President Joe Biden is asking a polarized and nearly evenly divided Congress to spend big on infrastructure, education, health care, climate change and more.
His proposed tax increases on corporations and upper-income households would pay for much of his spending, but trillion-dollar-plus annual deficits would persist through the next decade.
The ambitious budget blueprint sets the stage for a contentious battle over appropriations and tax policy that won’t be resolved for months — or longer.
Here are the top 10 things to know about Biden’s fiscal 2022 budget request:
1. Spending would zoom
Total federal spending would rise steadily through the decade, from $6 trillion in fiscal 2022 to $8.2 trillion in fiscal 2031. Much of the increase is already baked into current law to pay for the rising costs of entitlement programs such as Social Security and Medicare. But trillions more dollars would go to pay for Biden’s infrastructure, education and child care initiatives.
2. Economic growth would be tepid
Despite the spending surge, economic growth rates would remain modest through the decade. Gross domestic product, adjusted for inflation, would grow by 3.2 percent in the fourth quarter of next year, compared with the same period this year. Growth would then fluctuate between 1.8 percent and 2 percent each year through 2031, according to White House projections.
3. The budget would not balance
The deficit would be $1.8 trillion in fiscal 2022, down from the $3 trillion-plus deficits of the preceding two years as spending surged from the COVID-19 pandemic. The government would continue to run annual deficits of at least $1.3 trillion through the rest of the decade, although they would be mostly declining as a share of the economy, from 7.8 percent next year to 4.7 percent in fiscal 2031.
4. Debt would break records
Debt held by the public, already rivaling the size of the total U.S. economy, would amount to nearly 110 percent of gross domestic product this year, shattering the World War II-era record of 106 percent in fiscal 1946. And the debt ratio would continue to creep upward through the decade, reaching 117 percent in fiscal 2031.
5. Interest payments would be low
The administration is banking on low interest rates to make debt payments manageable. Adjusted for inflation, net interest payments on the debt averaged about 2 percent in the 1990s, the budget says, and 1 percent over the past four decades. But that figure would top out at 0.8 percent in fiscal 2023 before shrinking over time, ending up at an average of 0.2 percent over the next decade.
6. Middle-income tax cuts assumed to expire
Although Biden has pledged not to raise taxes on anyone making less than $400,000 a year, his budget assumes that the Republican-backed tax cuts of 2017 would be allowed to expire at the end of 2025. Those tax cuts affected income tax rates, the standard deduction, the child tax credit and more. While there is still time to revisit the issue, extending those tax cuts could cost more than $2 trillion over a decade, according to previous estimates.
7. Revenue would increase
Biden’s tax policies would bolster federal revenue by about $3.6 trillion over the decade. Most of that increase, almost $2.3 trillion, comes from higher corporate taxes, the budget shows. Biden has called for increasing the corporate income tax rate from about 21 percent to 28 percent, raking in more collections from overseas profits, eliminating fossil fuel preferences and more.
8. No ‘parity’ for defense spending
In a move that has already angered Republicans, Biden would increase nondefense spending while holding defense spending essentially flat. In numbers slightly revised from an outline released last month, nondefense spending would increase by 16.5 percent in the coming fiscal year, compared with this year’s enacted level. Defense spending would get a nominal increase of 1.6 percent, which Republicans say amounts to a cut after adjusting for inflation.
9. The abortion fight is on
Breaking with years of precedent, the budget omits from its health care spending request language prohibiting federal funding for abortion except in limited cases. The so-called Hyde amendment has been a staple of spending bills in an effort to ensure bipartisan support for them. But Democrats this year have signaled they want to scrap the Hyde language and allow for federal funding — a move that could imperil spending bills in the evenly divided Senate.
10. Bipartisan talks needed on spending bills
Like most White House budgets, Biden’s request will need a rewrite to win congressional support, at least for discretionary spending that will be implemented through the dozen fiscal 2022 appropriations bills. Top Republicans — including South Carolina Sen. Lindsey Graham, the Senate Budget Committee’s ranking member — have already declared Biden’s request dead on arrival. But it nonetheless will serve as a blueprint for Democrats as they write spending bills. The resulting partisan standoff is likely to delay appropriations and force passage of a continuing resolution in September to avoid a partial government shutdown.