White House Budget Would Shrink The Deficit By Taxing The Rich

WASHINGTON — President Joe Biden has made the first move in a budget standoff with congressional Republicans that could have a major impact on the U.S. economy this year — proposing a budget outline that would boost federal spending on families while slowing the growth of the national debt by taxing the wealthy.

In a statement, Biden called the document “a blue-collar blueprint to rebuild America in a fiscally responsible way that leaves no one behind.”

The proposal is largely symbolic, since it has no chance of becoming law, but it shows that Democrats can match their economic rhetoric with theoretical legislation that meets the definition of “fiscally responsible.” And it’s designed to elicit a counterproposal from Republicans.

Republicans have suggested they would balance the federal budget in a decade entirely by slashing spending, without raising taxes or touching popular programs such as Social Security and Medicare — something budget experts consider virtually impossible without draconian cuts to just about every other federal program.

The symbolic budget battle is more important this year because Republicans have demanded Biden go along with big spending cuts if he wants Congress to raise the federal government’s borrowing limit, which lawmakers will have to do sometime this summer.

Since the government spends more money than it brings in through tax revenue, the Treasury Department borrows from investors in order to make up the difference. If Congress prevented more borrowing, the government would default on its debts — potentially triggering a financial crisis and a recession.

Some Republicans have suggested they’ll oppose raising the debt limit no matter what — meaning House Speaker Kevin McCarthy (R-Calif.) may have to rely on Democratic votes to maneuver a debt limit increase through the House, essentially betraying far-right lawmakers who only reluctantly supported his speaker bid.

McCarthy said Wednesday that Republicans would not support any new taxes, but he remained vague about what spending cuts Republicans would actually seek. He called the national debt “one of the greatest threats to America.”

Much of the spending debate this year has been theatrical, with the two sides insisting that only they are the ones who take the budget seriously. To that end, McCarthy complained that Biden had not called him back about his budget plans after the two met at the White House last month.

“He hasn’t reached back out,” McCarthy said. “I believe eventually he will, but that’s a month wasted.”

The White House budget would reduce federal deficits by $3 trillion over a decade by raising the marginal tax rate on top earners, pushing the corporate tax rate from 21% to 28%, imposing higher taxes on investment income and stock buybacks, not to mention a new levy on the accumulated wealth of billionaires.

In addition to cutting deficits, the new revenue would afford more spending on families, such as by continuing a subsidy for private health insurance coverage, reinstating a monthly child benefit that Congress put in place during the second half of 2021, and establishing paid family and medical leave for all workers.

Biden’s budget includes no new spending dealing with the COVID-19 pandemic, a change from last year. The prior proposal faced overwhelming resistance from Republicans in Congress.

Republicans are likely to attack Biden’s proposed tax increases, but an array of public polling testifies to the popularity of Biden’s proposals: A Data for Progress survey found 58% of voters support increasing the tax on stock buybacks, and with just 24% opposed. And a YouGov poll found three-fifths of Americans support a minimum tax on billionaires.

One proposal Republicans might agree with is a 3.2% increase to defense spending over current levels, which, at $842 billion, would represent the largest military budget ever.

Biden’s budget would shore up Medicare’s finances by raising taxes on the highest earners while giving the program more leverage to lower prescription drug prices. It’s a starkly different approach than one previously offered by Republicans, which involves mostly cuts to benefits.

Even before its release, Republicans panned Biden’s budget document as a partisan exercise, urging the president to negotiate in a bipartisan way to lower the nation’s deficits and help make programs like Medicare and Social Security solvent into the next decade.

“It’s a messaging his bill from his standpoint ― huge tax increases that he knows are not going to fly in the House or the Senate,” Sen. Mitt Romney (R-Utah) said. “So it’s not a realistic attempt to say, ‘Hey, can we find some way to work together.’ It’s unfortunate given the stakes of what we’re dealing with right now.”