Biden, his US$6 trillion spending package and a plan to make US more competitive

Biden, his US$6 trillion spending package and a plan to make US more competitive
US President Joe Biden speaks to media as he arrives at Cleveland Hopkins International Airport in Cleveland, Ohio, U.S., May 27, 2021. Source: Evelyn Hockstein, Reuters

The spending numbers would push federal spending levels to its highest since World War II.

  • President Joe Biden has shared his spending package plan, which focuses on healthcare, infrastructure and education.
  • The plan would push federal spending levels to its highest since World War II.
  • The main goal with the new spending proposal is to switch the emphasis from cutting taxes for the rich and giving more support to working-class and poorer families.
  • “It is a budget that reflects the fact that trickle-down economics has never worked, and that the best way to grow our economy is not from the top down, but from the bottom up and the middle out,” Biden wrote to Congress.
  • Many members of the Republican party are against passage of such a large federal spending as these self-proclaimed deficit hawks do not like when the nation accrues too much debt.
  • The budget proposal is just a pitch to Congress. Fundamentally, it is up to the House and Senate to decide on what stays and goes.

What’s in the package?

  • The American Rescue Plan, a US$1.9 trillion spending measure focused on recovery from the COVID-19 pandemic, has already passed. This included Biden’s stimulus checks for millions of Americans.
  • The American Jobs Plan is Biden’s infrastructure plan that was unveiled on March 31. It includes US$621 billion for “traditional infrastructure” spending, like bridge, road, airport, mass transit development and improvement.
  • It also includes non-traditional infrastructure improvements like US$111 billion for drinking-water infrastructure and improvements to electrical grids and broadband access.
  • The American Families Plan includes US$1.8 trillion in spending to improve access to education, support women in the workforce, and reduce the cost of child care.
  • Another US$200 billion would be dedicated to new education funding, giving free universal preschool to five million children in working-class and low-income families. The fund would also include two free years of community college for all Americans.

What are the plans to pay for the package?

  • Added to Biden’s spending plan is a way to pay for new spending while avoiding a deficit.
  • Deficit spending is when the government borrows money from private companies or other governments to pay for programs instead of using taxpayer dollars.
  • In order to do this, Biden wants to raise the corporate tax rate, increase funding to the Internal Revenue Service (IRS) and increase taxes for the highest-earning Americans.
  • The package gives US$80 billion to the IRS, the department in charge of collecting taxes, and with this, the Biden administration believes the IRS can find an additional US$700 billion from tax evasion by corporations and high-earners.
  • The second plan is to increase the tax rate of the top earning 1%. It would increase their tax rate from 37% to 39.6% and would also raise capital gains tax – the tax charged on the growth of value of investments when sold. This could be financial investments, real estate, art, etc.

The yay and naysayers

  • Bernie Sanders, Progressive Democrat and Senate Budget Committee Chairman, gave Biden’s plan his approval.
  • He called the plan “the most significant agenda for working families in the modern history of our country” and applauded it for its potential to create jobs and improve the lives of the working-class.
  • Republicans, on the other hand, were not too thrilled with the idea of increasing taxes and expanding the federal government’s role in Americans’ lives.
  • Senate Majority Leader Mitch McConnell blasted Biden’s budget proposal, saying the “money would just disappear into a million mediocre socialist daydreams …. Biden’s proposal would drown American families in debt, deficits, and inflation.”
  • But, even with Republican nay-saying, the Biden team believes that US$4 trillion will be paid for by 2030 from the tax increases alone.

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