President Joe Biden’s budget on Friday revealed a blueprint for resolving long-standing inequality in the US economy, rather than changing the rules of the game for the country’s weak economic growth in recent years.
Biden’s plan goes against the budgets of recent presidents, who promised that policy recommendations will boost GDP growth. Biden’s core goal is social change-an attempt to reverse decades of widening income and wealth gaps, and these gaps are often divided by race.
The budget was proposed at the end of the Covid-19 recession, which exacerbated these disagreements and erased the gains made by American workers over the years.
The government predicts that the trend rate of GDP will not change significantly in the next ten years, and the average growth rate in the next ten years is about 2%. This is in line with the average for the 15 years before the outbreak of the 2019 pandemic.
The proposed budget for 2022 includes funding for early childhood care and universities, investment in minority-owned businesses, and grants to improve public transportation in impoverished communities.
Biden said in a statement issued by the Office of Management and Budget: “The places we choose to invest in reflect our value as a country.” “This is a budget that reflects the fact that trickle economics has never worked.”
The idea is that promoting the middle class and the poorest Americans will provide more stable long-term growth.
This approach is in stark contrast to the strategy of previous presidents, including Ronald Reagan, whose administration believed that tax cuts and deregulation would strengthen economic expansion — George HW Bush ridiculed it as “witch Drug Economics”. President Donald Trump has also pledged to power the economy, with an expected annual growth rate of 3%.
In describing Biden’s infrastructure and employment plans on Friday, the government said: “Unlike major investments in the past, this plan also prioritizes the resolution of long-standing racial injustices and helps ensure the prosperity of rural, urban and tribal communities. There is a fair chance.”
Cecilia Rouss, chairman of the Council of Economic Advisers, told reporters on Friday that the economic forecast was formulated in early February and did not fully reflect the policies proposed in the budget. She said that the White House’s choice to announce the budget was already later than the usual announcement date without further delay to incorporate recent data and progress in the fight against the pandemic. She is currently unable to quantify this full impact.
Nevertheless, the steady-state forecast does include part of the impact of Biden’s two-pronged long-term economic plan, the US Employment Plan and the US Family Plan, of the US$4 trillion in expenditure and tax credits.
Jared Bernstein, Biden’s economic adviser, said: “So far, the goal of government policy is not only to get us out of trouble-because it is always part of the solution-but to ensure this growth. It’s fair.” It was stated on Bloomberg TV on May 11. The budget document mentions stocks almost 40 times, and the number of mentions of growth has doubled.
The White House believes that the budget deficit has shrunk from the historical high of the pandemic, but it will still be much higher than 4% in the external years of the next ten years, and is expected to be 4.7% in 2031. It became popular this spring, and the annual growth rate in the next 10 years will never exceed 2.3%.
Biden’s budget plan is headed for the $6 trillion required expenditure for the fiscal year beginning on October 1, and together with his long-term proposal, it faces major adjustments by Congress. But as negotiations with lawmakers progress, it can be used as a measure of the White House’s priorities. In order to fund his spending plan, Biden has proposed tax increases to companies and wealthy American families.
According to the budget proposal, although the tax system will be more progressive, it will not fully cover the proposed expenditure plan within ten years. These differences will pose challenges to Congressional Democrats, because many moderates also want to reduce some of these tax proposals, which means a larger funding gap.
Biden’s employment plan will increase corporate taxes by US$2 trillion in ten years. The family plan includes an increase of approximately $1.5 trillion in taxes for high-income earners, which can be roughly divided into increases in income and capital gains tax rates, and increases in IRS enforcement and auditing. The total expenditure of low-income households tax credits, childcare expenditures, and education investments totaled nearly US$1.8 trillion.
Biden’s economic team in the White House is determined to fulfill his campaign promise, which is to increase taxes on the rich. During the Covid-19 crisis, the experiences of the upper and lower social economies were completely different, which made him even more bold.
Last year, the wealth of the wealthiest 1% of American households increased by US$4 trillion, accounting for 35% of total income, while the poorest half of American households (about 64 million people) received only 4% of income. Most of this is accumulated for those who invest in stocks and have a college education.
“The President firmly believes that the largest companies and those who have done very well in the past few decades should pay a little more,” said Bharat Ramamurti, a member of the National Economic Council, earlier this year. Said in an interview with Bloomberg TV. He said that although the “richest people” have performed well in the past year, one in seven American households reported going hungry during the pandemic.