The president’s plans have little in common with the budget Republicans are set to release this spring, as the nation hurtles toward a possible default on its debt.
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On Thursday, President Biden will release his budget featuring tax increases on corporations and high earners.
WASHINGTON — President Biden will propose a budget on Thursday that has no chance of driving tax or spending decisions in Congress this year, but instead will serve as a statement of political priorities as he clashes with Republicans over the size of the federal government.
Mr. Biden’s budget proposal, the third of his presidency, is an attempt to advance a narrative that the president is committed to investing in American manufacturing, fighting corporate profiteering, reducing budget deficits and fending off conservative attacks on safety-net programs.
It is expected to include what White House officials say will be nearly $3 trillion in new deficit reduction, largely from a familiar batch of tax increases on companies and high earners, along with robust spending on the military and policies to further Mr. Biden’s attempts to support high-tech factory jobs and fight climate change.
Republicans are expected to offer a starkly different budget sometime this spring, one likely to be stocked with cuts to federal health programs and aid to the poor, in an effort to eliminate the budget deficit within a decade without raising taxes. Mr. Biden is certain to reject those proposals, and they may struggle to attract enough moderate Republican votes to pass the House.
The competing documents will highlight the dearth of common ground for Mr. Biden and his opposition party on fiscal policy at a high-stakes moment for the government and the global economy. That is true even though both the president and congressional Republicans are embracing the politics of promising to reduce deficits and the growth of the national debt, which topped $31 trillion late last year.
Republican leaders in the House have refused to raise a congressionally imposed cap on how much the federal government can borrow unless Mr. Biden agrees to steep cuts to federal spending in exchange. Given the United States borrows huge sums of money to pay its bills, that position risks plunging the economy into crisis if the government runs out of cash and defaults on its debt later this year.
Mr. Biden has refused to tie any spending cuts to raising the borrowing cap, which does not authorize any new expenditures, but said he welcomes debate over how best to ease the nation’s debt burden.
The parties’ entrenched positions set Washington up for several bruising months, at least, of debt-limit discussions. Economists warn the standoff will rattle investors and poses mounting threats to the global financial system.
On Wednesday, Jerome H. Powell, the chair of the Federal Reserve, urged lawmakers not to play games, saying there is no way to prevent a financial meltdown without raising the borrowing cap.
“Congress raising the debt ceiling is really the only alternative,” Mr. Powell told a House committee. “There are no rabbits in hats to be pulled out on this.”
ImageJerome H. Powell, the chair of the Federal Reserve, told a House committee: “Congress raising the debt ceiling is really the only alternative.”Credit…Haiyun Jiang/The New York Times
Presidential budgets always offer visions for the nation’s fiscal policy that compete with those of their opposition — and budgets submitted by presidents to an opposition-dominated chamber of Congress rarely serve as more than messaging documents. Often, including under Mr. Biden, much of the budget fails to pass muster with the president’s own party.
Mr. Biden failed to persuade a sufficient number of Democrats to pass many of the policy priorities outlined in his previous budget requests, like free community college and federally guaranteed paid leave. More than $2 trillion in tax increases from last year’s budget were never enacted despite Democrats’ control of Congress.
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Still, this year’s budget releases from Mr. Biden and House Republicans carry extra importance because of the stakes of the debt-limit fight — and the few paths to compromise on fiscal policy that the documents are expected to show.
Mr. Biden’s budget will raise taxes on corporations and high earners, both to pay for his policy priorities and to reduce the growth in America’s reliance on borrowed money, including a 25 percent tax aimed at billionaires. Republicans will seek to cut taxes, including making permanent some temporary tax cuts approved under former President Donald J. Trump, and may seek to eliminate the budget deficit in 10 years by gutting huge swaths of federal spending.
Mr. Biden will continue to push his vision of an expanded and empowered government hand in the economy, with new spending for child care, education and more. Republicans will seek to slash federal agencies and much of the health coverage provided by the Affordable Care Act, though it may be difficult for Speaker Kevin McCarthy of California to assemble a package of cuts that will satisfy hard-liners and centrists in his caucus alike.
Leaders on both sides of the aisle are embracing the contrasts in their approach.
Mr. Biden “is willing to do what Republicans are not: lower the deficit in a realistic, responsible way without cutting benefits that tens of millions of people rely on,” Senator Chuck Schumer of New York, the majority leader, said in a brief speech on Wednesday. “Unlike Republicans, the president is also asking the richest of the rich to pay a little more of their fair share in taxes,” he added.
Senator Mitch McConnell of Kentucky, the Republican leader, told reporters this week that Mr. Biden’s budget was “replete with what they would do if they could.”
“Thank goodness the House is Republican,” Mr. McConnell said. “Massive tax increases, more spending, all of which the American people can thank the Republican House for, will not see the light of day.”
ImageSpeaker Kevin McCarthy faces a challenge in coming up with cuts that will satisfy both hard-liners and centrists in the Republican caucus.Credit…Julia Nikhinson for The New York Times
Republicans largely ignored the growth in deficits under Mr. Trump, including approving his tax cuts, which cost the federal government $2 trillion, and when joining with Democrats to pass trillions of dollars in economic aid amid the pandemic recession. Republicans joined Democrats three times to raise or suspend the debt limit without any spending cuts when Mr. Trump was in office. But after winning control of the House in November, Republican leaders have returned to warning that America’s debt load is hurting the U.S. economy and refusing to raise the debt limit unless Mr. Biden agrees to pare back federal spending.
The Congressional Budget Office projects the budget deficit will grow slightly this fiscal year, from $1.375 trillion to $1.41 trillion, then continue to rise for the course of the decade, topping $2 trillion in 2032.
Those increases are being driven in part by the rising costs of Medicare and Social Security as members of the baby boom generation retire, and by the growing cost of servicing the nation’s $31.4 trillion debt following a series of rapid interest rate increases by the Fed in a bid to tame high inflation. Mr. Powell told lawmakers on Wednesday that “it isn’t that the debt today is unsustainable. It’s that the path is unsustainable.”
The director of the budget office, Phillip L. Swagel, briefed lawmakers about deficit projections on Wednesday at the Capitol, warning they would eventually need to raise taxes, cut spending or both in order to mitigate rising debt. The office’s projections “suggest that, over the long term, changes in fiscal policy would need to be made to address the rising costs of interest and mitigate other adverse consequences of high and rising debt,” Mr. Swagel wrote in a slide deck presented to lawmakers.
From 2024 to 2033, the budget office projects, deficits will total more than $20 trillion, driving gross federal debt to nearly $52 trillion.
Mr. Biden’s proposals, if enacted in full, would reduce that growth by about 15 percent. They are not likely to be. Republicans have tried already this year to repeal tax increases and the Medicare prescription drug savings measures he signed last year.
Through new laws he has signed and executive actions he has issued, Mr. Biden has approved policies that would add about $5 trillion to the national debt over a decade, according to estimates by the Committee for a Responsible Federal Budget in Washington. Those include his 2021 economic aid law and debt relief for certain student loan borrowers, which is under challenge at the Supreme Court.
It is unclear how Mr. Biden settled on the ultimate figure of nearly $3 trillion for his budget’s deficit reduction, or to what extent he agrees with Republicans who claim that the nation’s current levels of debt and deficits pose a risk to the economy.
Karine Jean-Pierre, the White House press secretary, did not directly answer a reporter’s questions this week on how Mr. Biden arrived at his preferred level of deficit reduction or whether the path of growth in the national debt is hurting the economy.
“The president understands his fiscal responsibility. He understands how important it is to lower the deficit,” Ms. Jean-Pierre said.
“He’s going to put forward a fiscal budget that is going to be responsible,” she added.
Catie Edmondson, Carl Hulse and Zolan Kanno-Youngs contributed reporting.
Source: nytimes.com
