President Joe Biden released his $6.9 trillion budget proposal Thursday, March 9, outlining his administration’s spending priorities for the next fiscal year. It includes spending on old priorities for the Biden administration like ending Trump-era tax cuts, resorting the Child Tax Credit, and advancing racial and gender equity in STEM.
However, with a Republican controlled House and the fight over the debt ceiling looming, President Biden will have to make concessions. But the president’s proposed budget will be an important outline that will shape budget discussions at the Capitol between Republicans and Democrats.
Ultimately, Congress has the power of the purse and is the sole decision maker on spending. However, the proposed budget by the president is an important aspect of policy making. It allows the president to outline their goals for the country and facilitate discussion for how tax dollars are best spent to support the American people.
New Taxes to Reduce the U.S. Deficit
Biden’s budget proposal claims it would decrease the U.S. deficit by increasing taxes on wealthy Americans.
A 25% minimum tax on the wealthy
The budget proposes a minimum 25% tax on all wealthy Americans with a net worth of more than $100 million. President Biden claims that this will help address the issue of wealthy Americans taking advantage of tax loopholes that allow wealthy Americans to pay less taxes than middle-class families.
Increasing corporate taxes
Currently, the tax rate for U.S. companies is 10%. Biden’s budget proposes to increase the rate to 28% and quadruple the Stock Buyback Tax to 4%. This increase is to ensure that corporations pay their fair share and use profits to invest in the economy.
Repeals the 2017 Trump Tax Cut
Biden’s budget proposes to repeal President Trump’s tax cuts that were passed back in 2017. Under Biden’s proposal, this would restore the top tax rate of 39.6% for single filers (people without spouses or dependents) that make more than $400,000 per year. The budget would also tax capital gains (profit earned from stocks and investments) at the same rate as wage income.
2028 will be the last year Medicare will be able to cover 100% of costs associated with hospital insurance coverage. While Medicare will still be able to pay 90% of its obligations, filling this shortfall is a priority of the Biden administration in the FY24 budget.
To increase funding to Medicare, Biden proposes that taxes be increased on income earned after $400,000 to 5%. This proposal would allow Medicare to remain solvent for 100% of costs without cutting benefits for the next 25 years. Further, Biden’s budget proposes expanding Medicare’s ability to negotiate drug prices which was a key aspect of the Inflation Reduction Act of 2022.
The budget proposal also requests that insulin prices be capped at $35 all Americans, including those with private healthcare. This was a priority for Biden and Democrats last year, but the proposal was struck down by Republicans in the Senate.
In 2021, Medicare spending accounted for $689 billion of the federal budget. The program is one of the largest U.S. expenditures and will continue to be next to defense.
The U.S. currently spends $813 billion on defense spending and is the federal government’s largest expense. Under Biden’s proposed budget, defense spending would inflate to $842 billion in 2024. Biden placed an emphasis on $9.1 billion set aside for the Pacific Deterrence Initiative that is intended to deter Chinese aggression in the Pacific. $6 billion is also requested for additional military assistance to Ukraine amid the ongoing war with Russia. The proposal also requests $37.7 billion for modernizing the U.S. nuclear arsenal and providing nuclear power to the U.S. Navy.
Vikings may be pleased to see that under Biden’s proposed budget, the maximum award for Pell Grants would be increased to $8,215 by 2029. The budget also requests $500 million in new grant funding to expand tuition-free community college across the U.S. Students from families that earn less than $125,000 per year that attend a historically Black college or university would also receive additional tuition subsidies.
The Office of Federal Student Aid (FSA) would also see a budget increase of nearly $620 million. The FSA assists federal loan borrowers by administering loan aid programs and guiding borrowers through the repayment process. This increase in funding would bring a boost to the office’s capabilities as a looming Supreme Court decision could restart student loan payments as early as May.
Other new spending includes $150 million in grants for universities to address mental health concerns on campus and assistance to help with food insecurity and housing for students. Overall the Department of Education would receive a 13% increase in discretionary spending, or about $10 billion more than last year.
President Biden and Congressional Democrats have their work cut out for them. Biden’s budget proposes a historic amount of spending amid a clash between the GOP and Democrats in Congress over the nation’s debt ceiling. Treasury Secretary Janet Yellen has already warned that if an agreement is not reached over the debt ceiling, the U.S. would not be able to uphold its debt obligations. A default would lead to an unprecedented economic downturn that could cause lasting economic damage both in the U.S. and abroad.
Members of the right-wing House Freedom Caucus have already called for steeper spending cuts in exchange for extending the debt ceiling.
Biden’s budget is dead-on arrival in the Republican controlled House. Speaker McCarthy (R-CA) called the proposal “completely unserious”. Biden’s budget proposal will be important in shaping budget negotiations in Congress, but he will need to make concessions to Republicans in order to fund the government for the next year and avoid default.