President Joe Biden is set to unveil his 2024 spending budget, which he claims could reduce the nation’s deficit by nearly $3 trillion over ten years. Republicans are advocating for deep cuts in domestic spending – meanwhile, Joe Biden seems to be relying more on tax increases to achieve his deficit reduction goal.
New and additional taxes are on the cards
A CBO presentation laid out 17 different options for reducing the deficit, several of them proposing either higher or additional new taxes. Those with the largest deficit-reducing potential were new consumption and payroll taxes and new limits on tax deductions.
Meanwhile, the CBO said spending cuts would have significantly less impact, according to its report, published online. The proposed budget is expected to extend the Medicare healthcare plan for Americans over 65 by raising the Medicare tax on those earning over $400,000. The proposed budget would also increase taxes on billionaires.
Meanwhile, Republican members of the House Budget Committee are proposing $150 billion worth of cuts from nondefense discretionary programs in 2024 which would reset spending back to 2022 levels and save $1.5 trillion over a decade by keeping annual increases at 1%.
Negotiations between Republican House Speaker Kevin McCarthy and President Biden over spending for fiscal 2024, which begins October 1, are anticipated to commence soon after their release. However, McCarthy has ruled out new taxes as a solution to address the US’s financial challenges. There is a concern that raising taxes in an economy experiencing low growth will only exacerbate problems and send it into recession further.
This year’s negotiations between Biden and McCarthy are especially critical as the federal government is expected to reach its $31.4 trillion debt ceiling by summer. Failure to act by then could cause a potentially disastrous default.
Democrats and Republicans are at a ‘stand-still’
McCarthy demanded Biden agree to spending cuts before his narrow Republican House majority would support raising the debt ceiling. But Biden insists Republicans must agree on an “open” debt ceiling increase without first agreeing on spending.
Regardless of which party blames the other for America’s fiscal woes, Democrats and Republicans agree that action must be taken to address the deficit. But their approaches appear to differ.