WASHINGTON – President Joe Biden tabled his budget proposal for Fiscal Year 2022 in Congress on Friday, the first formal budget of his presidency and a sharp departure from his predecessor Donald Trump.
Biden’s budget contains his two distinctive national proposals, the American Families Plan and the American Jobs Plan, neither of which have been seriously debated in Congress.
It also shows how different Biden’s priorities are from Trump’s. For example, it calls for an increase of 41% for the Ministry of Education compared to the previous year, plus 23% more for the Ministry of Health and Social Affairs and 22% more for the Environmental Protection Agency.
Funds for the Department of Homeland Security, which carried out Trump’s aggressive immigration policy, would drop by a tenth of a percent. Another Trump priority, the Department of Defense, would see funding increase by just 2%.
On a personal level, Biden views his budget as a reflection of his values. He often quotes his own father as saying, “Don’t tell me what you value. Show me your budget and I’ll tell you what you value.”
The top budget requirement for 2022 is $ 6 trillion. But only $ 300 billion of that is required for the next year. Instead, as in any presidential budget, the vast majority of the money it contains is spent on programs that the government is legally required to fund, such as Medicare, social security, and interest on national debt.
In total, around $ 1.5 trillion was requested for discretionary items in FY 2022, which includes funding from all federal agencies. About half of this is already earmarked for the Ministry of Defense.
On the pay-for side, Biden’s budget includes a host of changes to tax law that the White House claims can fund its multi-trillion-dollar domestic spending plans. Among the most important are a rise in the corporate tax rate from 21% to 28%, as well as increased enforcement of the IRS and higher taxes for the richest taxpayers.
The tax changes also include a number of “Made in America” tax changes that penalize US companies for offshoring jobs, specifically to manufacture goods that are then sold back to American consumers.
As with most presidential budgets, the White House is relying on optimistic forecasts of low unemployment and low inflation rates to support the cast, which will amortize Biden’s spending plans through higher growth.
Unemployment, according to the White House forecasts, will fall to 4.7% by the end of the year, to 4.1% in 2022 and to 3.8% in the following year. Thereafter, unemployment will remain at a very low 3.8% for the next seven years.
The White House budget is also forecasting that inflation will be 2.1% this year and will not rise more than 2.3% a year for the next 10 years.
But numbers like this are hard to justify: the current unemployment rate is 6.1% and the current inflation rate is 4.2%, significantly higher than the White House estimate.
Jared Bernstein, a member of the President’s Council of Economic Advisers, admitted the problem with the inflation forecast in an interview on CNBC’s Closing Bell on Friday.
Bernstein said the economic forecast for the budget was made in February of this year when inflation rates were still low. If they were written now, they would take into account the higher inflation rates.
Speaking to reporters ahead of the plan’s release on Friday, Cecilia Rouse, chairwoman of Biden’s economic advisor, said the historically low interest rates are now an ideal time for the federal government to borrow additional debt to modernize and expand the economy social safety net.
Shalanda Young, acting director of OMB, said rates will rise slightly over time, but she believes they will remain comparatively low thanks to “a global, ongoing phenomenon” of low rates.
The White House believes that Biden’s proposals, over time, would increase productivity and consumer spending enough to pay for themselves and eventually reduce the deficit in 15 years.
Biden’s budget has already been scrutinized by some progressives, who suggest that it does not include a public healthcare option that was one of Biden’s campaign promises.
White House officials said Biden would instead turn to Congress to help create a public option and pass a law allowing Medicare to negotiate drug prices with drug companies.
Like all presidential budgets, Biden consists of a part plan and part wish list to illustrate the president’s political priorities as well as informing the appropriators of Congress.
Depending on whether Congress actually goes into effect, Biden’s budget will likely be changed in large and small ways before it is finally adopted by Congress. But with the Democrats in control of both houses this year, Biden stands a far better chance of reflecting his top priorities in the bottom line than most of his recent predecessors.
In a statement on budget release, the President said the document was “a budget of what our economy can be, who our economy can serve, and how we can better build it by using the needs, goals, ingenuity and strength of America People at the forefront. “
You can read the President’s entire budget here.