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  • Writer's pictureThe San Juan Daily Star

Biden is set to detail at least $2 trillion in measures to reduce deficits

President Biden faces pressure from Republicans, who won control of the House last fall, to make steep cuts in federal spending.

By Jim Tankersley

President Joe Biden today will propose policies aimed at trimming federal budget deficits by at least $2 trillion over the next 10 years as his administration embraces the politics of debt reduction amid a fight with Republicans over raising the nation’s borrowing limit.

Biden’s plans, which will be detailed as part of his budget blueprint, are expected to rely heavily on a familiar batch of tax increases on corporations and high earners along with savings from some spending reductions, including efforts to save money on federal health care programs by expanding legislation he signed last year that allows Medicare to negotiate the price of certain prescription drugs.

The moves come as Biden faces pressure from Republicans, who won control of the House last fall, to alter the nation’s fiscal path. House Republicans have refused to raise the nation’s debt limit, which caps how much money the federal government can borrow, unless Biden agrees to steep cuts in federal spending.

To help increase federal revenues and reduce the nation’s reliance on borrowed money, Biden is expected to announce a new tax on American households worth more than $100 million that would apply to both their earned income and the unrealized gains in the value of their liquid assets, like stocks. Biden will also call for the quadrupling of a tax on stock buybacks that was approved as part of a sweeping tax, health care and climate bill he signed last year.

The president is also expected to continue proposing some tax increases to offset the cost of portions of his agenda that have not yet passed Congress. That agenda includes efforts to expand access to child care and reduce its cost, provide federally guaranteed paid leave for workers, establish universal prekindergarten and enable students to attend community college for free.

Biden’s plans to trim the deficit are unlikely to mollify Republicans. Biden has refused to negotiate over the debt limit and has said he will not cut benefits for Social Security or Medicare, two popular safety net programs. But he has said repeatedly he is open to reducing deficits by raising taxes on corporations and the rich.

Biden previewed his budgetary deficit reduction in his State of the Union speech, saying that “the plan I’m going to show you is going to cut the deficit by another $2 trillion” without cutting “a single bit of Medicare or Social Security.”

The federal government has run deficits every year since 2000, spending more money than it receives in tax revenue. The deficit ballooned under former President Donald Trump after the onset of the pandemic recession, which spurred Congress to approve trillions of dollars in relief for individuals, businesses and state and local governments. It remained elevated in 2021 under Biden, thanks to a $1.9 trillion economic aid package he signed soon after taking office, but it declined last year.

The nonpartisan Congressional Budget Office projects the deficit will grow slightly this fiscal year, to $1.41 trillion from $1.375 trillion, then continue to rise for the course of the decade, topping $2 trillion in 2032. Those increases are being driven in part by the rising costs of Medicare and Social Security as members of the baby boom generation retire, and by the growing cost of servicing the nation’s $31.4 trillion debt following a series of rapid interest rate increases by the Federal Reserve in a bid to tame high inflation.

From 2024 to 2033, the budget office projects, deficits will total more than $20 trillion, driving gross federal debt to nearly $52 trillion.

Biden’s proposals, if enacted in full, would reduce that growth by about one-tenth. They are not likely to be. Republicans roundly oppose Biden’s tax proposals and have tried to repeal the Medicare prescription drug savings measure he signed last year.

Through new laws he has signed and executive actions he has issued, Biden has approved policies that would add about $5 trillion to the national debt over a decade, according to estimates by the Committee for a Responsible Federal Budget in Washington. Those include his 2021 economic aid law and debt relief for certain student loan borrowers, which is under challenge at the Supreme Court.

It is unclear how Biden settled on the $2 trillion figure for his budget’s deficit reduction, or to what extent he agrees with Republicans who claim that the nation’s current levels of debt and deficits pose a risk to the economy.

Karine Jean-Pierre, the White House press secretary, did not directly answer a reporter’s questions this week on how Biden arrived at his preferred level of deficit reduction or whether the path of growth in the national debt is hurting the economy.

“The president understands his fiscal responsibility. He understands how important it is to lower the deficit,” Jean-Pierre said.

“He’s going to put forward a fiscal budget that is going to be responsible,” she added.

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