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 budget framework, including Social Security and Medicare. That provides a fuller view of the administration's fiscal posture.
Democratic aides disclosed key elements of the Biden plan, speaking on condition of anonymity because the document is not yet public.
The whopping deficit projections reflect a government whose steadily accumulating pile of debt has topped $28 trillion after well more than $5 trillion in Covid-19 relief.
The government's structural deficit remains unchecked, and Biden uses tax hikes on businesses and the wealthy to power huge new social programs like universal prekindergarten and large subsidies for child care.
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 appropriations for the Pentagon and domestic agencies.
It is sure to give Republicans fresh ammunition for their criticisms of the new Democratic administration as bent on a “tax and spend" agenda with resulting deficits that would damage the economy and impose a crushing debt burden on younger Americans. Huge deficits have yet to drive up interest rates as many fiscal hawks have feared, however, and anti-deficit sentiment among Democrats has mostly vanished.
“Now is the time to build (upon) the foundation that we've laid to make bold investments in our families and our communities and our nation,” Biden said Thursday in an appearance in Cleveland to tout his economic plans. “We know from history that these kinds of investments raise both the floor and the ceiling over the economy for everybody.”
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. Typically, lawmakers host an immediate round of hearings on the budget, but those will have to wait until Congress returns from a weeklong recess.
Under Biden's plan, the debt held by the public would exceed 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 per cent to 28 per cent, increased capital gains rates on top earners, and returning the top personal income tax bracket to 39.6 per cent.
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 budget increases to domestic agencies than promised for the Pentagon are sure to hit a roadblock with Republicans. Some Democrats, however, are already balking at Biden's full menu of tax increases.
The Biden plan comes as the White House is seeking an agreement with Senate Republicans over infrastructure spending.
There are growing expectations that he may have to go it alone and pass his plans by relying on support from his narrow Democratic majorities in both the House and Senate.