Biden proposes budget that spends more and taxes the rich
What happened
A high-stakes showdown over the country’s finances began this week as the Senate took up the Biden administration’s 2024 budget proposal, a $6.8 trillion behemoth that would include a raft of tax increases on corporations and the wealthy. The plan, published last week, would revive parts of the 2021 Build Back Better agenda, including an expanded child tax credit and funding for climate, child care, and other projects. To raise revenue, it includes a 25 percent minimum tax on billionaires and a hike in the top tax rate for Americans making more than $400,000 a year (from 37 percent to the pre-2017 rate of 39.6 percent). It also gives Medicare the power to negotiate lower drug prices from pharmaceutical companies. The administration says the revenue increase and cost savings will shave $3 trillion off the national debt over 10 years. The plan, though, is unlikely to advance past a deeply divided Congress. While Republicans have not yet released their official counterproposal, the hard-right House Freedom Caucus has drawn up its own version. Its budget would largely freeze spending on everything but Social Security, Medicare, and defense, and would cancel Biden’s $80 billion in new funding for the IRS.
The U.S. has been using emergency funding measures since breaching the $31.4 trillion debt ceiling in January. Without an agreement to lift or suspend the debt limit, the country will enter default this summer, which could torch its creditworthiness, leave millions of federal employees unpaid, and trigger a deep global recession. Federal Reserve Chair Jerome Powell recently pleaded for an end to partisan games over debt. “There are no rabbits in hats to be pulled out on this,” he said. “The path is unsustainable.”
What the editorials said
President Biden’s budget would saddle young Americans with an “unprecedented and unsustainable debt burden,” said National Review. That $3 trillion in debt relief he’s touting? It uses a baseline inflated by his administration’s “extravagant” spending. In fact, the national debt is now already 98 percent the size of the economy. It has never exceeded GDP for two consecutive years except during World War II, but under this plan it would do so “in every single year” of the next decade.
Republicans are floating an “even worse” idea: a “nonsensical” promise to balance the budget without raising anyone’s taxes, said Bloomberg. But Biden is also engaging in magical thinking with his promise that everyone making under $400,000 can keep the tax cuts they got under President Trump. Pushing wealthy Americans’ tax burden to potentially “well over 50 percent,” counting state and local taxes, will not head off an imminent fiscal crisis that will be exacerbated by crushing interest payments. Only “spending discipline” and “judiciously higher taxes, including on the middle class,” can do that.
What the columnists said
We’ll certainly “have to do more” to shrink the national debt than Biden is proposing, said Paul Krugman in The New York Times. But his plan is “basically reasonable,” including its projections of future economic growth. And Republicans can hardly claim to be hawkish on deficits—after all, Trump-approved budgets, with their huge corporate and individual tax cuts, grew the debt by $7.5 trillion.
Neither party is facing the reality that it’s time for hard choices, said Jackie Calmes in the Los Angeles Times. The long-predicted “demographic tsunami” of retiring Boomers is here, and the Congressional Budget Office is warning that dramatic cuts to Social Security and Medicare benefits will be necessary by 2033. Balancing the budget without entitlement reform or major tax increases would mean slashing all other spending by 85 percent. Both parties must strike “a deal to reinforce the retirement safety net for future generations before insolvency forces across-the-board benefit cuts.”
There’s a second catastrophe approaching: ballooning interest, said Henry Olsen in The Washington Post. About 60 percent of the deficit we’ll be running by 2033 will be interest on debt we already owe—not transformative social programs, not defense spending, and not Social Security or Medicare. Even if Congress implausibly rejects all of Biden’s spending increases while keeping all the revenue boosts, that will still leave a $1.5 trillion shortfall in 2033. Averting disaster “will require both parties to sacrifice a lot of sacred cows”—and soon.