Joe Biden will set out a $6tn budget proposal on Friday that, if passed, would fund a sweeping overhaul of US infrastructure and pour money into education and tackling climate change while driving government spending to its highest sustained levels since the second world war.
The president’s first budget is largely a political document and faces months of difficult negotiations in Congress where Republicans are already balking at the scale of his spending plans. But it clearly sets out his ambitious plans to remake the US after the coronavirus pandemic.
“Now is the time to build the foundation that we’ve laid, to make bold investments in our families, in our communities, in our nation,” Biden told a crowd in Cleveland on Thursday. “We know from history that these kinds of investments raise both the floor and the ceiling of an economy for everybody.”
The White House has set out a two part plan to overhaul the US economy by upgrading its infrastructure and expanding its social safety net. The New York Times obtained an early copy of the document that showed the costs of the programmes would lead to the US running annual deficits of over $1.3tn over the next decade and debt rising to 117% of the value of economic output by 2031.
Alongside rebuilding US bridges, roads, airports and other infrastructure Biden has proposed a massive federal to roll out broadband internet access. The Democrats are also pushing to expand and reform the US’s social programmes with government money for paid family leave and universal preschool.
In part the plan would be funded by tax increases on corporations and the very wealthy. Biden has already proposed increasing US corporation taxes to 28% from 21%, a plan opposed by all Republicans and some Democrats.
Biden has said he is willing to negotiate with his political opponents on the shape and size of his proposals but he will struggle to find Republican support for his agenda. No Republicans voted for his $1.9tn coronavirus stimulus bill and he has already been forced to scale back his infrastructure bill to $1.7tn from the originally proposed $2.2tn plan.
The economy has improved markedly since Biden took office and the coronavirus pandemic began to wane in the US. More than half of the country is now fully vaccinated and hiring has picked up as the economy has reopened.
But the Biden administration believes the pandemic highlighted many structural issues with the US economy that need to be addressed by federal spending. Unemployment rates for Black and Latino Americans remain disproportionately high and women were hit particularly hard by the pandemic recession – in many cases because lack of affordable child care prevented them from working.
A massive increase in government spending has fueled concerns about rising inflation. Prices on goods including lumber, cars and chicken have soared in recent months and the Commerce Department said on Friday that the personal consumption expenditures index, a key measure of inflation, increased by 3.1% in April from one year ago, its highest level since 1992.
On Thursday Treasury secretary Janet Yellen said the budget would push US debt above the size of the US economy, but argued the proposed plan was responsible and would not contribute to inflationary pressures.
“We’ll have a temporary period of spending too and some of these increases, will – beyond the budget window – will result in lower deficits and more tax revenue to support those expenditures. I believe it is a fiscally responsible program,” Yellen told a House appropriations subcommittee.