Biden budget offers up election-year contrast with GOP foes

President Joe Biden unveiled a $7.3 trillion budget blueprint Monday that amounts to an election-year pledge to lower costs for struggling families while reining in federal deficits and protecting cherished entitlement programs.

As he fights for a second term with underwater job approval ratings, Biden offered up a slew of spending proposals and tax credits in his fiscal 2025 budget request, including a number of familiar faces from past budgets. Among many other provisions, his budget is designed to lower health care costs, make housing more affordable, boost child care funding, expand college aid and provide up to 12 weeks of paid leave to workers.

The president claimed credit for substantial deficit reduction already in the pipeline, including through the debt limit and spending caps law he brokered with former Speaker Kevin McCarthy, R-Calif., last year. Biden is now promising to slash deficits by another $3.2 trillion over the coming decade from previously projected levels.

That reduction would come, however, mostly from tax increases on corporations and wealthy households that Republicans have already rejected in previous years. About a third of the deficit reduction, for example, would come from raising the corporate income tax rate from 21% to 28% to generate an additional $1.35 trillion in revenue over a decade.

And the president again promised to protect Social Security and Medicare from benefit cuts, even as those programs face fiscal insolvency in coming years.

His budget calls for extending the solvency of Medicare by increasing the Medicare tax rate on annual incomes above $400,000 and closing a “loophole” allowing some businesses to avoid paying a Medicare tax on their profits, among other things. It similarly calls for higher taxes on wealthy households to extend the solvency of Social Security.

“My Administration will keep fighting to lower costs for working families, on everything from housing to childcare to student loans,” Biden said in a written message to Congress accompanying his budget request.

Mortgage relief, child credits

Hoping to combat higher housing costs, the budget calls for a $10,000 mortgage relief credit over two years and expanded rental assistance to hundreds of thousands of families.

It also calls for restoring an expanded child tax credit that the administration credits with cutting child poverty nearly in half in 2021.

White House budget director Shalanda Young, in a conference call with reporters, said the administration wants the child tax credit extended “in perpetuity,” but the budget only asks for it to be extended through 2025 because it will be part of the debate over tax cuts expiring after that year.

“We’re going to have a robust tax debate at the end of 2025 and child credit will be a part of that,” she said.

Biden would also fully fund the Special Supplemental Nutrition Program for Women, Infants, and Children, known WIC, to serve all eligible participants, after Democrats won a boost in funding this fiscal year to cover a $1 billion shortfall.

And with crime remaining a key concern for many voters, the budget requests $7.3 billion to replenish and overhaul the Crime Victims Fund to “ensure a stable and predictable source of funding is available to support critical victim service and compensation programs over the next decade,” a White House fact sheet says.

But with a highly polarized, divided Congress and election-year pressures, Biden’s budget stands almost no chance of winning adoption — and even less chance of being enacted before the new fiscal year begins on Oct. 1.

Congress is still struggling to complete appropriations for the current fiscal year, which is nearly half over. That delay forced a delay in the administration’s fiscal 2025 submission, which is due by the first Monday in February, though there is no penalty imposed for blowing that deadline.

Despite the attempts at deficit reduction, the presidential blueprint still envisions the government amassing nearly $16.3 trillion in deficits over the coming decade. Annual deficits would decline gradually from $1.78 trillion in fiscal 2025 to $1.48 trillion in fiscal 2029, before starting to tick upward.

Jared Bernstein, chair of the Council of Economic Advisers, defended the size of projected deficits in a conference call with reporters Monday.

“Especially when you’re getting to the out years … it’s important to look at the deficit as a share of the economy because [gross domestic product] of course is growing significantly over these years and so we have a deficit that goes down considerably as a share of GDP,” he said.

While revenue would increase by about $4.9 trillion over 10 years, spending would increase by just $1.7 trillion on net, producing the advertised $3.2 trillion in deficit reduction, according to budget documents.

Discretionary caps

With about two-thirds of federal spending made up of mandatory entitlements such as Social Security, the big fiscal fight will center on Biden’s request of nearly $1.7 trillion in discretionary funding.

That fight might be more subdued than in previous years, however, because Congress already agreed to a topline discretionary limit as part of spending caps included in last year’s debt limit suspension law.

Those limits would allow fiscal 2025 appropriations to rise just 1% above the topline totals agreed to for the current fiscal year. However, the White House request appears to use some accounting sleight of hand to boost the nondefense total closer to a 2% boost above the current year’s level, which is certain to come in for questioning among Capitol Hill Republicans.

The administration also assumes relatively strong economic growth and low inflation over the coming decade, with no recessions.

Gross domestic product would increase by 2% in fiscal 2025, as measured from the fourth quarter of each year, and gradually increase to 2.2% annually in the latter half of the decade.

Bernstein defended the administration’s economic forecast as more realistic than the 3% economic growth assumed in the House Budget Committee’s fiscal 2025 budget resolution.

“We haven’t had a … sustained period of growth, 3% growth, in this country in a long time,” he said. “That’s more the kind of growth rate you’d typically see in developing economies.”

Inflation, as measured by the consumer price index, would hold steady at 2.3% annually through the decade. And unemployment would decline from 4 percent in fiscal 2025 to 3.8% by fiscal 2028, where it would remain through fiscal 2034.

Debt held by the public would grow from nearly $30 trillion in fiscal 2025 to $45 trillion by fiscal 2034.