US PRESIDENT Joe Biden will propose a budget on Thursday (Mar 10) that has no chance of driving tax or spending decisions in Congress this year, but instead will serve as a statement of political priorities as he clashes with Republicans over the size of the federal government.

Biden’s budget proposal, the third of his presidency, is an attempt to advance a narrative that the president is committed to investing in US manufacturing, fighting corporate profiteering, reducing budget deficits and fending off conservative attacks on safety-net programmes.

It is expected to include what White House officials say will be nearly US$3 trillion in new deficit reduction, largely from raising taxes on companies and high earners, along with robust spending on the military and policies to further Biden’s attempts to support high-tech factory jobs and fight climate change.

Republicans are expected to offer a starkly different budget sometime this spring, one likely to be stocked with cuts to federal health programmes and aid to the poor, in an effort to eliminate the budget deficit within a decade without raising taxes. Biden is certain to reject those proposals, and they may struggle to attract enough moderate Republican votes to pass the House.

The competing documents will highlight the dearth of common ground for Biden and his opposition party on fiscal policy at a high-stakes moment for the government and the global economy. That is true even though both the president and Congressional Republicans are embracing the politics of promising to reduce deficits and the growth of the national debt, which topped US$31 trillion late last year.

Republican leaders in the House have refused to raise a Congressionally imposed cap on how much the federal government can borrow unless Biden agrees to steep cuts to federal spending in exchange. Given the United States borrows huge sums of money to pay its bills, that position risks plunging the economy into crisis if the government runs out of cash and defaults on its debt later this year. Biden has refused to tie any spending cuts to raising the borrowing cap, which does not authorise any new expenditures, but said he welcomes debate over how best to ease the nation’s debt burden.

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The parties’ entrenched positions set Washington up for several bruising months, at least, of debt-limit discussions. Economists warn the standoff will rattle investors and poses mounting threats to the global financial system.

On Wednesday, Federal Reserve chair Jerome Powell urged lawmakers not to play games, saying there is no way to prevent a financial meltdown without raising the borrowing cap.

“Congress raising the debt ceiling is really the only alternative,” Powell told a House committee. “There are no rabbits in hats to be pulled out on this.”

Presidential budgets always offer visions for the nation’s fiscal policy that compete with those of their opposition – and budgets submitted by presidents to an opposition-dominated chamber of Congress rarely serve as more than messaging documents. Often, including under Biden, much of the budget fails to pass muster with the president’s own party.

Biden failed to persuade a sufficient number of Democrats to pass many of the policy priorities outlined in his previous budget requests, like free community college and federally guaranteed paid leave. More than US$2 trillion in tax increases from last year’s budget were never enacted despite Democrats’ control of Congress.

Still, this year’s budget releases from Biden and House Republicans carry extra importance because of the stakes of the debt-limit fight – and the few paths to compromise on fiscal policy that the documents are expected to show.

Biden’s budget will raise taxes on corporations and high earners, both to pay for his policy priorities and to reduce the growth in America’s reliance on borrowed money. Republicans will seek to cut taxes, including making permanent some temporary tax cuts approved under former President Donald Trump, and may seek to eliminate the budget deficit in 10 years by gutting huge swathes of federal spending.

Biden will continue to push his vision of an expanded and empowered government hand in the economy, with new spending for child care, education and more. Republicans will seek to slash federal agencies and much of the health coverage provided by the Affordable Care Act, although it may be difficult for Speaker Kevin McCarthy of California to assemble a package of cuts that will satisfy hard-liners and centrists in his caucus alike.

Republicans largely ignored the growth in deficits under Trump, including approving his tax cuts, which cost the federal government US$2 trillion, and when joining with Democrats to pass trillions of dollars in economic aid amid the pandemic recession. Republicans joined Democrats three times to raise or suspend the debt limit without any spending cuts when Trump was in office. But after winning control of the House in November, Republican leaders have returned to warning that America’s debt load is hurting the US economy and refusing to raise the debt limit unless Biden agrees to pare back federal spending.

The Congressional Budget Office projects the budget deficit will grow slightly this fiscal year, from US$1.375 trillion to US$1.41 trillion, then continue to rise for the course of the decade, topping US$2 trillion in 2032.

Those increases are being driven in part by the rising costs of Medicare and Social Security as members of the baby boom generation retire, and by the growing cost of servicing the nation’s US$31.4 trillion debt following a series of rapid interest rate increases by the Fed in a bid to tame high inflation. Powell told lawmakers on Wednesday that “it isn’t that the debt today is unsustainable. It’s that the path is unsustainable.” NYTIMES