Biden unveiling 2024 budget with deficit cuts, tax hikes

PENNSYLVANIA - As political gridlock puts the government at risk of defaulting, President Joe Biden on Thursday is making an opening offer with a budget plan that would cut deficits by $2.9 trillion over the next decade — a proposal that Republicans already intend to reject.

It's part of a broader attempt by the president to call out House Republicans who are demanding severe cuts to spending in return for lifting the government's legal borrowing limit. But the GOP has no counteroffer so far, other than a flat "no" to a Biden blueprint with tax increases on the wealthy that could form the policy backbone of Biden's yet-to-be-declared campaign for reelection in 2024.

"We see this as a value statement," White House press secretary Karine Jean-Pierre told reporters Wednesday. "This is something that shows the American people that we take this very seriously when we think about the fiscal responsibility, when we think about how do we move forward."

Biden’s package of tax and spending priorities is unlikely to pass the House or Senate as proposed. Senate Minority Leader Mitch McConnell, R-Ky., predicted in advance that the plan "will not see the light of day," a sign that it might primarily serve as a messaging document going into the 2024 elections.

The president picked the battleground state of Pennsylvania for the plan's release, staking out what he believes is popular terrain that will make it hard for Republicans to criticize without risking blowback.

Biden wants to impose higher taxes on the rich to limit federal borrowing, and that would include a reversal of the 2017 tax cuts made by President Donald Trump on people earning more than $400,000 a year. The added revenue would help to shore up Medicare, the government health insurance program for adults over 65.

Biden has floated a new tax on incomes above $100 million that would target billionaires and called for lower prescription drug prices. The tax that companies pay on stock buybacks would rise fourfold and those earning more than $400,000 would pay an additional Medicare tax that would help to keep the program solvent beyond the year 2050.

The budget would seek to close the "carried interest" loophole that allows wealthy hedge fund managers and others to pay their taxes at a lower rate, and prevent billionaires from being able to set aside large amounts of their holdings in tax-favored retirement accounts, according to an administration official. The plan also projects saving $24 billion over 10 years by removing a tax subsidy for cryptocurrency transactions.

The official spoke on condition of anonymity to preview the plan before its public release.

Biden's budget plan also would:

• Expand the ability of Medicare to negotiate on pharmaceutical drug prices, saving an estimated $160 billion over a decade.
• Auction off rights to the radio spectrum, generating $50 billion.
• Take new steps to reduce identity theft and unemployment insurance fraud.
• Target insurance companies that overcharge Medicaid, with anticipated savings of $20 billion through repayments to the government.
• End subsidies valued at $31 billion for oil and gas companies.
• Scrap a $19 billion tax break for real estate investors.

House Speaker Kevin McCarthy, R-Calif., has called for putting the U.S. government on a path toward a balanced budget. But by refusing to raise taxes or cut Social Security and Medicare spending, GOP lawmakers face some harsh math that makes it hard to reduce deficits without risking a voter backlash before a presidential election.

McCarthy told The Associated Press that his plan's release has been pushed back because Biden's proposal is only just being issued.

Senate Majority Leader Chuck Schumer, D-N.Y., expressed skepticism that McCarthy has any coherent plan that House Republicans can coalesce around. "Enough with the dodging, enough with the excuses," Schumer said. "Show us your plan. And then show us how it’s going to get 218 votes on your side of the aisle."

Biden's deficit reduction goal is significantly higher than the $2 trillion that he had promised in his State of the Union address last month.

It's a delicate time, with the U.S. economy already in a fragile state because of high inflation. If Biden and Congress fail to increase the statutory debt cap of $31.4 trillion by this summer, the government could default on payments and shove the U.S. economy into a recession.

Rohit Kumar, a former McConnell aide who is now an executive with the tax consultancy PwC, said Biden's plan does matter "in terms of putting ideas out there." He said that if Biden won a second term, elements of his spending blueprint could be part of negotiations in 2025 over the expiring provisions in Trump's tax cuts.

Biden’s proposal would increase the top marginal tax rate to 39.6% on income above $400,000. For households with $1 million in income, earnings from capital gains, such as stocks or property sales, would no longer enjoy a discounted tax rate compared with wages.

The president would increase the corporate tax rate to 28% and increase the tax rate on U.S. multinationals’ foreign earnings from 10.5% to 21%.

In February, the nonpartisan Congressional Budget Office estimated that the national debt held by the public will grow by more than $20 trillion over the next decade. The publicly held debt, which reflects the cumulative impact of yearly deficits, would be equal to 118% of U.S. gross domestic product, compared with 98% this year. Biden's budget would reduce the debt, though it would still be high relative to historical levels.