Biden plans raise taxes to reduce budget deficit
2023.03.08 13:11
Biden plans raise taxes to reduce budget deficit
By Ray Johnson
Budrigannews.com – Thursday, U.S. President Joe Biden will announce his budget plans at a union hall in Philadelphia. He will emphasize a promise to reduce the government’s deficit by trillions of dollars, something that was rarely mentioned during his previous presidential campaign.
The U.S. federal deficit was not one of Biden’s many campaign promises when he ran for president in 2020. Instead, he focused on putting money in people’s pockets and rebuilding the middle class. However, according to an administration official, the primary objective on Thursday will be to reduce the deficit by nearly $3 trillion over a decade by increasing taxes on individuals and businesses earning more than $400,000 per year.
The White House does not believe that the nation’s $32 trillion debt will lead to a crisis as a result of Biden’s increasing focus on the deficit at this time.
Instead, the White House wants to show how Republican threats to refuse to raise the debt limit without drastic spending cuts are starkly different. The White House is of the opinion that including this fiscal plan in Biden’s agenda can assist in bolstering his economic credibility prior to his anticipated re-election campaign in 2024.
According to polls, most people support taxing the wealthy and businesses while maintaining Social Security, Medicare, and Medicaid. According to Biden’s aides, raising these taxes can help address fundamental economic issues.
“Our tax system is fundamentally flawed because it does not encourage the kinds of investments and commitments that the American people demand, want, and anticipate.” According to Michael Linden, executive associate director at the White House’s Office of Management and Budget, “that’s largely because Republicans kept cutting taxes repeatedly, primarily for people at the top and for big corporations.”
Naturally, this does not imply that the White House’s proposal will be implemented. Republicans control the lower chamber of Congress and have stated that they want to extend tax breaks granted by Donald Trump and demand drastic spending cuts for Biden’s initiatives. Additionally, despite the fact that Americans tell pollsters they want higher taxes on the wealthy, raising taxes is never a wise political move.
Tobin Marcus, a former economic aide to Biden and current analyst for investment bank Evercore ISI, stated, “In 2023 and 2024, it is hard to see how any of the administration’s progressive tax proposals get done. But after 2025 is a different story if Democrats manage to get unified control of Congress back.”
Are Americans concerned about the country’s debt?
Last year, the annual deficit in the United States was 5.4% of GDP, and the total debt was higher than 1200% of GDP—even higher than it was at the height of World War II.
The last time the federal government had a surplus, which was used to pay down the long-term debt, was in 2001, and Democratic presidents have always done a better job of cutting the deficit.
In January, nearly six out of ten people told Pew Research Center that reducing the deficit should be a top priority for the Biden administration. However, Americans are evenly divided when asked whether the government should primarily reduce services to reduce debt or raise taxes. According to a Marist poll conducted last month, half of respondents said they would mostly cut spending, while 46% would raise taxes.
The risk of deficits has been approached more optimistically by the Biden administration than by Democrats in previous years.
Jason Furman, a Harvard University economics professor and former top economic adviser, stated, “There has been a sea change in attitudes.” He claimed that finance rather than shifting economic thought is to blame. Debt and deficits are of little concern to bond markets.
Robert Reich, who served as President Bill Clinton’s labor secretary, stated that the administration’s top economic officials with whom he worked were not “deficit hawks.”
He said that many people had learned from the global financial crisis of 2008-2009, when the U.S. government didn’t spend enough to fix the economy, and that they would spend freely in 2021 to stop the same thing from happening.
He stated, “Getting out of the pandemic recession was also extremely important.”
According to Biden’s aides, deficits are a fiscal risk insofar as they lead to unsustainable interest payments, deter private sector investment and spending, or skew the economy by raising inflation.
When U.S. 10-year Treasury rates are currently below 4%, which is still low by historical standards, none of those are factors.
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