President Biden released his $6 trillion budget proposal on May 28th, which calls for massive funding increases to address infrastructure modernization and climate change resiliency.
It projects a $1.8 trillion deficit in the first year and at least a trillion-dollar deficit annually for the next decade. As a result of those deficits, the Administration projects that debt held by the public would increase to 117% of GDP by 2031, although the Administration doesn’t foresee inflation becoming a problem, citing FED-controlled interest rates and economic stimulus as counterbalances.
This request is only a starting point of the budgetary process, and Congress will likely make several changes to this framework before sending it to the President’s desk for his signature or veto.
Financing the Budget
The Administration projects that its proposed tax changes to finance the budget would raise $2.4 trillion over the next decade. Those changes include:
- Set a 15% minimum tax on profitable corporations that pay little in federal taxes (Biden had previously proposed raising the corporate tax rate from 21% to 28%)
- Raising the global minimum tax to 21%
- Raising the capital gains tax to 39.6% for households earning over $1 million
- Raising the income tax rate 39.6% for individuals making over $452,700 and $509,200 for joint filers
- Make permanent the income credit for childless workers and care credits passed under the American Rescue Plan (ARP)
- Extend the ARP’s child tax credit through 2025.
Department Highlights
- Defense: $715 billion (1.6% increase from FY2021).
- Prioritizes China deterrence, Russia security threats, R&D, and climate resilience.
- Retires legacy systems and funds new hypersonic weapons.
- Allocates $27.7 billion to modernize nuclear forces and $20.4 billion to modernize missile defense systems.
- Education: $102.8 billion (40.8% increase, the largest increase in the budget).
- $36.5 billion for Title I grants for schools with low-income students to address equity concerns.
- $27.5 billion for student financial assistance.
- $17.2 billion for special education programs.
- $6.5 billion for school improvement programs.
- $3.3 billion for higher education.
- $2.2 billion for career, technical, and adult education
- Increase max Pell Grant award by $400 and expands eligibility to DACA recipients
- Health and Human Services (HHS): $133.7 billion (23.4% increase).
- $50.5 billion for the National Institutes of Health (NIH), including $6.5 billion to create an Advanced Research Projects Agency (ARPA) for Health
- $30.6 billion for the Administration for Children and Families
- $8.5 billion for the CDC
- $8.5 billion for the Indian Health Service
- $7.8 billion for the Health Resource and Services Administration
- $3.6 billion for the FDA
- Also removes Hyde Amendment language, funds gun research at the CDC and NIH, and calls for a public option
- Energy: $46.2 billion (10.4% increase).
- $19.7 billion for the National Nuclear Security Administration
- $7.44 billion for the Office of Science
- $4.73 billion for the Office of Energy Efficiency and Renewable Energy
- $500 million for ARPA-Energy and $200 million for a new ARPA-Climate
- $890 million for Office of Fossil Energy and Carbon Management
- The Interior Department will use this budget to push renewable energy
- Funds maintenance and modernization of nuclear stockpile and related cleanup
- Transportation: $25.7 billion.
- Requested funds are in addition to transportation proposals in the American Jobs Plan
- Discretionary funding is increased by $3.3 billion.
- Other money comes from trust fund programs, putting total funding at $88 billion (trusts expire on September 30th)
- $47.1 billion for the Federal Highway Administration
- $18.5 billion for the Federal Aviation Administration
- $13.5 billion for the Federal Transit Administration
- $2.7 billion for Amtrak
- $1 billion for Rebuilding American Infrastructure with Sustainability and Equity Grants
- $625 million for a new passenger rail competitive grant program
- $110 million for a new Thriving Communities program to address transportation inequities
- Department of Homeland Security (DHS): $54.9 billion (largely no increase).
- No new border wall funding and cancels any unspent border wall funds
- $18.8 billion for disaster relief
- $10.9 billion for the Coast Guard
- $7.99 billion for ICE, including funds for 32,500 detention beds
- $5.9 billion for TSA
- $2.57 billion for the Secret Service
- $2.13 billion for the Cyber Security and Infrastructure Security Agency (CISA), including $20 million for a new Cyber Response and Recovery Fund
- NASA: $24.8 billion (6.6% increase).
- $6.9 billion for Mars exploration
- $1.3 billion for continued operations on the International Space Station
- $1.2 billion to build a Human Landing System
- Veterans Affairs: $113.1 billion (8.2% increase).
- $3.3 billion for medical care
- $4.8 billion for IT modernization
- $3.7 billion for the Veterans Benefits Administration
- $2.7 billion for continued electronic health record modernization
- $2.2 billion for veterans’ homelessness programs
- National Science Foundation: $10.2 billion (19.8% increase).
- Social Security Administration: $9.8 billion (9.3% increase).
- Small Business Administration: $900 million (9.5% increase).
Budget Process Historical Overview
The budget process has not been timely completed since the 1990s. Biden was late in submitting his request by about three months. Congress is on par with holding hearings on topline agency funding requests, but specific budget markups will commence in June with floor votes taking place in July.
The government funding deadline is September 30th, but Congress will likely need to pass a continuing resolution since Republicans and Democrats will likely not agree to spending levels by that time. This is especially so since the House has roughly six working weeks left in the year and budget caps are expiring this year (Biden is proposing a 16% increase in domestic spending). Republicans also wanted larger spending increases for defense.
Budgetary reconciliation may be an option for some portions of the plan, but some items that do not have a budgetary impact may have to pass through another mechanism.
Becker’s Federal Lobbying Team will continue to monitor developments as they evolve and will share with you as soon as information becomes available.