The introduction of President Biden’s budget on Capitol Hill on Thursday is the “starter’s gun” in the negotiations with Republicans over raising the debt limit, ratcheting up pressure on Speaker Kevin McCarthy (R-Calif.) to unveil his own detailed budget plan, which he has not yet done.
The Congressional Budget Office estimates Congress needs to raise the debt limit by September to avoid default.
But Biden’s budget also exposes tensions between liberal and moderate Democrats, as it includes $2 trillion in tax hikes, which will be tough to sell in Senate battlegrounds like West Virginia and Montana.
The president will call for a 20 percent tax on the income and unrealized capital gains of households worth more than $100 million; a 5 percent Medicare surtax on earned and unearned income over $400,000; a quadrupling of the 1 percent excise tax on stock buybacks; and an increase in the top marginal income and corporate tax rates.
Biden’s bold effort to put tax increases in the political spotlight is making Senate Democrats nervous ahead of the 2024 election, when they will have to defend 23 seats to keep their majority.
Asked if a proposal to hike taxes by $2 trillion is cause for any concern or anxiety, Sen. Jon Tester (D-Mont.) replied: “For sure. I got to make sure that will work. I just got to see what he’s doing.”
“I don’t know what they are, who they’re on,” he said of Biden’s proposed tax hikes.
Tester, who represents a state former President Trump won in 2016 and 2020, announced last month that he will run for a fourth term.
Sen. Sherrod Brown (D), a progressive running for reelection in Ohio, which also voted twice for Trump, emphasized that Biden’s proposed tax increases will only hit the rich.
But Republicans are trying to muddy that distinction, arguing that the hikes will reverberate through the economy.
“This is classic liberal tax-and-spend Democrat politics,” said Sen. John Barrasso (R-Wyo.). “What we know happens is people at every stage of society get hit when Democrats raise taxes.”
Sen. Joe Manchin (D-W.Va.), who last year opposed Biden’s proposal to raise the corporate tax rate to 28 percent and is expected to vote Thursday against Biden’s nominee to serve as the IRS commissioner, declined to comment on Biden’s tax plans.
“When I see it, I’ll give you a thing,” he said, waving off a question about the topic.
Manchin and senior White House officials clashed heatedly over the expanded child tax credit in December 2021 after the White House leaked that the West Virginia senator opposed a one- or two-year extension of the popular tax break.
Manchin is now pressing Senate Democrats to pass their own budget resolution, but there’s not much appetite among Democratic lawmakers to do this.
Under the Senate’s rules, passing a budget requires the majority party to slog through hours of tough votes on issues ranging from border security and immigration to crime and oil and gas drilling on federal land — giving Republicans plenty of opportunities to take shots at Democratic incumbents up for reelection.
Senate Budget Committee Chairman Sheldon Whitehouse (D-R.I.) said on Wednesday that it’s too early to know whether Senate Democrats will put their own budget resolution on the floor or instead rally around Biden’s budget proposal.
Republicans may try to embarrass Biden by forcing a Senate floor vote on the White House proposal to drive a wedge between centrist and liberal Democrats.
GOP lawmakers tried that tactic in 2011, 2012 and 2015, when the Senate rejected former President Obama’s budget proposals by votes of 97-0, 99-0 and 98-1, respectively.
Liberal Democrats, however, are thrilled that Biden is taking the fight to wealthy individuals and corporations.
They say Biden’s budget will put pressure on McCarthy and House Republicans to explain why popular domestic programs should get cut instead of requiring millionaires and billionaires and big companies to pay more in taxes.
“This budget will lay out the Democratic approach to the economy, but it is also a statement of our values. The budget explains what we prioritize. That’s already flared up in the back-and-forth of Social Security and Medicare,” said Sen. Elizabeth Warren (D-Mass.).
“We’re going to see more of that kind of back and forth. The Republicans for years have talked about so-called smaller government, but they don’t have any realistic plans to put that in place. Are we really a country that wants fewer food inspectors and fewer air traffic controllers? I don’t think so,” she said.
Biden gave Senate Democrats a brief preview of his budget when he met with them in the Capitol last week.
Sen. Tim Kaine (D-Va.) said Biden told lawmakers to expect “to see some interesting stuff on March 9, and he very much said, ‘Look, that’s kind of like a starter’s gun in a race.’”
The president told lawmakers he would attempt to address the flow of fentanyl and other drugs into the United States by calling for money for border security.
Todd Belt, the director of the political management program at George Washington University’s Graduate School of Political Management, called Biden’s budget the “first serve” in the negotiations with House Republicans to raise the debt limit.
He said House Republicans will have a tough time coming up with their own budget proposal to match Biden’s plan, which the White House says will reduce the deficit by $2 trillion.
Belt said he “would be surprised” if Republicans will come up with a budget plan with major deficit reduction “because it is so politically difficult.”
“The question is, whose ox get gored?” he asked.
A group of conservative House Republicans are coalescing around a budget outline drafted by former White House budget director Russell Vought calling for deep cuts to an array of smaller social spending programs, such as housing assistance for the poor, foreign aid and federal subsidies for Medicaid expansion.
McCarthy has given himself little room to come up with a plan to achieve significant savings because he is ruling out tax increases and pledged not to cut Social Security or Medicare.
A growing number of GOP lawmakers say defense spending cuts should be taken off the table as well.
Senate Republican Leader Mitch McConnell (Ky.) told reporters last week that he “absolutely” agrees with Sen. Tom Cotton (R-Ark.), a defense hawk, that Congress should not cut spending and if anything “substantial defense increases” are in order.
Senate Majority Leader Chuck Schumer (D-N.Y.) said Democrats will insist that nondefense discretionary spending programs receive the same treatment as defense programs in this year’s budget negotiations.
“Democrats have always believed in parity,” he said. “There’s virtual unanimity that if we’re going to raise defense spending, which has happened in the last few budgets, that we raised domestic spending in equal amount.”