On Monday, President Joe Biden unveiled his budget proposal for the fiscal year 2025, emphasizing his commitment to bolstering the middle class as the nation gears up for the general election. This ambitious plan seeks to reintroduce the expanded Child Tax Credit, enhance Medicare’s ability to negotiate drug prices, implement national paid family leave, make housing more affordable, and much more.
The administration asserts that Biden’s budget strategy would trim the deficit by $3 trillion over the coming decade. This significant reduction is expected to come from revising the tax code to ensure the wealthiest Americans contribute more and eliminating unnecessary subsidies.
This budget announcement follows closely on the heels of Biden’s State of the Union address, where he outlined his vision for the country, drawing a stark contrast with the policies of his Republican adversaries, including his potential 2024 opponent, Donald Trump.
Shalanda Young, the director of the Office of Management and Budget, shared in a press briefing, “The budget details the president’s vision to protect and build on this progress and deliver on the agenda laid out in his State of the Union by lowering costs for families, growing the economy from the middle out and bottom up by investing in all America to make sure the middle class has a fair shot and we leave no one behind.”
However, the path forward for these policies in a divided Congress remains uncertain. Lawmakers, who hold the purse strings, are still in the process of funding key agencies for the remainder of this fiscal year.
The House Republican leadership, including Speaker Mike Johnson, Majority Leader Steve Scalise, Majority Whip Tom Emmer, and Republican Conference Chair Elise Stefanik, quickly dismissed Biden’s budget proposal. They issued a joint statement, asserting, “House Republicans reject Biden’s misguided budget proposal and have taken action to steer our nation back to a path of fiscal sanity. The House’s budget plan for the next fiscal year, preceding the President’s proposal, reflects the values of hardworking Americans who know that in tough economic times, fiscal discipline is non-negotiable. House Republicans understand the American people expect and deserve nothing less from their government.”
When asked about the feasibility of the budget’s proposals, the White House opted not to delve into specifics but expressed openness to collaborate with Republicans on these issues. Deputy press secretary Olivia Dalton, speaking to reporters aboard Air Force One as Biden traveled to New Hampshire for an economy-focused speech, stated, “We’re going to work across the aisle in good faith to try and get these things done for the American people. We think that the president’s agenda is incredibly popular, and we encourage Republicans to join us.”
A closer examination of Biden’s budget proposal reveals significant investments in healthcare savings. The plan proposes to accelerate Medicare drug negotiations and expand the list of drugs eligible for negotiation shortly after their launch. This initiative builds on the first 10 prescription drugs identified for negotiation under the Inflation Reduction Act, targeting medications for heart failure, blood clots, diabetes, kidney disease, arthritis, blood cancers, and more. Furthermore, Biden’s budget seeks to extend the Inflation Reduction Act’s rebates and the $2,000 cap on out-of-pocket prescription drug costs to the commercial market, alongside a $35 cost-sharing cap for a month’s supply of insulin.
In the realm of child care, the budget aims to reinstate the expanded Child Tax Credit, providing an average benefit of $2,600 for 39 million low- and middle-income families. It also proposes the creation of an affordable child care program for families earning less than $200,000 and a national paid leave program offering up to 12 weeks for eligible workers. Additionally, $8.5 billion would be allocated to states for Child Care and Development Block Grants, the primary federal funding source for child care subsidies.
The budget also introduces a new tax credit for middle-class first-time homebuyers, offering up to $10,000 over two years. It calls on Congress to approve a one-year tax credit of up to $10,000 for middle-class families who sell their starter homes, aiming to increase housing market inventory. Moreover, first-time homebuyers would be eligible for a $5,000 annual mortgage relief credit for two years.
On the foreign policy front, the president’s budget proposes $850 billion in discretionary budget authority for the Department of Defense for 2025, marking a 4.1% increase from the previous year. It also includes a request for unmet needs from the administration’s October 2023 supplemental request for urgent security needs through the end of 2024.
Tax adjustments form the backbone of Biden’s budget, with proposals to reverse the 2017 Trump corporate tax cut, raising the corporate tax rate from 21% back to 28%—still lower than the 35% rate before the Trump-era cut. The budget also introduces a 25% minimum tax on individuals with wealth exceeding $100 million and seeks to eliminate corporate deductions for all compensation over $1 million for employees, targeting high CEO salaries. Additionally, a 39.6% marginal rate would apply to households earning over $1 million.