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Biden’s $7.3 Trillion Budget Proposal Highlights Divide With Trump and GOP

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President Biden proposed a $7.3 trillion budget on Monday packed with tax increases on corporations and high earners, new spending on social programs and a wide range of efforts to combat high consumer costs like housing and college tuition.

The proposal includes only relatively small changes from the budget plan Mr. Biden submitted last year, which went nowhere in Congress, though it reiterates his call for lawmakers to spend about $100 billion to strengthen border security and deliver aid to Israel and Ukraine.

Most of the new spending and tax increases included in the fiscal year 2025 budget again stand almost no chance of becoming law this year, given that Republicans control the House and roundly oppose Mr. Biden’s economic agenda. Last week, House Republicans passed a budget proposal outlining their priorities, which are far afield from what Democrats have called for.

Instead, the document will serve as a draft of Mr. Biden’s policy platform as he seeks re-election in November, along with a series of contrasts intended to draw a distinction with his presumptive Republican opponent, former President Donald J. Trump.

Mr. Biden has sought to reclaim strength on economic issues with voters who have given him low marks amid elevated inflation. This budget aims to portray him as a champion of increased government aid for workers, parents, manufacturers, retirees and students, as well as the fight against climate change.

Speaking in New Hampshire on Monday, Mr. Biden heralded the budget as a way to raise revenue to pay for his priorities by raising taxes on the wealthiest Americans and big corporations.

“I’m not anti-corporation,” he said. “I’m a capitalist, man. Make all the money you want. Just begin to pay your fair share in taxes.”

The budget proposes about $5 trillion in new taxes on corporations and the wealthy over a decade. Administration officials said Monday that those increases would be split equally between corporations and the nation’s highest earners, and that Americans earning less than $400,000 a year would enjoy tax cuts totaling $750 billion under their plans.

“We can do all of our investments by asking those in the top 1 and 2 percent to pay more into the system,” Shalanda Young, the director of the White House budget office, told reporters.

The president has already begun trying to portray Mr. Trump as the opposite: a supporter of further tax cuts for the well-off. “Do you really think the wealthy and big corporations need another $2 trillion tax break?” Mr. Biden asked in New Hampshire, referencing Mr. Trump — but not by name. “Because that’s what he wants to do.”

Speaker Mike Johnson and other members of House Republican leadership criticized Mr. Biden in a statement released Monday afternoon. “The price tag of President Biden’s proposed budget is yet another glaring reminder of this administration’s insatiable appetite for reckless spending and the Democrats’ disregard for fiscal responsibility,” they said.

Polls have found that Americans are dissatisfied with Mr. Biden’s handling of the economy and favor Mr. Trump’s approach to economic issues. But the president has been unwavering in his core economic policy strategy, and the budget shows that he is not deviating from that plan.

Mr. Biden’s budget proposes about $3 trillion in new measures to reduce the federal deficit over the next decade. That is in line with his budget proposal last year, which narrowed deficits by raising taxes on businesses and the rich and by allowing the government to bargain more aggressively with pharmaceutical companies to reduce spending on prescription drugs.

The budget again calls for raising the corporate tax rate to 28 percent from 21 percent, the level Mr. Trump set in the tax bill he signed in late 2017. It increases a new minimum tax on large corporations and quadruples a tax on stock buybacks, among other efforts to raise more revenue from companies and individuals who make more than $400,000 a year.

Those savings would build on discretionary spending limits that Mr. Biden and congressional Republicans agreed on last year to resolve a standoff over raising the nation’s borrowing limit. They still would leave the nation with historically high budget deficits: about $1.6 trillion a year on average over the next decade, by administration forecasts. As a share of the economy, deficits would decline in that time — but total government debt as a share of the economy would tick upward.

House Republicans released a budget last week that seeks to reduce deficits much faster — balancing the budget by the end of the decade. Their savings relied on economic growth forecasts that are well above mainstream forecasters’ expectations, along with steep and often unspecified spending cuts.

The nonpartisan Committee for a Responsible Federal Budget called the Republican plan “unrealistic in its assumptions and outcomes.” On Monday, the group called Mr. Biden’s proposed deficit reduction “a welcome start, but a too timid one.”

Mr. Biden and his aides have repeatedly said they believed the projected deficits in his budgets would not hurt the economy. Ms. Young and Jared Bernstein, who leads the White House Council of Economic Advisers, repeated that position on Monday, even after acknowledging that the budget now forecasts higher government borrowing costs over the next decade than previous budgets have.

Instead of turning toward more aggressive deficit reduction, as prior Democratic presidents have done after losing control of a chamber of Congress, Mr. Biden has leaned into the need for new spending programs and targeted tax incentives to bolster growth and the middle class.

The new proposal continues that trend. It would create a national program of paid leave for workers. It would reinstate an expanded child tax credit that Mr. Biden created temporarily in his $1.9 trillion economic stimulus law in 2021. That credit helped reduce child poverty significantly over the span of a year before expiring. That reinstatement would last for only a year, but administration officials said Monday that they hope to make it permanent as part of a broader debate on taxes in 2025.

The budget also includes new efforts to help Americans struggling with high costs. That issue has dogged Mr. Biden with voters since inflation soared on his watch to its highest levels in four decades, even as price increases have cooled over the past year. Mr. Biden previewed many of those efforts in his State of the Union speech last week, including new tax credits for certain home buyers and expanded assistance for people to buy health insurance through the Affordable Care Act.

Mr. Biden also called for new efforts to improve the solvency of Social Security and Medicare. In the budget, he opposed benefit cuts for the programs and any additional contributions from workers earning less than $400,000 a year.

On Monday, Ms. Young implied that Mr. Biden would look to shore up Social Security in part by targeting a cap on income subject to the payroll taxes that feed the program — a move he has specifically endorsed for Medicare. She said Mr. Biden would improve its solvency “by asking high-income Americans to pay their fair share. If you make a million dollars in this country, you are done paying your Social Security taxes sometime in February.”

In another key area, Mr. Biden’s proposal punts on key details: what to do about the provisions of the 2017 Republican tax law, including tax cuts for individuals, that expire in 2025. The budget calls that expiration, which was written into the law in order to hold down its estimated cost, “fiscally reckless.” But it does not specify how Mr. Biden would handle the expirations if he wins a second term.

Instead, the budget says Mr. Biden would seek to extend tax breaks for people earning less than $400,000 a year, offset with “additional reforms to ensure that wealthy people and big corporations pay their fair share.”

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Economics

‘He should bring them down’

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U.S. President Donald Trump and U.S. Federal Reserve Chair Jerome Powell.

Win McNamee | Annabelle Gordon | Reuters

President Donald Trump on Friday lobbed his latest criticism at Federal Reserve Chair Jerome Powell, as the White House’s discontent for the economic policy leader hits a fever pitch.

During a Friday afternoon question-and-answer session with reporters, Trump pointed to examples of prices going down.

“If we had a Fed Chairman that understood what he was doing, interest rates would be coming down, too,” Trump said. “He should bring them down.”

Trump has long argued that the Fed, which sets monetary policy in the U.S., should cut down interest rates. His latest comments come as the White House has ratcheted up its attacks on Powell in recent days.

White House economic adviser Kevin Hassett said Friday that Trump and his team are assessing whether they can remove the Fed chair. Powell has said previously that he cannot be fired under law and intends to serve through the end of his term as chair in May 2026.

“The president and his team will continue to study that matter,” Hassett said at the White House after a reporter questioned if firing Powell “is an option in a way that it wasn’t before,” according to Reuters.

Trump posted on Truth Social on Thursday that “Powell’s termination cannot come fast enough.” His post included the nickname of “Too Late” for Powell, a continuation of Trump’s habit of giving satirical titles to political rivals.

His use of the word “termination” raised questions around if Trump was referring to Powell’s potential removal from his post ahead of schedule. Hassett said on Friday the administration will look at if there’s “new legal analysis” that would allow for Powell’s firing.

Powell appeared to irk Trump after saying Wednesday that the president’s contentious tariff plan could drive up inflation in the near-term and create challenges for the central bank in managing goals of high employment rates and price stability. Powell said Trump’s levies — many of which are currently on pause — are “likely to move us further away from our goals.”

“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Powell said in prepared remarks before the Economic Club of Chicago. “If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.”

Powell also said that the Fed was “well positioned to wait for greater clarity before considering any adjustments to our policy stance.”

The Federal Open Market Committee has its borrowing rate currently targeted in a range between 4.25% and 4.5%, where it has sat since December. Fed funds futures are pricing in a more than 90% likelihood that the central bank holds rates steady again at its policy meeting next month, according to CME’s FedWatch tool.

As Trump’s team has scaled up criticisms, some Democrats have gone on defense. Sen. Elizabeth Warren, D-Mass., warned on Thursday that a president firing the Fed chief would be dire for U.S. financial markets.

“Understand this: If Chairman Powell can be fired by the president of the United States, it will crash markets in the United States,” Warren said on CNBC.

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China targets U.S. services and other areas after decrying ‘meaningless’ tariff hikes on goods

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Dilara Irem Sancar | Anadolu | Getty Images

China last week announced it was done retaliating against U.S. President Donald Trump’s tariffs, saying any further increases by the U.S. would be a “joke,” and Beijing would “ignore” them.

Instead of continuing to focus on tariffing goods, however, China has chosen to resort to other measures, including steps targeting the American services sector.

Trump has jacked up U.S. levies on select goods from China by up to 245% after several rounds of tit-for-tat measures with Beijing in recent weeks. Before calling it a “meaningless numbers game,” China last week imposed additional duties on imports from the U.S. of up to 125%.

While the Trump administration has largely focused on pressing ahead on his tariff plans, Beijing has rolled out a series of non-tariff restrictive measures including widening export controls of rare-earth minerals and opening antitrust probes into American companies, such as pharmaceutical giant DuPont and IT major Google.

Before the latest escalation, in February Beijing had put dozens of U.S. businesses on a so-called “unreliable entity” list, which would restrict or ban firms from trading with or investing in China. American firms such as PVH, the parent company of Tommy Hilfiger, and Illumina, a gene-sequencing equipment provider, were among those added to the list.

Its tightening of exports of critical mineral elements will require Chinese companies to secure special licenses for exporting these resources, effectively restricting U.S. access to the key minerals needed for semiconductors, missile-defense systems and solar cells.

In its latest move on Tuesday, Beijing went after Boeing — America’s largest exporter — by ordering Chinese airlines not to take any further deliveries for its jets and requested carriers to halt any purchases of aircraft-related equipment and parts from U.S. companies, according to Bloomberg.

Having deliveries to China cut off will add to the cash-strapped plane maker’s troubles, as it struggles with a lingering quality-control crisis.

In another sign of growing hostilities, Chinese police issued notices for apprehending three people they claimed to have engaged in cyberattacks against China on behalf of the U.S. National Security Agency.

Chinese state media, which published the notice, urged domestic users and companies to avoid using American technology and replace them with domestic alternatives.

“Beijing is clearly signaling to Washington that two can play in this retaliation game and that it has many levers to pull, all creating different levels of pain for U.S. companies,” said Wendy Cutler, vice president at Asia Society Policy Institute.

“With high tariffs and other restrictions in place, the decoupling of the two economies is at full steam,” Cutler said.

Targeting trade in services

China is seen by some as seeking to broaden the trade war to encompass services trade — which covers travel, legal, consulting and financial services — where the U.S. has been running a significant surplus with China for years.

China Beige Book CEO: U.S. needs to articulate what they want from China

Earlier this month, a social media account affiliated with Chinese state media Xinhua News Agency, suggested Beijing could impose curbs on U.S. legal consultancy firms and consider a probe into U.S. companies’ China operations for the huge “monopoly benefits” they have gained from intellectual-property rights.

China’s imports of U.S. services surged more than 10-fold to $55 billion in 2024 over the past two decades, according to Nomura estimates, driving U.S. services trade surplus with China to $32 billion last year.

Last week, China said it would reduce imports of U.S. films and warned its citizens against traveling or studying in the U.S., in a sign of Beijing’s intent to put pressure on the U.S. entertainment, tourism and education sectors.

“These measures target high-visibility sectors — aviation, media, and education — that resonate politically in the U.S.,” said Jing Qian, managing director at Center for China Analysis.

While they might be low on actual dollar impact given the smaller scale of these sectors, “reputational effects — such as fewer Chinese students or more cautious Chinese employees — could ripple through academia and the tech talent ecosystem,” he added.

Nomura estimates $24 billion could be at stake if Beijing significantly step up restrictions on travel to the U.S.

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Travel dominated U.S. services exports to China, reflecting expenditure by millions of Chinese tourists in the U.S., according to Nomura. Within travel, education-related spending leads at 71%, it estimates, mostly coming from tuition and living expenses for the more than 270,000 Chinese students studying in the U.S.

Entertainment exports, encompassing films, music and television programs, accounted for just 6% of U.S. exports within this sector, the investment firm said, noting that Beijing’s latest move on film imports “carries more symbolic heft than economic bite.”

“We could see deeper decoupling — not only in supply chains, but in people-to-people ties, knowledge exchange, and regulatory frameworks. This may signal a shift from transactional tension to systemic divergence,” said Qian.

Can Beijing get more aggressive?

Analysts largely expect Beijing to continue deploying its arsenal of non-tariff policy tools in an effort to raise its leverage ahead of any potential negotiation with the Trump administration.

“From the Chinese government’s perspective, the U.S. companies’ operations in China are the biggest remaining target for inflicting pain on the U.S .side,” said Gabriel Wildau, managing director at risk advisory firm Teneo.

Apple, Tesla, pharmaceutical and medical device companies are among the businesses that could be targeted as Beijing presses ahead with non-tariff measures, including sanction, regulatory harassment and export controls, Wildau added.

Shoppers and staff are seen inside the Apple Store, with its sleek modern interior design and prominent Apple logo, in Chongqing, China, on Sept. 10, 2024.

Cheng Xin | Getty Images

While a deal may allow both sides to unwind some of the retaliatory measures, hopes for near-term talks between the two leaders are fading fast.

Chinese officials have repeatedly condemned the “unilateral tariffs” imposed by Trump as “bullying” and vowed to “fight to the end.” Still, Beijing has left the door open for negotiations but they must be on “an equal footing.”

On Tuesday, White House press secretary Karoline Leavitt said Trump is open to making a deal with China but Beijing needs to make the first move.

“In the end, only when a country experiences sufficient self-inflicted harm might it consider softening its stance and truly returning to the negotiation table,” said Jianwei Xu, economist at Natixis.

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Economics

Donald Trump’s approval rating is dropping

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EVEN WHEN Donald Trump does something well, he exaggerates. He won the popular vote last November for the first time in three tries, by a 1.5 point margin. “The mandate was massive,” he told Time. In fact it was the slimmest margin since 2000, but it was an improvement on Mr Trump’s two previous popular-vote losses, by 2.1 points in 2016 and 4.5 points in 2020. (He was elected in 2016 through the vagaries of the Electoral College.)

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