Biden's $6.8 trillion budget challenges Republicans, raises taxes on rich

The Democratic president challenged Republican opponents on fiscal responsibility.

PHILADELPHIA, (Reuters) - US President Joe Biden on Thursday unveiled plans for government spending and higher taxes on the wealthy, choosing the swing state of Pennsylvania to reveal his playbook for an expected 2024 re-election bid.

Speaking at a Philadelphia union hall, the Democratic president challenged Republican opponents on fiscal responsibility, highlighting plans to cut US deficits nearly $3 trillion over 10 years by raising taxes on those earning more than $400,000 a year.

Overall, the budget would increase federal spending in the twelve months starting in October to $6.8 trillion from the $6.2 trillion expected to be spent in the current fiscal year.

"For too long, working people been breaking their necks, the economy's left them behind - working people like you - while those at the top get away with everything," Biden told Pennsylvania blue-collar workers, a group he also targeted in his 2020 presidential campaign.

Biden's budget proposal faces stiff opposition from Republican lawmakers emboldened by winning control of the House of Representatives in November's midterm elections. Large parts of his agenda are unlikely ever to be enacted by this Congress.

The plan, however, is a political statement that directly challenges Republican House Speaker Kevin McCarthy's threats to block an increase in the $31.4 trillion limit on federal borrowing unless Biden agrees to rein in federal spending.

"I want to make it clear I'm ready to meet with the speaker anytime, tomorrow, if he has his budget. Lay it down, tell me what you want to do. I'll show you what I want to do, see what we can agree on," Biden said.

Biden, asked for areas of possible compromise with Republicans, told reporters at the White House: "We'll see what their budget is." His message to Republicans who say the budget is dead on arrival was: "Watch me."

McCarthy and other Republicans on Thursday described Biden's budget plan as "reckless."

The president seeks to fund higher spending and narrowing the deficit by imposing a 25% minimum tax on billionaires and nearly doubling the capital gains tax from 20%, the White House said.

He also wants to quadruple a 1% stock buyback tax, potentially picking a fight with some of the investors he would need to call on to finance any re-election campaign. The measures would roll back some corporate tax breaks enacted in 2017 under Republican former President Donald Trump.

Political messaging aside, the Biden budget makes clear one thing - the aging US population means that legally mandated spending on social programs will continue to be a long-term drag. One in five Americans will be retirement age or older by 2030, the U.S. Census predicts.

The budget projects more than $1 trillion deficits every year over the next 10 years, even if Biden gets his requests for higher taxes and cost-cutting measures.

Total US debt would rise to nearly 110% of annual gross domestic product in 2033, a figure that rivals the peaks during the country's mobilization for World War II.

The administration based its budget on a muted, 0.6% inflation-adjusted growth forecast for the current calendar year.

It sees unemployment creeping up to 4.6% in 2024 as the Federal Reserve engineers a slowdown to fight inflation, and predicted that effort will succeed in getting consumer prices down by nearly two-thirds from current levels by next year. In each case, the assumptions closely track the projections of economists polled by Refinitiv. EM

REPUBLICAN PUSHBACK

"President Joe Biden's budget is a reckless proposal doubling down on the same Far Left spending policies that have led to record inflation and our current debt crisis," McCarthy and other Republicans said in a statement.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget advocacy group, said the budget did not go nearly far enough to rein in dangerous debt levels.

"When it comes to fixing the debt, this is by no means an award-winning budget, but the president deserves at least a participation trophy," she said in a statement.

Republicans are already preparing $150 billion in cuts to non-defense discretionary programs, including about $25 billion from the Department Education and cuts in foreign aid and programs aimed at preventing sexually transmitted diseases. They say that would save $1.5 trillion over a decade.

Biden's proposals, meanwhile, are a sweeping endorsement of the power of the federal government to solve big problems.

He would boost military spending to stop China and Russia pushing beyond their borders, extend healthcare subsidies for the country's aging population while funding cancer research to cut the death rate from that disease in half, support down payments for first-time homebuyers, improve rail safety after recent accidents and guarantee preschool for all the country's four million four-year-olds.

Biden requested $886 billion in spending for national defense, a 3.2% increase over the number enacted for the 2023 fiscal year.

Aides see most of the proposals enjoying strong bipartisan support in the country, hoping they could lift the president's low approval ratings as he gears up announce his reelection bid as soon as next month.

Biden also proposed increases in funding for crime prevention and border patrol, a nod to issues Republicans often use in barbed attacks on the administration.

The Committee for a Responsible Federal Budget, a non-partisan Washington think tank, said Biden deserved credit for for putting forward $3 trillion in deficit reduction.

"However, deficit reduction will ultimately need to be nearly three times that large, and it is disappointing the budget has put forward so many costly proposals," it said.

Josh Bivens, director of research at the progressive Economic Policy Institute, praised the measures on paid leave, climate and funding for schools in high-poverty neighborhoods.

"If there's a quibble on the tax side, it's that it doesn't ask enough of plenty of American households who could afford to pay more," he wrote on Twitter.