Biden’s budget plan inflates US debt before tax hikes take effect

0

WASHINGTON, May 28 (Reuters) – U.S. President Joe Biden’s $6 trillion budget plan calls for a large short-term increase in U.S. debt to fund his plans to reduce inequality, fight climate change, reconstruction of US infrastructure and investment in new technologies, but counts on higher tax revenues to reduce deficits in the longer term.

The budget proposal released Friday builds on a partial “skinny budget” the White House announced last month that aimed to increase spending to fight climate change, fight cancer and boost underperforming schools. Read more

Here are some takeaways from Biden’s first comprehensive spending plan for fiscal year 2022 — a proposal that faces strong opposition from Republican lawmakers and will be subject to months of negotiations:

Join now for FREE unlimited access to Reuters.com

Register

INCREASE IN DEBT

Biden’s 10-year budget plan would add $14.53 trillion to the country’s debt between 2022 and 2031, but he plans to reduce annual deficits as proposed tax hikes on wealthy individuals and corporations and increased tax enforcement increases revenue.

The proposal predicts that total public debt will reach 117% of gross domestic product by 2031, down from peaks seen during the COVID-19 pandemic, but still well above historic levels.

However, low interest rates mean the cost of borrowing will be negative through 2028 and remain below historic levels through 2031, officials said.

TAXES

The plan calls for paying for Biden’s spending priorities by increasing the amount of taxes paid by America’s biggest corporations and wealthy Americans. He proposes closing long-standing loopholes, including lower capital gains taxes and dividends for the wealthy.

The Biden administration’s proposals to raise taxes on businesses and wealthy Americans would boost net incomes by nearly $2.4 trillion over a decade, after rolling back heavy tax deductions and credits to prop up the clean energy, children and families, the Treasury said on Friday. Read more

The plan allows tax cuts enacted by former President Donald Trump for individuals to expire in 2025.

Acting Office of Management and Budget Director Shalanda Young said Biden remains committed to not raising taxes on people earning less than $400,000, and there is enough time to revise the code. taxes before the expiry of these tax reductions.

“The President will use the time between now and that expiration in 2025 to work with Congress to continue reforming our tax code so that it asks the wealthy to pay their fair share, raising the right amount of income and protecting the low and medium. -income families,” Young said.

ROSIER’S ECONOMIC ASSUMPTIONS

Cecilia Rouse, who chairs Biden’s Council of Economic Advisers, told reporters the economy has improved sharply since the forecast underlying the budget was locked in early February, buoyed by bailout spending, a decline unemployment and progress in vaccinations against COVID-19.

The administration will revisit that forecast later this year, but did not revise it before the budget was released, administration officials said.

For example, the budget assumes real GDP growth of 5.2% in 2021 and 3.2% in 2022, but the consensus forecast for GDP growth in 2021 has already risen to 7%.

Even smaller percentage point differences would result in trillions in additional cumulative economic output over a decade, Rouse said.

Using conservative February estimates, the budget assumes US GDP growth of 2% in 2031, compared to the Federal Reserve’s estimate of 1.8%.

Join now for FREE unlimited access to Reuters.com

Register

Reporting by Andrea Shalal and Jarrett Renshaw; Editing by Andrea Ricci

Our standards: The Thomson Reuters Trust Principles.

Share.

Comments are closed.