Biden will propose his budget on Friday. A New York Times report on Thursday revealed that the Democratic president will ask Congress for $6 trillion, and to increase this to $8 trillion by 2031. Such a sustained level of government spending has not been seen in the US since World War II.
Biden’s plan would drive the US’ budget deficit to $1.8 trillion in 2022, per the Times’ reporting. The largest prior deficit was $1.4 trillion, following then-President Obama’s economic bailout after the 2008 financial crisis. National debt would grow to 117% of the size of the economy by 2031, and by the end of Biden’s first term in 2024, would reach its highest level in history, passing the previous WWII-era record.
Biden hopes to offset the spending hike with tax increases, particularly on corporations and wealthy Americans. However, raising taxes is a delicate balancing act, and a jacked up corporate tax rate could strangle economic growth and cost jobs, industry groups have warned.
The New York Times was broadly supportive of Biden’s plans to open the federal government’s purse, praising “Mr. Biden’s ambitions to wield government power to help more Americans attain the comforts of a middle-class life and to lift US industry to better compete globally.”
However, deficit hawk Republicans are likely to oppose it bitterly. Kentucky Sen. Rand Paul has already warned that Biden’s spending splurge will have “profound repercussions,” given that inflation is currently at a 12-year high. The federal government has already spent $6 trillion on helping the economy survive the coronavirus pandemic, and Biden’s infrastructure and jobs bills – both currently being negotiated in Congress by Democrats and Republicans – could add another $4 trillion to the government’s expenditure. If passed, both of these bills could be rolled into Biden’s budget.
Despite the looming showdown in Congress, this budget will likely scrape through Congress. A simple majority is enough to pass the yearly budget, and Democrats hold a slim majority in the House of Representatives and a slimmer one in the Senate, where even a single Democratic defection would scupper its passage.
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