The Biden administration released a $6 trillion budget on Friday (28th). What impact will such a large budget have on the U.S. economy? What is the meaning behind the budget? Forbes magazine has compiled the following Q&A to get a quick overview of the Biden budget.
Q: Will every item in the budget be legislated?
A: Not necessarily.
Congress writes and negotiates budget proposals, not the president, and it’s unlikely that every Biden proposal will make it through Congress. So the president’s proposal is more of a wish list with an emphasis on priorities than a shopping list that Congress will just accept.
With Democrats in control of both the House and Senate, Biden is in a good position to use the budget reconciliation process to bypass Republican opposition and pass legislation with a simple majority.
However, the budget reconciliation process also has a number of limitations, such as not including measures that have no budgetary impact (such as immigration), or increasing the deficit over time (usually for ten years).
In addition, considering the Republican Party’s strong opposition to the position, if the Democrats adopt the budget reconciliation process, basically every Senate Democrat would have to support the Biden proposal.
However, according to Bloomberg, there are already divisions within the Democratic Party over Biden’s plans to raise the defense budget to $753 billion for fiscal year 2022 and to raise the capital gains tax rate, which means that Biden’s proposals could be blocked even if Democrats have a majority in Congress.
Q: What is the size of Biden’s budget compared to previous presidents?
A: It is much higher than former President Trump and former former President Obama.
The current Biden budget of $6 trillion is much larger than the $4.8 trillion budget proposed by former President Trump in 2020 and the $3.6 trillion budget proposed by former President Obama in 2019.
Q: What are the elements of the Biden budget?
A: The budget includes $5 trillion in federal spending over the next 10 years.
In addition to Biden’s previous proposals for Jobs for America and Families for America, the budget also includes.
36.5 billion for schools in disadvantaged areas to raise educational standards and provide resources for student education.
10.7 billion in discretionary funds to combat the opioid epidemic and for medical assistance for research, prevention, treatment and rehabilitation.
30.4 billion provides housing assistance for homeless street people and victims of domestic violence.
Notably, the budget does not include unemployment insurance reform and Medicare, both of which Biden has strongly supported in the past few months.
Q: What is the purpose of Biden’s budget proposal?
A: To make government work in the economy for the next 10 years.
Although the Biden budget is designed to help working families afford childcare and improve U.S. infrastructure, it has sparked criticism for proposing a budget of this size during a time when the epidemic is hitting the economy, and for raising taxes (primarily on the wealthiest at the top).
Biden’s proposal would bring the U.S. debt to 117 percent of U.S. GDP by 2030. This ratio is usually an indicator of a country’s dependence on debt, and the higher the number, the more worrisome the economic outlook.
In the past, debt-to-GDP ratios have often spiked in times of crisis, such as wars, recessions and major epidemics, as governments have used debt to respond to national emergencies. Biden’s budget estimates this ratio at 106 percent, the highest since World War II, yet the ratio has hovered around 100 percent since 2012.
In addition, the American people are also worried about the budget will affect the government deficit, when the government can not make ends meet, the deficit will appear, however, the government currently has only 3.6 trillion dollars of revenue to pay Biden’s 6 trillion dollar budget, the net deficit will reach 1.4 trillion dollars, and in 2030 are difficult to reduce.
Some economists warn that the deficit means that the government must raise taxes to meet spending, which means that this kind of digging the east wall to make up for the west wall of debt will be passed from generation to generation, leaving the United States in a long-term debt status. In addition when the economy slows down, debt will become a serious problem again. The next generation will not have a good time because reducing the debt through tax increases will put a financial burden on these young people.
Biden’s plan to support the budget by increasing taxes on high income earners also makes Democrats on the same front feel uneasy because the plan will have a wider impact than expected.
In addition, inflation remains a problem as the deficit continues to climb. The Federal Reserve Bank of St. Louis has previously posted on its blog that if the government just keeps raising debt without a corresponding increase in revenue, the inflation rate will soar again.
Even if it is not clear how large the debt will make the inflation rate climb to a “worrying” degree, but the Federal Reserve Board (Fed) has a variety of monetary policies to prevent inflation from getting out of control. Biden’s budget predicts that consumer prices will not rise by more than 2.3% per year.