What would you do with $6 trillion?
President Joe Biden would give a lot more money to working-class parents and spend billions on roads and bridges, among other priorities. The question is whether he can get a closely divided—yet Democratic majority—Congress to go along.
The president’s proposed budget outlines his ambitious plans for the country over the next few years. Its massive price tag and potential effects on the economy are causing buzz—but what does it all mean for you?
We break it down here.
Your Questions About Biden’s $6 Trillion Budget Proposal, Answered
Is what’s in the budget going to become law?
Not everything.
Because Congress, not the president, is responsible for writing and negotiating a budget proposal, what Biden proposed is more than likely not going to be everything that gets approved by Congress. The president’s proposal is more of a wishlist that highlights his priorities, rather than a grocery list that Congress dutifully accepts.
Since Democrats control both the House and Senate, albeit by razor thin margins, Biden is at an advantage: Congressional Democrats could bypass Republican opposition through the budget reconciliation process, a parliamentary maneuver, that will allow them to pass legislation with a simple majority.
Budget reconciliation comes with significant limitations, though, such as not being able to include measures that don’t have a budgetary effect (i.e. immigration) or adding to the long-term deficit (typically 10 years).
Given staunch Republican opposition, basically every Senate Democrat would need to support the bill if reconciliation is used. Democrats are already divided over Biden’s proposal for $753 billion in defense spending—a 1.7% increase from last year—for the next fiscal year, according to Bloomberg, and his plans to increase capital gains rates.
Even with a Democratic majority in Congress, aspects of Biden’s proposal will likely get cut. It’s happened to presidents in the past.
Take President Trump’s big ask for border wall funding. In 2019, Trump requested $5 billion in federal spending for the 2020 fiscal year to build the southern border wall—but Congress wouldn’t give him the money.
The impasse contributed to the the longest government shutdown ever, and ultimately ended up with Trump diverting military funds to the wall after he declared a national emergency.
How does this budget proposal compare to ones from past presidents?
Biden’s budget proposal is large and ambitious, especially when compared to proposals from past presidents. President Donald Trump’s budget proposal for the 2020 year was $4.8 trillion. President Obama’s proposal for 2009 totaled $3.6 trillion.
What’s in Biden’s budget proposal?
The most important part of Biden releasing his budget proposal isn’t the price tag that comes with it (remember, that’s hypothetical), but rather the individual policy proposals it contains, which gives us a glimpse at the administration’s priorities .
The American Jobs Plan and American Families Plan, two already-public proposals from Biden, are also included in the plan. Combined, these two proposals aim to dramatically strengthen the social safety net and infrastructure of the country.
The budget proposal also includes:
- * $36.5 billion investment in high-poverty schools to help increase education quality and resources for students.
- * $10.7 billion in discretionary funding to help fight the opioid pandemic. The funds would support research, prevention, treatment and recovery support services.
- * $30.4 billion to provide housing assistance, with a focus on providing support to those who are homeless or fleeing domestic violence.
The proposal notably leaves out an overhaul of unemployment insurance and creating a public option for health care, two proposals Biden has heavily endorsed over the last few months.
In total, the proposal includes $5 trillion in federal spending over the next decade.
So, what’s the big deal?
Though Biden’s proposals aim to help working families afford child care and improve the country’s infrastructure, it’s garnering criticism due to its gigantic size and tax hikes needed to pay for it (albeit on the nation’s richest citizens) during a recession.
Biden’s proposal would increase the country’s debt to 117% of gross domestic product (GDP) by 2030. The ratio is usually an indicator of how much a country depends on debt to finance its operations, and economists are generally nervous when the figure gets too high.
Times of crisis, like wars, recessions—and now, pandemics—often cause debt-to-GDP ratios to spike, as the government will use debt to combat national emergencies. The projection in Biden’s budget proposal would be the highest since World War II, where it sat at 106%. The ratio has hovered around or just above 100% since 2012.
There’s also concern around how the budget would affect the deficit, which occurs when federal spending is higher than the amount of tax revenue the government collects. Only $3.6 trillion of Biden’s proposal would be paid for by new revenues; the net deficit would hit $1.4 trillion and wouldn’t shrink until after 2030.
Some economists warn that deficit spending means a government is waiting until the future to raise taxes to pay for what it’s spending today—a hesitation that shifts the debt burden from one generation to the next. That can be a major problem when it comes to a slowing economy; the next generation won’t be as well off as hoped, and raising taxes to decrease the debt can cause financial burdens on those individuals.
Biden’s plans on how to pay for his budget proposal are by increasing taxes on the highest earners as well as bumping up the capital gains tax. Although some Congressional Democrats are uneasy with imposing a complicated tax hike that could affect more people than first assumed.
Inflation also remains an issue as the deficit keeps climbing. A continuing debt-load that’s not met with corresponding growth will likely show up as a higher rate of inflation, according to a blog post by the St. Louis Federal Reserve Bank.
There’s no way to tell how large of a debt load can increase inflation to where it becomes “worrisome”–but the Federal Reserve has multiple monetary policies it can utilize to keep the inflation from getting out of control. Biden’s proposal predicts consumer prices never rising faster than 2.3% per year.
Overall, the budget shows that Biden is aiming to give the government a more prominent role in the economy for the next decade, even if it means spending big to get there.