WASHINGTON — President Joe Biden unveiled a $6.8 trillion budget blueprint on Thursday that included new spending on child care, education and health care, and $5 trillion in proposed tax increases on wealthy Americans and corporations over the next decade.
Biden, who is widely expected to announce his 2024 reelection bid in the coming weeks, was set to present his plan for the next fiscal year in Pennsylvania, a critical battleground state.
Though budgets are typically released with little fanfare, Biden has sought to use the annual request to Congress as a contrast to Republicans over federal spending, setting the stage for the 2024 race and a brewing battle over raising the country’s legal debt ceiling.
Republicans in the House of Representatives have demanded budget cuts in exchange for their cooperation on raising the federal borrowing limit, but Biden has refused to negotiate spending as part of debt ceiling talks. Failure to reach a deal could lead to the U.S. defaulting on its debt payments, which would spark a global financial crisis.
Ahead of Biden’s speech, the White House announced his budget would aim to cut the deficit by $3 trillion over the next decade as he seeks to burnish his credentials on fiscal responsibility after two years of significant domestic spending. The president wants the country’s wealthiest to foot most of the bill, an unmistakable preview of a populist pitch to blue-collar voters.
Biden’s request, however, is dead on arrival in a divided Congress, where Senate Minority Leader Mitch McConnell, R-Ky., said it “will not see the light of day.”
“The budget reflects our values as a nation — a nation of good people, growing in a new age of possibilities, and standing as a beacon to the world,” Biden said in the plan’s introduction.
The budget focuses on four themes: reducing the deficit, lowering costs, investing in America and protecting Social Security and Medicare.
Here’s a look at what’s in it:
Reducing the deficit by nearly $3 trillion over the next decade
The president renewed his pitch to pay for his domestic priorities and reduce the deficit by increasing taxes on high earners and on corporations. His plan also calls for cracking down on wasteful spending and investing in fraud prevention.
The proposal would repeal some of the 2017 tax cuts signed into law by former President Trump and restore the top marginal tax rate to 39.6% on income above $400,000. The plan also calls for taxing capital gains at the same rate as wage income for households worth more than $1 million.
Biden’s so-called billionaire tax would target the wealthiest Americans, requiring households worth more than $100 million to pay a 25% income tax, including on appreciated assets.
The president repeated a call to quadruple a new tax on corporate stock buybacks imposed last year under his Inflation Reduction Act. The law requires companies to pay a 1% excise tax on purchases of their own stock to discourage them from using a maneuver that steers profits to their shareholders and boosts the stock price.
Biden’s budget proposes ending lucrative tax breaks for oil and gas companies, which would total $31 billion in savings, according to the White House. It also claims to save $19 billion by halting a special tax subsidy for real estate investors.
The White House also anticipates saving more than $20 billion by targeting insurance companies that are excessively charging Medicaid by requiring repayments to the government.
Taxing the rich to fund Medicare
Biden wants to extend the solvency of Medicare by 25 years by raising tax rates on people earning more than $400,000 a year. The Medicare tax rate would increase from 3.8% to 5% on earned and unearned income for the wealthy. The Medicare trust fund, which is paid for by payroll taxes, is projected to run out in 2028 under current tax and spending levels.
The plan also proposes capping the price of certain prescriptions to $2 per month for Medicare recipients, including generic drugs used to treat chronic conditions like high cholesterol and hypertension. Biden also wants to expand Medicare’s ability to negotiate lowering the cost for prescription drugs, which the White House said will cut federal spending by $160 billion over a decade.
No changes to Social Security
The White House said it was committed to strengthening Social Security but did not detail a solvency plan similar to the Medicare proposal. It instead allocated $1.4 billion (a 10% increase) to improve on the agency’s staff and technology. Changes to Social Security are “not on the table,” Shalanda Young, director of the White House Office of Management and Budget, told reporters in a call previewing the plan on Thursday.
Biden has excoriated Republicans over Medicare and Social Security in recent months, citing a Republican senator’s 2022 call to sunset all federal programs every five years. Republican leaders have said in recent weeks that the two popular entitlement programs are off the table when it comes to slashing spending, but have yet to offer a plan of where they expect the cuts. Social Security and Medicare comprise a large portion of the federal budget due to the nation’s aging population and increasing health care costs.
A bigger child tax credit
The president revived his pitch for family-focused and “care economy” policies that were core tenets of his initial Build Back Better plan but failed to win enough support to clear a Democratic-controlled Congress during his first two years in office.
He called for restoring the enhanced Child Tax Credit, which cut poverty nearly in half when lawmakers gave the payment a pandemic-related boost in 2021. Biden wants to expand the credit from $2,000 per child to $3,000 per child for children 6 and older and up to $3,600 for children under 6. He also called for making the Earned Income Tax Credit expansion for childless workers permanent.
Biden proposed making permanent the expanded subsidies for people buying their own health coverage on the Affordable Care Act marketplaces, which were extended through 2025 in the Inflation Reduction Act.
He also allocated $325 billion for a national paid medical leave program, $400 billion in child care subsidies, and $300 billion for universal pre-kindergarten and expanding free community college. The budget allocates $150 billion over 10 years to improve and expand Medicaid home and community-based services and $100 billion in funding and tax incentives aimed at increasing the affordable housing supply.
More border agents and more money for the military
The president is requesting a defense budget of $842 billion in the fiscal year of 2024, a 3.2% increase from fiscal year 2024 that includes $6 billion for continued support to Ukraine. The budget also allocates $25 billion for U.S. Customs and Border Protection and Immigration and Customs Enforcement and $535 million for border technology at and between ports of entry. It also includes funding to hire an additional 350 border agents.
