huge new social programs like universal prekindergarten, large subsidies for child care and guaranteed paid leave.
Social spending, business tax hike drive $6T Biden budget
WASHINGTON (AP) — President Joe Biden's $6 trillion budget proposal for next year would run a $1.8 trillion federal government deficit despite a raft of new tax increases on corporations and high-income people designed to pay for his ambitious spending plans. Biden had already announced his major budget initiatives, but during a rollout Friday he will release them as a single proposal to incorporate them into the government's existing budgetBiden had already announced his major budget initiatives, but during a rollout Friday he will release them as a single proposal to incorporate them into the government's existing budget framework, including Social Security and Medicare.
“The best way to grow our economy is not from the top down, but from the bottom up and the middle out,” Biden said in his budget message. “Our prosperity comes from the people who get up every day, work hard, raise their family, pay their taxes, serve their Nation, and volunteer in their communities.”
The budget incorporates the administration’s eight-year, $2.3 trillion infrastructure proposal and its $1.8 trillion American Families Plan and adds details on his $1.5 trillion request for annual operating expenditures for the Pentagon and domestic agencies.
Acting White House budget chief Shalanda Young said the Biden plan “does exactly what the president told the country he would do. Grow the economy, create jobs and do so responsibly by requiring the wealthiest Americans and big corporations to pay their fair share.”
President Joe Biden's $6 trillion budget is important for this one reason
Biden’s budget is sure to give Republicans fresh ammunition for their criticisms of the new Democratic administration as bent on a “tax and spend” agenda that would damage the economy and impose a crushing debt burden on younger Americans. Republicans also say he’s shorting the military.
“It is insanely expensive. It dramatically increases nondefense spending and taxes" and would weaken the Pentagon, said South Carolina Sen. Lindsey Graham, top Republican on the Budget Committee and a generally pragmatic GOP voice on spending bills. “There will be serious discussions about government funding. But the Biden budget isn’t serious and it won’t be a part of those discussions.”
Veteran GOP Sen. Richard Shelby, whose help is needed to pass annual agency budget bills, blasted Biden’s plan as “a blueprint for the higher taxes, excessive spending" that also "shortchanges our national security.”
Record debt, improved deficits: Key takeaways from President Joe Biden's budget request
Higher debt. No restrictions on abortion funding. More spending on child care and education. Those are some of the takeaways of Biden's budget.The plan covers taxes and spending for the fiscal year that begins in October. But a 10-year outlook also incorporates the multi-year spending on infrastructure, education, child care and other domestic programs proposed through what Biden has called is American Jobs and American Families plans.
Biden is a veteran of a long-gone Washington that fought bitterly in the 1980s and 1990s to wrestle the deficit under control. But there hasn’t been any real effort to stem the flow of red ink since a tea party-driven moment in 2011 that produced unpopular automatic spending cuts that were largely reversed over the ensuing decade.
Huge deficits have yet to drive up interest rates as many fiscal hawks have feared, however, and genuine anti-deficit sentiment is difficult to find in either political party.
The unusual timing of the budget rollout — the Friday afternoon before Memorial Day weekend — indicates that the White House isn’t eager to trumpet the bad deficit news.
Video: Treasury releases tax details of latest White House budget proposal (CNBC)
Under Biden’s plan, the debt held by the public would quickly match the size of the economy and soon eclipse record levels of debt relative to gross domestic product that have stood since World War II. That’s despite more than $3 trillion in proposed tax increases over the decade, including an increase in the corporate tax rate from 21% to 28%, increased capital gains rates on top earners and returning the top personal income tax bracket to 39.6%.
Like all presidential budgets, Biden’s plan is simply a proposal. It’s up to Congress to implement it through tax and spending legislation and annual agency budget bills. With Democrats in control of Capitol Hill, albeit barely, the president has the ability to implement many of his tax and spending plans, though his hopes for awarding greater increases to domestic agencies than to the Pentagon are sure to hit a GOP roadblock.
Biden Goes Big in First Budget Proposal
The plan reflects a new populist approach Biden has taken to budgeting – spend big and bank on those investments paying off in a stronger economy, higher wages and reduced poverty. "Where we choose to invest speaks to what we value as a Nation," Biden said in his opening statement to Congress. "This year's Budget, the first of my Presidency, is a statement of values that define our Nation at its best. It is a Budget for what our economy can be, who our economy can serve, and how we can build it back better by putting the needs, goals, ingenuity, and strength of the American people front and center.
Some Democrats are already balking at Biden’s full menu of tax increases, imperiling his ability to pay for his ambitious social spending. And his plan to increase spending on domestic agencies by 16% while limiting defense to a 1.7% rise is politically impossible in the 50-50 Senate.
A top Senate ally, Appropriations Committee Chairman Patrick Leahy, D-Vt., called Thursday for bipartisan talks to start the annual appropriations bills. There’s incentive for both GOP defense hawks and liberal Democrats like Leahy to bargain since the alternative is a long-term freeze at current spending levels.
The Biden plan comes as the White House is seeking an agreement with Senate Republicans over infrastructure spending. But winning gains that would even begin to meet his social spending goals would require him to rely solely on support from his narrow Democratic majorities in Congress.
Biden’s spending proposals include numerous new programs to strengthen the “caring economy” with large programs aimed at child and elder care: $437 billion over 10 years to provide free preschool to all 3- and 4-year-olds and two years of free community college to all Americans. Also, $225 billion would subsidize child care to allow many to pay a maximum of 7% of their income for all children under age 5.
Another $225 billion over the next decade would create a national family and medical leave program, while $200 billion would make recently enacted subsidy increases under the Obama health care law permanent.
Biden’s $6 trillion budget proposal would rebuild America’s social safety net
Biden’s first budget aims to herald a new era of big governmentAs proposed, the budget would reinvest in infrastructure and education, raise taxes on the wealthy and corporations, and meet many — but not all — of Biden’s campaign promises. It also represents the most substantial expansion of the federal government’s spending powers since World War II and a direct rebuttal of the small-government principles of his Republican, and even many Democratic, predecessors.
Tax hikes, Biden claims, would pay for his initiatives over the next 15 years, including $2 trillion from corporations from curbing overseas tax preferences and raising rates to 28%. Unrealized capital gains would be taxed at death, a problem for some Democrats, and the Biden plan would significantly stiffen IRS enforcement, which the budget claims would raise $700 billion over a decade otherwise lost to cheating and dodging.
Biden’s budget calls for a roughly 10% bump in foreign affairs funding from 2021, with top increases for climate change, global health and humanitarian aid. Biden’s $58.5 billion request would support the administration’s return to international groups, like the World Health Organization and others, from which former President Donald Trump had withdrawn.
Last year’s $3.1 trillion budget deficit under Trump more than doubled the previous record, as the coronavirus pandemic shrank revenues and sent spending soaring.
Council of Economic Advisers Chair Cecelia Rouse told reporters Friday that the economy is likely to outperform the administration's official prediction, forged in February, of 5.2% economic growth this year.
President Joe Biden listens during a tour of the Cuyahoga Community College Manufacturing Technology Center, Thursday, May 27, 2021, in Cleveland. (AP Photo/Evan Vucci)
Biden is signing onto Trump's trillion-dollar plans for new nuclear weapons .
Biden is going full speed ahead on beefing up the nuclear triad and expensive modernization - despite cries from his own party.On Friday, the Biden administration submitted its fiscal year 2022 budget request - with a whopping $752.9 billion set aside for national defense, $715 billion of which is designated for the Pentagon. The proposed funding actually increases defense expenditures by some $11 billion from the Trump years.