President Joe Biden’s budget on Friday unveiled a plan to address long-standing inequalities in the U.S. economy, rather than serve as a change for the nation’s weakened economic growth trend in recent years.
Biden’s program breaks with the budgets of recent presidents, who promised that policy proposals would turbocharge gross domestic product. Biden’s central goal, on the other hand, is social change: to try to reverse decades of widening the income and wealth gaps that often fall along the racial line.
The budget comes at the end of the Covid-19 recession, which exacerbated these fractures and wiped out years of gains made by American workers.
The administration does not anticipate any significant change in the trend rate of GDP over the next decade, with an average expansion of approximately 2% over the next decade. This is in line with the average for the 15 years to 2019, before the pandemic arrived.
The proposed budget application for 2022 includes funding for daycare and schools, investing in minority-owned businesses, and grants to improve public transportation in poor communities.
“Where we choose to invest speaks to what we value as a nation,” Biden said in a statement released by the Office of Management and Budgets. “It’s a budget that reflects the fact that the drip economy has never worked.”
The idea is that raising the middle class and the poorest Americans will provide more stable, long-term growth.
It is an approach that contrasts sharply with the strategy of previous presidents, including Ronald Reagan, whose administrations argued that tax cuts and deregulation would strengthen economic expansions, which George HW Bush mocked as a “voodoo economy.” ”. President Donald Trump also pledged to make a dent in the economy, forecasting annual growth of 3%.
“Unlike previous large investments, the plan also prioritizes the solution to persistent and long-lasting racial injustice and helps ensure that rural, urban and tribal communities have a good shot at prosperity,” he said. administration in describing Biden’s infrastructure and jobs plan on Friday.
Cecilia Rouse, chair of the Council of Economic Advisers, told reporters on Friday that the economic forecasts were developed in early February and do not fully reflect the policies proposed in the budget. He said the White House chose to release the budget, already later than the typical publication date, without further delay to incorporate recent data and progress in the fight against the pandemic, and that it could not currently quantify that full impact.
Still, the stability forecast includes part of the $ 4 trillion impact on spending and tax credits from the American Jobs Plan and the American Families Plan, Biden’s two long-term economic programs.
“The administration’s policies so far are very much aimed at not only getting it out, because that will always be only part of the solution, but at making sure that this growth is fair,” said Jared Bernstein, economic adviser. of Biden told Bloomberg TV on May 11th. Equity is mentioned almost 40 times in the budget document, double the references to growth.
The White House sees the budget deficit shrinking from the pandemic’s all-time highs, although it remains well above 4% in the coming years of the next decade, with 4.7% forecast for 2031. Inflation, measured by consumer prices, is set to remain after its pop this spring, at a rate that will never exceed 2.3% annually in the next ten years.
Biden’s budget plan, titled with $ 6 trillion in requested spending for the fiscal year beginning Oct. 1, along with its long-term proposals, faces major reform in Congress . But it serves as a gauge of White House priorities as negotiations continue with lawmakers. To fund its spending plans, Biden has raised taxes on wealthy American businesses and households.
While the tax system would be more progressive, according to the budget proposal, it would not fully pay off the proposed spending plans for a decade. The discrepancies will pose a challenge for Democrats in Congress, as many moderates also want to reduce some of these fiscal 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 approximately $ 1.5 trillion in tax increases for higher-income workers, which is roughly divided between increased income and capital gains taxes, and increased enforcement and IRS audits. Total spending on tax credits for low-income families, spending on daycare and investments in education totals nearly $ 1.8 trillion.
Biden’s economic team at the White House is determined to fulfill its campaign commitment to raise taxes on the rich, encouraged by the abruptly divergent experiences of those at the top and bottom of the socioeconomic scale during the crisis. of the Covid-19.
The top 1% of American households experienced a $ 4 trillion increase in wealth last year, or 35% of total earnings, while the poorest half in the country – about $ 64 million. people – saw only 4% of profits. Much of this was accumulated by those who invest in stocks and with university studies.
“The president firmly believes that big business and those who have done very well in recent decades should pay a little more,” National Economic Council member Bharat Ramamurti said in an interview with Bloomberg TV in early ‘this year. While “the richest people” fared well even over the past year, one in seven American families reported going hungry during the pandemic, he said.