WASHINGTON, May 15 (Reuters) – The administration of President Joe Biden and Republicans in the US Congress are in talks to end their stalemate over raising the $31.4 trillion debt ceiling.
Democrat Biden’s full budget request of $6.8 trillion for fiscal year 2024 doubles down on his economic agenda to reduce inequality, with pre-K, child care and more health care. It is paid for with tax hikes for wealthy Americans and corporations.
US House Speaker Kevin McCarthy and his fellow Republicans’ “Limit Save and Grow Act” is a bill to reduce spending in 2024 and reduce 2024 federal discretionary spending to fiscal levels of 2022 and revoke the Biden programs already approved by Congress.
Comparisons between apples and apples are difficult, but here they can be drawn:
TOP-LINE DISCRETIONARY EDITIONS
Discretionary spending in the federal budget refers to funds for anything but mandatory programs such as Social Security and Medicare. It is the core of the party dispute.
Republicans: The House bill would reduce US discretionary spending in 2024 to its 2022 level of $1.664 trillion and cap subsequent ten-year annual increases to 1%. According to the Congressional Budget Office (CBO), the cumulative savings over 10 years would be $3.2 trillion.
But the bill does not specify how this 4.1% reduction from the $1.736 trillion 2023 level would be distributed among the programs. Republicans have objected to the Biden administration accusations that blanket cuts would cut veterans’ benefits, and said they never intended to.
Biden: The White House budget request for 2024 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.
SHORT REDUCTION
Republicans: Full enactment of the Limit, Save and Grow Act would result in a total 10-year deficit reduction of $4.804 trillion from the CBO’s February baseline.
Biden: Full enactment of the 2024 budget request would reduce deficits by $2.857 trillion, according to the White House.
TAXES
Republicans: Repeal clean energy and spending tax credits passed in the Inflation Reduction Act, for 10-year savings of $540 billion, according to CBO. The plan does not include changes to current tax rates.
Biden: Eliminate various fossil fuels, digital currencies and other tax breaks to save $325 billion.
Extend the child tax credit through 2025 and convert it into monthly payments, expand the Earned Income Tax Credit for low-income earners, and expand other tax credits and credits, at an estimated cost of $615 billion.
Raise the corporate tax rate from 21% to 28%, reform international tax rules, increase taxes on corporate share buybacks and implement other tax increases to raise $3.0 trillion in 10 years.
Introduce a 25% “billionaire tax” on unrealized capital gains for the wealthiest 0.01% of Americans, raise the top individual tax rate from 37% to 39.6%, and raise capital gains and estate taxes to raise $985 billion.
Apply net investment income tax to “pass-through” business income for individuals and raise Medicare tax rates for taxpayers earning more than $400,000 to raise $680 billion.
EDUCATION AND SOCIAL PROGRAMS
Republicans: Repealing Biden’s student debt forgiveness and expanding means-tested student loan amortization plans, reversing $460 billion in charges recognized in fiscal 2022. a disputed point.
Expand job requirements for Medicaid, food stamps and other welfare programs, saving $120 billion over 10 years, according to CBO.
Biden: Free pre-K education, child care, community college, nationally paid family and sick leave, and other higher education spending, for more spending of $1.1 trillion in a decade.
Expand Affordable Care Act health care subsidies and coverage, Indian health service funding, and other long-term care spending, for more spending of $880 billion.
INTERNAL INCOME SERVICE
How the IRS, the US tax collection agency, is treated is a big difference.
Republicans: Withdraw $80 billion in IRS funding passed by Democrats in Biden’s climate law signature to boost enforcement, operations and customer service. This adds $120 billion to the deficit over 10 years, according to CBO, because of lower tax collections.
Biden: Extend the $80 billion in 10-year IRS investments for another two years, invest approximately $29 billion, and increase the IRS’s annual operating budget by $1.8 billion. The increase will bring in another $134.1 billion over a decade, the White House estimates.
OTHER PROVISIONS:
Republicans: Withdraw unused COVID-19 relief funds for $30 billion in savings, nearly half of which will be realized next year. Change regulations, permits and leases for energy projects to reduce the deficit by $3 billion. Requires congressional approval of rules with an annual economic effect of at least $100 million, for an unknown budget impact.
Biden: Reduce future growth in discretionary defense spending, expand user fees and spectrum auctions, expand Medicare budget capturing, and reduce fraud and abuse, for savings of $350 billion.
Note: Estimates for the Republican plan come from the Congressional Budget Office, based on February baseline deficits that were revised upward on Friday. Estimates for Biden’s budget request come from the White House, as CBO has not yet issued a score.
Reporting by David Lawder; Edited by Heather Timmons and Grant McCool