US president Joe Biden has proposed increasing the country’s military funding by 9.8 per cent as part of a sweeping $5.8tn budget plan that includes measures to boost the Pentagon’s response to Russia’s invasion of Ukraine as well as a tax crackdown on the wealthiest Americans.
In the proposal released on Monday, the White House said Biden would ask Congress to increase spending for the defence department by $69bn in the coming fiscal year, to a total of $773bn.
Of this, $6.9bn would be specifically earmarked to support Ukraine and “enhance the capabilities and readiness” of the Nato alliance in the region. Additional funding would also be directed towards bolstering US “deterrence” in the Indo-Pacific region.
In a statement released on Monday, Biden lauded the broader defence proposal as “one of the largest investments in our national security in history, with the funds needed to ensure that our military remains the best-prepared, best-trained, best-equipped military in the world”.
The budget included a minimum tax on the investment income of the richest Americans as well as restrictions on share buybacks by top executives.
It underscores how the Biden administration has been forced to prioritise national security even as it tries to push through the rest of its economic agenda, with high inflation remaining its biggest political vulnerability heading into November’s midterm elections.
In the economic projections accompanying the proposal, the White House said the consumer price index would drop from its four-decade-high pace of 7.9 per cent to 4.7 per cent by the end of this year, before halving to 2.3 per cent in 2023.
Over that period, no substantive decline in either growth or employment is forecast, with the White House suggesting the economy will continue to expand at a healthy clip. The unemployment rate is expected to dip to 3.6 per cent in 2023 before settling back at its current level of 3.8 per cent.
The White House maintains that the proposed increases in spending will not exacerbate the surge in inflation. Instead, it argues the changes may in fact help to alleviate price pressures that have become more prevalent across the economy and are at risk of becoming entrenched.
“It fights inflation and helps families deal with rising costs by growing our economy, making more goods in America, and lowering the costs families face,” Biden said in a letter to Congress that accompanied the budget blueprint. “Its bold ideas are fully paid for, with tax reforms that more than offset the cost of new investments.”
The White House’s budget seeks to resurrect initiatives at the heart of its huge social spending plan unveiled last year, which has since run into opposition from members of Biden’s own party, namely Joe Manchin, the moderate Democrat from West Virginia.
The plan aims to lower costs for prescription drugs and other healthcare expenses as well as childcare, while also calling for investment to combat climate change and additional funding for policing and law enforcement.
To pay for the plans, Biden called on Congress to impose a minimum tax targeting the investment income of the wealthiest Americans to help reduce the deficit.
The proposal — which requires US households worth more than $100mn to pay a minimum 20 per cent tax on all income, including unrealised gains from investments such as stocks and bonds — is forecast to reduce the deficit by roughly $360bn in the next decade. Combined with the other measures outlined in the budget, that total would grow to $1tn, the administration said.
The president also reiterated his plans to increase ordinary income taxes on households earning more than $400,000 and raising corporate income taxes to 28 per cent.
Biden is also taking aim at share buybacks by top executives, with a proposal to ban them from selling shares in the years after those repurchases.
The budget blueprint was met with a mixed reception from progressive Democrats, with Senator Bernie Sanders pushing back on the need for a “massive increase” in the defence budget.
Elizabeth Warren, the progressive senator from Massachusetts, commended Biden for seeking to address what she called “misaligned incentives that encourage excessive stock buybacks, often at the expense of investments in workers, innovation, and communities”.