Last Thursday, President Joe Biden finally unveiled his budget proposal for the upcoming fiscal year 2024. This marks the third straight year that Biden submitted his budgetary proposal late after the statutory deadline on the first Monday of February, indicating a likeliness that the congressional budgetary process will be delayed. For perspective, it has been 20 years since Congress actually passed a budget on time. Delay from the President will likely encourage members of Congress to also slow-walk the process, fueling the possibility of a last-minute budgetary approval in order to avoid government shutdown. Furthermore, additional missed deadlines may foster a cascade of hasty decisions on what should be included in the budget. After enough delays, we cannot allow Congress to simply pass another 4,000-page trillion-dollar omnibus package without proper review by lawmakers.
Budget proposals generally signal the start of the federal budgetary cycle, allowing the executive branch to signal to Congress how much requested funding its leadership believes should be allotted to its various departments and agencies. Despite serving as an important funding indicator, these budget requests typically do not become law. Biden’s bold and costly set of funding requests is similarly unlikely to be approved by a sharply divided Congress. It is worth exploring what the Biden administration is asking for and how this may impact negotiations amid considerations from lawmakers on both sides to raise the debt ceiling.
The largest amount of federal discretionary spending requested has traditionally been reserved for defense. Biden’s proposal is no different, as it calls for raising defense spending by $26 billion (3.2 percent) to $842 billion for fiscal 2024. Congress generally allocates half of its discretionary spending toward national defense, with the remaining funds being disseminated across other administrative programs. The proposal lays out $9.1 billion in targeted funding for defense aid to U.S. allies in the Indo-Pacific region, serving as a countermeasure to Chinese aggression toward Taiwan. Similarly, $6 billion in aid is allotted to go to Ukraine, amid escalating tensions with Russia and fears of potential Chinese intervention.
In response to increased bipartisan criticism to the historically poor handling of illegal immigration, Biden’s proposal seeks to increase federal spending on border security by $15.3 billion. The request would enable the hiring of 350 border patrol agents, reserve $40 million to combat fentanyl trafficking, and allot $535 million for border technology surrounding ports of entry. Beyond defense, the proposal also calls for increased spending on non-defense projects, with a 7.6 percent increase over the previous fiscal year. House Republicans are expected to call for a higher amount of defense spending, while also mounting challenges to Biden’s proposed spending on Social Security, which seeks a $1.4 billion (10 percent) increase. In line with hardline House Democrats, Biden’s proposal shows a refusal to cut back on Social Security and Medicare spending, instead seeking to invite more welfare funding, despite projections that it Social Security will become insolvent by 2033.
Biden claims that his proposed budget will lower deficits by $3 trillion over the next decade. However, the proposal itself calls for nearly $7 trillion in spending that is actually estimated to increase the spending deficit to $1.8 trillion and $17 trillion over the next decade. This will neither stabilize nor lower the national debt by any measure, but instead spur a greater volume of unconstrained federal spending, all at taxpayer expense. The proposal calls for a radical set of tax increases for wealthiest earners, forcing those whose net worth for the taxable year surpasses $100 million to pay at least 25 percent of all their income in taxes, including appreciated assets. In another shot at wealth-producing corporations, the proposal would raise the corporate tax rate from 21 percent to 28 percent. Additionally, as recently declared in his State of the Union Address, Biden would aim to quadruple the 1% surcharge on corporate stock buybacks.
Biden has targeted corporate buybacks more heavily for taxation purposes, as the shares sold in a buyback generally incur a capital gains tax, often coming in lower than the income tax rate applied on dividends. Biden’s proposal peddles the erroneous assumption made during his State of the Union address that corporate buybacks should be shunned because they enable corporations to divest away from production and keep the price of goods stable in favor of rewarding CEOs and shareholders with the excess proceeds. But according to a 2017 study by Silvana Rubio, corporate buybacks actually increased investment in the company, spurring growth and productivity in the years after an announced repurchase. Rather than divesting away from production, corporate spending onresearch and design was notably 27 percent higher.
Biden’s burgeoning $6.9 trillion budget plan is not a wise proposal, especially at a time when the rapid rate of federal spending has already exceeded the Congressional Budget Office’s expectations. In fact, the CBO’s 2023 fiscal year estimate was raised to $6.2 trillion, which works out to the federal government spending more than $197,000 per second. Government today seems determined to embark on a dangerous trend of overspending, without exercising proper considerations as to how much is being spent and how fast it is expended. Fortunately, there is a much more sensible and cost-saving alternative to the White House proposal.
The House Freedom Caucus, a group of Republican members of Congress known for their commitment to fiscal restraint, just introduced a proposal that would save taxpayers an estimated $275 to $775 billion over the next two and a half years and $2.9-$3.7 trillion over the next decade. To achieve this, the proposal would rescind Biden’s $400 billion student cancellation plan, reduce appropriations to 2022 levels, repeal the $50 billion Inflation Reduction Act climate spending, and rescind $90 billion in unspent Covid-19 funding. These cuts would take careful aim at lowering inflation and achieve actual deficit reduction in an effort to stabilize the economy. Congress desperately needs to hit the brakes on its accelerated spending spree and exercise strict caution regarding Biden’s extreme budget proposal.