Biden Unveils $6 Trillion Spending Plan

WASHINGTON—President Biden’s $6 trillion budget proposal unveiled Friday charts his vision of an expansive federal government role in the economy and the lives of Americans, with big increases in spending on infrastructure, public health and education along with tax increases on corporations and the wealthy.

The Biden administration is seeking $1.52 trillion for spending on the military and domestic programs in fiscal year 2022, which begins Oct. 1, an 8.6% increase from the $1.4 trillion enacted last year, excluding emergency measures to combat the Covid-19 pandemic.

The proposal would shift more federal resources from the military, which would see a 1.6% rise in spending next year, to domestic programs such as scientific research and renewable energy, which would receive 16.5% more funding under the president’s plan in 2022.

The White House also detailed costs for its proposals to spend $4.5 trillion over the next decade on infrastructure and social programs, which the administration is hoping to advance through Congress this summer. The plan would provide $17 billion next year for infrastructure improvements, including repairs to roads, bridges and airports, $4.5 billion to replace lead water pipes across the country, and $13 billion to expand high-speed broadband.

Plans to provide universal preschool and ensure teachers at those schools earn $15 an hour would cost $3.5 billion in 2022. The budget would also provide $8.8 billion next year on direct spending on families, including $6.7 billion for affordable child care, and $750 million for paid leave, the costs of which would rise substantially in 2023 and beyond.

“Put together, this budget is an agenda for durable economic growth and broadly shared prosperity,” Shalanda Young, the acting director of the Office of Management and Budget, said on a call with reporters Friday. “It will deliver a strong economy now and for decades.”

The plan relies on corporate tax increases to pay for infrastructure and taxes on high-income households for the family-spending and education initiatives. The corporate tax rate would climb to 28% from 21%, the top capital-gains tax rate would go to 43.4% from 23.8% and unrealized gains would be taxed at death, with a $1 million per-person exemption.

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Those changes would reverse many of the tax cuts that Republicans enacted in 2017. The administration is also proposing a rewrite of the international tax system, including limits on deductions for companies that send profits to countries without minimum taxes, a plan that would raise $390 billion over a decade.

The budget plan also includes $80 billion in additional spending at the Internal Revenue Service and new rules requiring banks to report flows in accounts. Those changes are projected to raise about $700 billion over 10 years as tougher enforcement curbs tax dodging.

Democrats in Congress welcomed the plan, saying it would provide money for long overdue investments after years of spending constraints.

“For too long, self-inflicted austerity has been mistaken for fiscal responsibility, to the detriment of American families and our nation’s economy,” said

Rep. John Yarmuth

(D., Ky.), chairman of the House Budget Committee.

Republican lawmakers were critical, saying the plan represents an unwarranted intrusion of the federal government in the economy and risks stoking inflation and adding to a massive national debt.

“It is insanely expensive,” said

Sen. Lindsey Graham

(R., S.C.), the top Republican on the Senate Budget Committee. “It dramatically increases nondefense spending and taxes. Over time it will result in a weakened Department of Defense.”

Ms. Young pushed back against Republican criticism that the plan would worsen the country’s fiscal picture by dramatically increasing deficits and debt over the coming decade.

The budget plan projects a deficit of $1.84 trillion in fiscal 2022, which comes to 7.8% of gross domestic product, down from a deficit of $3.67 trillion in fiscal 2021, when emergency government spending to battle the Covid-19 pandemic and its economic fallout added to the red ink.

Debt held by the public would rise to 111.8% in 2022, surpassing the level seen in the wake of World War II. Debt would continue to rise in the following years, reaching 117% of GDP in 2031.

Ms. Young emphasized that net interest payments on the debt as a share of economic output will remain below the historical average over the next decade, thanks in part to historically low interest rates that have steadily declined in recent decades. The yield on the 10-year Treasury note has averaged 2.085% over the past decade and is currently around 1.59%.

“This shows that the cost of these upfront investments is not burdening the economy,” she said, adding that deficits will begin to decline by the end of the decade. “Failing to make these investments at a time with such low interest costs would be a historic missed opportunity that would leave future generations worse off.”

Administration officials have said its proposals would add to deficits over the next decade but that higher spending would eventually be offset by revenue from tax increases on wealthy individuals and corporations.

The budget assumes that interest rates and inflation will remain low for the foreseeable future, forecasts that some economists and Republican critics dispute.

The economy is expected to grow 5.2% this fiscal year and 3.2% in fiscal 2022, as the recovery continues. In following years, the annual pace of growth would settle between 1.8% and 2%.

Cecilia Rouse, chairwoman of the White House Council of Economic Advisers, said the economic forecasts were submitted in early February, when the economic outlook wasn’t as bright. Since then, millions more Americans have been vaccinated and Covid-19 infections have declined, leading to a faster reopening of the economy and stronger growth than many expected, she said.

Ms. Rouse said most economists now see GDP growth approaching 7% this year, along with higher inflation and Treasury yields. She declined to detail how the White House’s economic expectations have shifted. She also said the administration’s economic assumptions don’t include all of the policy proposals from the president’s American Jobs Plan and American Families Plan.

The president’s budget proposal signals to Congress what the White House hopes to accomplish over the coming years. Lawmakers routinely ignore the White House’s budget requests in favor of their own plans. The government is actually funded through 12 appropriations, or spending, bills that need to be passed by both chambers of Congress and signed into law by the president.

Democrats have agreed with much of what Mr. Biden was expected to propose, but military spending has been an area of contention, because some liberal Democrats want to see it cut. This is an area of dispute that might be problematic when Democrats try to pass a budget through both the House and Senate, where they have slim majorities.

Although a budget can pass through both chambers of Congress with just a simple majority, the actual spending bills needed to fund the government will need bipartisan support in the Senate.

Write to Kate Davidson at [email protected]

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