WASHINGTON (Reuters) – President Joe Biden’s administration and Republicans in the U.S. Congress are in talks to end their standoff over raising the $31.4 trillion debt ceiling, haggling over vastly different proposals that both claim to cut deficits by trillions of dollars.
Democrat Biden’s full $6.8 trillion fiscal 2024 budget request doubles down on his economic agenda to shrink inequality, with pre-K, childcare and more healthcare. It is paid for by with tax increases on wealthy Americans and corporations.
U.S. House of Representatives Speaker Kevin McCarthy and his fellow Republicans’ “Limit Save and Grow Act” is a spending reduction bill that would cut 2024 federal discretionary spending to fiscal 2022 levels and rescind signature Biden programs already approved by Congress.
Apples-to-apples comparisons are difficult, but here’s where they can be lined up:
TOP-LINE DISCRETIONARY SPENDING
Discretionary spending in the federal budget refers to funds for everything except mandatory programs such as Social Security and Medicare. It is at the heart of the partisan dispute.
Republicans: The House bill would cut 2024 U.S. discretionary spending back to the 2022 level of $1.664 trillion and limit subsequent annual increases to 1% for a decade. The cumulative 10-year savings would be $3.2 trillion, according to the Congressional Budget Office (CBO).
But the bill does not specify how this 4.1% cut from the 2023 level of $1.736 trillion would be allocated among programs. Republicans have objected to the Biden administration’s accusations that across-the-board cuts would reduce veterans’ benefits, saying they never intended that.
Biden: The White House’s 2024 budget request proposes $1.9 trillion in discretionary spending – a 9.4% increase followed by annual increases averaging 1% over a decade. The discretionary spending proposals would add $2.23 trillion to deficits over 10 years, offset by tax increases.
DEFICIT REDUCTION
Republicans: Full enactment of the Limit, Save and Grow Act would result in total 10-year deficit reduction of $4.804 trillion from the CBO’s February baseline.
Biden: Full enactment of the fiscal 2024 budget request would reduce deficits by $2.857 trillion, according to the White House.
TAXES
Republicans: Repeal clean energy tax credits and spending passed in the Inflation Reduction Act, for a 10-year savings of $540 billion, according to CBO. The plan contains no changes to current tax rates.
Biden: Eliminate various fossil fuel, digital currency and other tax breaks to save $325 billion.
Expand Child Tax Credit through 2025 and convert it to monthly payments, expand the Earned Income Tax Credit for low-wage earners and expand other tax cuts and credits, for an estimated cost of $615 billion.
Raise the corporate income tax rate to 28% from 21%, reform international tax rules, increase taxes on corporate stock buybacks and enact other business tax increases to raise $3.0 trillion over 10 years.
Enact a “billionaires tax” of 25% on unrealized asset gains for the wealthiest 0.01% of Americans, increase the top individual tax rate to 39.6% from 37% and increase capital gains and estate taxes, to raise $985 billion.
Apply net investment income tax to “pass-through” business income for individuals and increase Medicare tax rates for taxpayers making over $400,000, to raise $680 billion.
EDUCATION AND SOCIAL PROGRAMS
Republicans: Repeal Biden’s student debt cancellation and expansion of income-driven student loan repayment plans, reversing $460 billion in costs recognized in fiscal 2022. The Supreme Court is expected to rule in June on a legal challenge to Biden’s debt cancellation, which may make this a moot point.
Expand work requirements for Medicaid, food stamps and other welfare programs, for 10-year savings of $120 billion, according to CBO.
Biden: Free pre-K education, child care, community college, national paid family and medical leave and other higher education spending, for increased spending of $1.1 trillion over a decade.
Expand Affordable Care Act health care subsidies and coverage, Indian Health Service funding and other long-term care spending, for increased spending of $880 billion.
INTERNAL REVENUE SERVICE
How the IRS, the U.S.’s tax collection agency, is treated is a major divide.
Republicans: Repeal $80 billion in IRS funding passed by Democrats in Biden’s signature climate bill to boosting enforcement, operations and customer service. This adds $120 billion over 10 years to the deficit because of lower tax collections, according to CBO.
Biden: Extend the $80 billion in 10-year IRS investments for two more years, investing about $29 billion, and increase the IRS’s annual operations budget by $1.8 billion. The increase raises an additional $134.1 billion over a decade, the White House estimates.
OTHER PROVISIONS:
Republicans: Rescind unused COVID-19 relief funds for a savings of $30 billion, with nearly half of that realized next year. Modify regulations, permitting and leases for energy projects, for a $3 billion in deficit reduction. Requires congressional approval of rules with an annual economic effect of at least $100 million, for an unknown budget impact.
Biden: Reduce future growth of defense discretionary spending, expand user fees and spectrum auctions, extend budget sequestration for Medicare and reduce fraud and abuse, for savings of $350 billion.
Note: Estimates for the Republican plan are from the Congressional Budget Office, based on February baseline deficits that were revised upwards on Friday. Estimates for Biden’s budget request are from the White House, as CBO has not yet issued a score.
Source: Economy - investing.com
