President Joe Biden’s budget on Friday revealed a plan to address long-standing inequalities in the U.S. economy, rather than a game-changer for the country’s weakening economic growth trend in recent years.
Biden’s agenda breaks with the budgets of recent presidents, who promised policy proposals would increase gross domestic product. Rather, Biden’s central goal is societal change – attempting to reverse decades of widening income and wealth gaps that often run along racial lines.
The budget comes at the end of the Covid-19 recession, which has exacerbated those divisions and wiped out years of gains made by working Americans.
The administration does not anticipate a major change in the trend rate of GDP over the next decade, with an expansion of around 2% on average over the next decade. This is the average of the 15 years until 2019, before the pandemic struck.
The proposed 2022 budget request includes funding for early childhood care and colleges, investments in minority-owned businesses, and grants to improve public transportation in poor communities.
“Where we choose to invest is a testament to what we value as a nation,” Biden said in a statement released by the Office of Management and Budget. “It’s a budget that reflects the fact that the economic spinoffs never worked.”
The idea is that strengthening the middle class and poorer Americans will lead to more stable growth in the long run.
It’s an approach in stark contrast to the strategy of former presidents, including Ronald Reagan, whose administrations argued that tax cuts and deregulation would boost economic expansion – what George HW Bush called ” voodoo economy ”. President Donald Trump has also pledged to boost the economy, forecasting 3% annual growth.
“Unlike past major investments, the plan also prioritizes tackling persistent and persistent racial injustice and helps ensure that rural, urban and tribal communities have a fair chance to prosper,” the administration said in outlining Biden’s infrastructure and employment plan on Friday.
Cecilia Rouse, chairwoman of the Council of Economic Advisers, told reporters on Friday that the economic forecast was drawn up in early February and did not fully reflect the policies proposed in the budget. She said the White House chose to release the budget, already later than its usual release date, without further delay to incorporate recent data and progress in the fight against the pandemic, and that it currently could not quantify this full impact.
Still, the steady-state forecast includes some of the impact of the $ 4 trillion in spending and tax credits in the US Jobs Plan and the US Plan for Families, economic programs. long-term two-pronged from Biden.
“So far the administration’s policies are aimed not only at getting us out – because that will always be only part of the solution – but also at ensuring that this growth is equitable,” Jared Bernstein, adviser Biden’s economy, said on Bloomberg TV on May 11. Equity is mentioned almost 40 times in the budget document, double the references to growth.
The White House sees the budget deficit shrink from historic highs for the pandemic, while remaining well above 4% in the closing years of the coming decade, at 4.7% in 2031. Inflation, measured by consumer prices, is expected to remain contained after its pop this spring, with a pace never exceeding 2.3% per year over the next 10 years.
Biden’s budget plan, titled with $ 6 trillion in requested spending for the fiscal year that begins October 1, along with his longer-term proposals, faces a major overhaul in Congress. But it serves as a gauge of the White House’s priorities as negotiations continue with lawmakers. To fund his spending plans, Biden launched tax increases on businesses and wealthy American households.
While the tax system would be more progressive, it would not fully pay for proposed spending plans over a decade, according to the budget proposal. The spreads will present a challenge to Congressional Democrats, as many moderates also want to cut some of these tax proposals, which means an even bigger funding gap.
Biden’s jobs plan would raise corporate taxes by $ 2 trillion over the decade. The Families plan includes roughly $ 1.5 trillion in high income tax increases, roughly split between increasing rates on income and capital gains and increasing enforcement and audits of the ‘IRS. Total spending on low-income household tax credits, child care spending, and education investments is nearly $ 1.8 trillion.
Biden’s White House economics team were determined to keep their election promise to raise taxes for the rich, emboldened by the widely divergent experiences of those at the top and bottom of the socioeconomic ladder during the Covid-19 crisis.
The richest 1% of U.S. households saw a $ 4 trillion increase in wealth last year, or 35% of total earnings, while the poorest half of the country – about 64 million people – n ‘saw only 4% of the gains. Much of this accrued for those who invested in stocks and had a college education.
“The president strongly believes that the biggest companies and the people who have been extremely successful in recent decades should pay a little more,” said Bharat Ramamurti, member of the National Economic Council, in an interview with Bloomberg TV earlier this year. . While “the richest people” have done well even over the past year, one in seven American families have reported going hungry during the pandemic, he said.