Biden prepares to release budget proposal with eye toward 2024
The White House has started preparing to release President Biden’s annual budget proposal on Thursday, when he will lay out his administration’s priorities for the next fiscal year as he readies an expected reelection bid with Republicans in control of the House.
The proposal is expected to include plans to strengthen entitlement programs by raising taxes on the wealthy and include trillions of dollars in deficit-reduction measures aimed at blunting GOP attacks about runaway government spending. In an indication of the political dynamics underlying the plan, Mr. Biden will travel to Pennsylvania, a crucial swing state, to deliver a speech Thursday afternoon on the details of his budget.
The president’s budget serves as a starting point for negotiations with lawmakers who are ultimately responsible for crafting and passing spending bills that keep the government running. Presidents’ budgets as proposed are never identical to what Congress passes, particularly when the opposition party controls one or both chambers, but they are useful for revealing the administration’s priorities and expectations. As he and other presidents have done before, Mr. Biden is releasing this budget proposal weeks after a deadline of early February.
The White House has said the president’s budget would lower costs for families and strengthen Social Security and Medicare while reducing the deficit by raising taxes on the most affluent Americans, a nonstarter with House Republicans. White House press secretary Karine Jean-Pierre said Wednesday that the budget proposal would reduce the deficit by nearly $3 trillion over the next decade, higher than the $2 trillion in savings the White House had previously identified.
“This is something that he’s talked about since the campaign, and he believes in being fiscally responsible, and that’s what you’re going to see from the president tomorrow,” Jean-Pierre said at the daily press briefing.
Officials said earlier in the week that the president is proposing to increase the Medicare tax rate on income above $400,000 to 5%, up from the current rate of 3.8%. The White House said the president’s proposal would also close loopholes on Medicare taxes and help the program be strong for “decades” to come.
One reporter at Wednesday’s press briefing pointed out that the details of the president’s budget that have been released so far did not appear to have an “olive branch” for Republicans. “If they want to talk to the president about how we’re going to reduce the deficit, he’s willing to have that conversation. But that’s not what they’re putting forth,” Jean-Pierre replied.
Republicans in Congress have not yet released a budget proposal of their own nor detailed what specific spending cuts they would like to see.
The president has made protecting Social Security or Medicare central to his message since his State of the Union address, when GOP lawmakers loudly objected to his characterization of their position on entitlements. The president and Democrats have heavily criticized a proposal from GOP Sen. Rick Scott of Florida in 2022 that would have made all federal programs subject to renewal every five years. (He later amended his plan to exclude Medicare and Social Security.)
Meanwhile, lawmakers and the White House are facing a summer deadline for raising or suspending the nation’s borrowing limit to avoid a potentially catastrophic default. Last week, House Speaker Kevin McCarthy told reporters there had been no further outreach from the White House on the debt limit since he met with the president earlier this year, but said talks could pick back up after the president releases his budget.
McCarthy has said that any suspension or raising of the debt limit must be accompanied by spending cuts, but has said Social Security and Medicare should be off the table in negotiations.
President Biden’s budget would eliminate a tax subsidy for cryptocurrency transactions. Right now, the White House said, crypto investors can sell a cryptocurrency at a loss, “take a substantial tax loss to reduce their tax burden, and then buy back that same cryptocurrency the very next day.” The White House estimated closing this loophole would mean $23 billion in more taxes.
The president’s budget would also address the carried interest loophole that allows investment managers to pay a 20% rate on the pay they receive from managing fund assets, instead of a higher rate of 37% paid by “comparable wage earners.” The White House estimated that would amount to $6 billion more in tax revenue.
The budget proposal would also limit the amount taxpayers with incomes above $400,000 can keep in tax-favored retirement accounts.
Additionally, the budget would prohibit real estate investors from putting off paying taxes on profits from deals as long as that money is reinvested in real estate. The White House calls that a “free loan” from the government.
The White House also said the president’s budget would eliminate tax subsidies for oil and gas companies, claiming the elimination of special tax treatment would mean $31 billion more in tax revenue. The White House did not immediately specify which subsidies it planned to eliminate.
The White House also touted a proposed crackdown on fraud and identity theft, saying that each dollar spent on enforcement and oversight would save more than $10 for the taxpayer. The budget would extend the statute of limitations for serious instances of fraud, increase funding for groups investigating COVID-19 relief fraud and provide significant funding for inspectors general, among other things, the White House said. The budget would also include new proposals for strengthening the unemployment insurance program, leading to an estimated $2 billion in savings, the White House said.
The budget also proposes canceling about $1 billion in unused Bureau of Prisons construction funding that the administration said it won’t need, amid a declining federal prison population and in light of the Trump-era First Step Act.
The White House also claimed the proposed budget would eventually lower Medicaid costs by $10 billion by improving access to HIV prevention and care. Making sure Medicaid beneficiaries have access to PrEP and early treatment will save money in the long run, the administration believes.
The Biden budget would require drug manufacturers to pay rebates for commercial drug sales. The administration believes that will save the federal government $40 billion and reduce health insurance premiums for Americans with private health insurance.
The budget would also give the Department of Health and Human Services the authority to negotiate supplemental Medicaid drug rebates for states to grow purchasing power, according to the White House.
The budget would further require that insurance companies charging Medicaid more than they spend on patient care pay back some of the excess. Medicaid already generally reimburses at lower rates than Medicare and certainly less than private insurers.