US President Joe Biden presented a draft budget for the 2022 fiscal year, it provides for maintaining a high level of deficit – 7.3% of GDP – due to significant new spending. Additional funds are needed to implement two key initiatives of the new US administration – upgrading infrastructure and increasing social spending. This will require higher taxes on corporations and wealthy households. However, these plans may be subject to significant adjustments in the process of their approval in Congress, the Republicans have already called the budget “unimaginably expensive” and opposed tax increases.
The White House has presented a budget plan for the 2022 fiscal year (starting in October).
- They provide for expenses in the amount of $ 6 trillion with a revenues of $ 4.17 trillion.
- The budget deficit will amount to $ 1.84 trillion, which is significantly less than this year ($ 3.67 trillion with spending of $ 7.25 trillion).
- In relation to US GDP, the deficit is set to decline from a record 16.7% to 7.3% (and to 4.7% in 2023).
Recall that in March, the second major package of assistance to the American economy in the amount of $ 1.9 trillion was approved in March, this allowed maintaining anti-crisis payments, but sharply increased the level of the deficit.
The new budget includes two key initiatives to stimulate economic growth – a job creation plan (aimed at upgrading infrastructure) and a family support plan (increasing social spending). The first was originally announced at $ 2.3 trillion over eight years, but the White House has already cut it to $ 1.7 trillion.
Republican senators last week presented their own $ 928 billion infrastructure improvement plan and said they would not support a corporate tax hike from 21% to 28%, which the administration planned to finance the measures.
The parties also differ in determining what can be attributed to infrastructure: Republicans insist that these are only bridges, roads, telecommunication networks, while the Democrats included in their plan, among other things, improving conditions in nursing homes and creating infrastructure for electric vehicles.
The volume of the submitted plan to increase social spending is $ 1.8 trillion for ten years, $ 1 trillion of this amount is an increase in social benefits (for preschool education, support for children in low-income families, free two-year education in colleges, for the paid parental leave program for a child), and $ 800 million – tax breaks (mainly they consolidate subsidies for the health care system introduced during the pandemic). It is proposed to compensate for the increase in expenses with an additional increase in taxes, in particular, the income tax rate is expected to be raised from 37% to 39.6% for families with incomes over $ 400 thousand and sharply – from 20% to 39.6% – to increase the rate on capital gains for those , whose income exceeds $ 1 million. In relation to this plan, Republicans also said that it could lead to “disastrous economic consequences” and is “unimaginably expensive.”
The discrepancies also concern the coverage of US military spending, which already amount to about $ 740 billion – some Democrats insist on the need to reduce them, while Republicans expressed dissatisfaction with the reduction in spending on certain items. Another controversial budget item is the increase in spending on combating climate warming. In particular, it provides for the allocation of $ 265 billion in tax breaks for companies in the field of renewable energy.