Joe Biden proposes higher taxes and spending in $7.3-trillion budget

Washington — US President Joe Biden sketched his policy vision for a potential second four-year term on Monday, unveiling a $7.3-trillion election-year budget aimed at convincing sceptical Americans that he can run the economy better than Donald Trump.

Biden wants to raise taxes by trillions on corporations and high earners, his budget wish list showed, to help cut the deficit and pay for new programmes assisting those who make less cope with high housing and childcare costs. Congress is unlikely to adopt the measures as proposed.

Biden’s budget for the 2025 fiscal year, which starts this October, includes raising the corporate income tax rate to 28% from 21%, forcing those with wealth of $100m to pay at least 25% of their income in taxes, and letting the government negotiate to bring more drug costs down.

Meanwhile, the government would bring back a child tax credit for low- and middle-income earners, fund childcare programmes, funnel $258bn to building homes, provide 12 weeks of paid family leave for workers, and spend billions on law enforcement.

Republican House of Representatives speaker Mike Johnson quickly rejected the proposal, saying it reflected an “insatiable appetite for reckless spending” and a “disregard for fiscal responsibility.”

The budget was released days after the Democratic president’s fiery state of the union address, where he assailed the values of Trump, his expected Republican opponent in November’s election.

Biden’s campaign has struggled to shake voters’ concerns about high prices and the US economy’s direction. Forty percent of Americans think Trump would handle the economy best, compared with 31% who picked Biden and 28% who either didn’t know or refused to answer, according to a January Reuters/Ipsos poll. Biden travels to the competitive election state of New Hampshire on Monday.

Trump, whose signature legislative accomplishment as president was a major 2017 tax cut, wants to sharply increase tariffs on imported foreign goods and cut regulations on energy producers.

On Monday, the Republican’s campaign sought to clarify his stance on the popular Social Security and Medicare entitlement programmes after the former president alluded to “cutting” them by targeting “theft and bad management.” Biden has vowed to shield the programmes from benefit cuts.

Democrats faulted the Trump tax cuts as widening the deficit and tilted to the wealthy but did not repeal them when they controlled Congress in 2021-2023. Key provisions expire next year, setting up a major showdown over tax policy.

Biden’s proposal to bring down deficit spending by $3-trillion over 10 years would slow but not halt the growth of the $34.5-trillion national debt. Deficits would total $1.8-trillion in the 2025 fiscal year, 6.1% of GDP, before falling to under 4% over a decade, the White House forecast.

The Committee for a Responsible Federal Budget, a deficit-reduction advocacy group, called the proposal a “welcome start” but said it “doesn’t go nearly far enough”.

The White House forecast 1.7% real GDP growth in 2024, and 1.8% in 2025, rising to 2.2% by 2030. Consumer price inflation for 2024 was forecast at 2.9% and 2.3% in 2025, with 4% unemployment, a figure that falls to 3.8% later in the decade.

The forecasts were set in November, and officials said the figures would be more optimistic if they were fixed today.

Democratic manifesto

White House budgets are always something of a presidential wish list, but that is even more so in the current political climate.

US agencies are operating without a full-year 2024 budget, after hardline Republicans rejected an agreed-upon spending level. The US government spends more than it takes in each year, and the majority goes to so-called mandatory programmes and military programmes, which legislators are unlikely to cut.

A House Republican plan unveiled last week, which the White House immediately rejected, was aimed at balancing the federal budget within a decade by sharply cutting the scope of federal government and relying on optimistic, out-of-consensus growth forecasts.

Last year’s standoff between Biden and hardline Republicans resulted in a two-year agreement to cap spending, the ouster of House speaker Kevin McCarthy and the credit ratings agency Fitch stripping the country of its AAA rating.

Reuters