Tangle - Biden's new budget.

Episode Date: March 30, 2022

Is this a pivot? A White House budget like this is not a binding document; it is more like a baseline from which to begin negotiations, and sometimes a party agenda statement for Washington D.C. to squabble over. Many consider it little more than symbolic, while others view it as a document that creates the boundaries for federal priorities. So heading into the midterms, the budget is an important look at the administration's goals. Plus, a reader question about how the fed manages inflation.You can read today's podcast here.You can subscribe to Tangle by clicking here or drop something in our tip jar by clicking here.Our podcast is written by Isaac Saul and produced by Trevor Eichhorn. Music for the podcast was produced by Diet 75.Our newsletter is edited by Bailey Saul, Sean Brady, Ari Weitzman, and produced in conjunction with Tangle’s social media manager Magdalena Bokowa, who also created our logo.--- Send in a voice message: https://podcasters.spotify.com/pod/show/tanglenews/message Hosted on Acast. See acast.com/privacy for more information.

Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight.

Interior Chinatown is streaming November 19th, only on Disney+. From executive producer Isaac Saul, this is Tangle. Good morning, good afternoon, and good evening, and welcome to the Tangle Podcast, the place where you get views from across the political spectrum, some independent thinking without all that hysterical nonsense you find everywhere else. I'm your host, Isaac Saul, and on today's episode, we are going to be talking about the new budget President Biden released, the fiscal year 2023 budget that came out on Monday. But before we jump in, as always, we'll start off with some quick hits. First up, the Kremlin said yesterday's peace talks did not result in any breakthroughs despite Western reports to the

contrary, and Ukraine reported continued airstrikes overnight despite Russia's claims to reduce operations. Number two, Senator Susan Collins, the Republican from Maine, said she intends to vote for Supreme Court nominee Katonji Brown-Jackson. Number three, President Biden signed the Emmett Till Anti-Lynching Act into law yesterday, making lynching a federal hate crime for the first time. Number four, the FDA authorized a second COVID-19 vaccine booster for Americans aged 50 and up. Number five, Poland said it would end Russian oil imports, and Germany issued a warning about low natural gas levels, calling on citizens to conserve energy. All right, that is it for our quick hits. That brings us to today's main topic,

President Biden's new budget. On Monday, President Biden unveiled a new budget for fiscal year 2023. A White House budget like this is not a binding document. It is more like a baseline from which to begin negotiations and sometimes a party agenda statement for Washington D.C. to squabble over. Many consider it little more than symbolic, while others view it as a document that creates the boundaries for federal priorities. So, heading into the midterms, the budget is an important look at the administration's priorities. In the summer and fall, Congress will use the budget to begin negotiations on it and create spending bills like the one Biden just passed a few weeks ago. The headline news is that the budget increases domestic spending 7% over last year, but also aims to reduce the nation's deficit, the year-over-year debt, by $1 trillion over the next 10 years. The budget totals $5.8 trillion

for 2023, a 31% increase from 2019, the last pre-pandemic budget year. The White House plans to reduce the deficit despite this increase through major tax hikes on the wealthiest Americans. The budget calls for increasing spending in the military and for police across the United States. Biden's new taxes on the wealthy would require American households worth more than $100 million to pay a rate of at least 20% on their income, as well as unrealized gains on their liquid assets like stocks and bonds, which are currently taxed only when sold. The budget also raises the top marginal tax rate from 37% to 39.6% and raises the corporate tax rate from 21% to 26%. The plan calls for $773 billion in military spending, a 10% increase for the Pentagon.

It includes $32 billion to increase state and local police staffing, $70 billion for the FBI to address violent crime, $17 billion to crack down on illegal gun sales, and a 13% increase in spending for two major immigration law enforcement agencies. Customs and Border Protection will receive $15.3 billion, and ICE will receive $8.1 billion. There is also $309 million for border security technology and $19 million for border fencing and other infrastructure. Biden's plan also calls for enacting the bipartisan unity agenda that he announced in his State of the Union address, which focuses on cancer prevention, mental health care, and veteran services. There's also $45 billion spread across the federal government to address

climate change, which is an increase of $16.7 billion over the 2021 enacted level, according to the New York Times. There is a 29% increase in spending on veterans affairs and $3 billion for veterans homeless programs. The education and housing departments also see a 21% increase in their budget. Many observers view the new budget as a, quote, pivot to a more moderate agenda. In Biden's first year, the budget would have increased the nation's deficit over 10 years by almost $1.4 trillion, with a focus on sweeping social policy programs. While the debt would initially keep growing if all the proposals in this year's budget were enacted, it would reduce the annual deficit every year thereafter. We're making real headway cleaning up the fiscal mess I inherited, Biden said when he announced the budget.

We're returning our fiscal house to order. In a moment, you'll hear some arguments and reactions from the left and then the right and then my take. First up, we'll start with what the left is saying. Some on the left are critical of the budget, panning Biden for abandoning some of the large social policies he ran on. However, many are supportive of the increased tax on the wealthy. Some consider the budget flawed, but also recognize that it meets the moment. In CNN, Jill Filipovich said the budget will cause a red wave in November.

President Joe Biden's proposed budget makes one thing clear. Despite progressive hopes that the president might be a secret Franklin Delano Roosevelt capable of ushering in an ambitious domestic agenda, Biden is exactly the timid moderate he always appeared to be, she said. He seems to be hoping that an agenda of the same old tacking right policies will benefit vulnerable Democrats in the midterms. Instead, he may be simply depressing Democratic enthusiasm and helping to consign the party to a red wave. Almost $70 million of the Biden budget would go to the FBI to fight violent crime, while

$30 billion would be set aside for police and community programs aimed at decreasing violent crime. The money for anti-violence programs is laudable and could have a real impact, but most of the proposed budget funding isn't for community efforts, it's for more policing, Filibovich wrote. Biden himself put it best. Budgets are statements of values, he said in a statement. But what does it say about Biden and his administration that they prioritize policing and militarism, but don't make sufficient investments in policies that the future of the nation hinges on, like child care, for example, and fighting climate change? The Washington Post editorial board called it insufficient, incomplete, and pretty good. As he has before, Mr. Biden proposed more spending and substantial tax increases to pay for it.

Much of the new spending is sorely needed, the board wrote. Rather than offering free college for all, Mr. Biden proposed beefing up Pell Grants, which assists poor students rather than wealthier ones who do not need aid. More Internal Revenue Service funding would improve taxpayer support services and enable the agency to better crack down on tax cheats, who place more burdens on those who play by the rules. More election assistance money would enable states to secure voting systems and make absentee ballots postage-free. The White House claims Mr. Biden's plan would cut deficits by more than $1 trillion over the next decade, in part by hiking corporate taxes, the board added.

This nod toward fiscal responsibility contrasts with a bipartisan consensus that seemed to be emerging, that deficits do not matter. Yet the Committee for a Responsible Federal Budget notes that deficits would still total $14.4 trillion over the next decade, in part because Mr. Biden's plan would fail to overhaul old-age retirement programs such as Medicare, continuing the national debt's rise into alarming territory. Despite these shortcomings in the spending blueprint, if Mr. Biden persuades Congress to accept many of the proposals he outlined Monday and gets even a slimmed-down Build Back Better bill over the finish line, he could claim substantial victories for himself and for the Americans who elected him.

In New York Magazine, Jonathan Chait said U.S. politics is still a class war. A large swath of commentary about American politics is built on the premise that the Democratic Party represents the economic elite, while Republicans are the party of the working class, Chait wrote. But while the voting bases of the two parties have changed some, and the thematic content of American commentary has changed a lot, the prosaic reality has changed very little. The main battle lines between the two parties are fixed around Democrats proposing more redistribution and Republicans proposing less. That reality has been highlighted once again by President Biden's new plan to tax the income of billionaires. Democrats have long wanted to find a way to tax wealth, since one of the problems with the tax

code is that enormous fortunes can accrue and be passed from generation to generation without any tax at all, Chait continued. Figuring out how to tax that wealth presents both a technical problem and a political one. The political problem is that the legal basis for taxing wealth, as opposed to income, is unclear. The technical problem is finding a way to fairly and efficiently tax the income wealthy people enjoy from their accrued savings. It's clear, however, that the thrust of the opposition on the right has nothing to do with the program's design and everything to do with its objective. Alright, that is it for what the left is saying, which brings us to the right's take. So the right is critical of the budget, saying Biden pretends it is fiscally responsible despite

being a spending bonanza. Many are upset about the wealth tax, arguing that it will stymie businesses and eventually expand to middle-class Americans. Some say the money on the military side is laudable, but being spent in the wrong way. The New York Post said the budget would be laughable if it weren't so alarming. Team Biden, for example, brags about its fiscal responsibility, arguing that a plan to spend a jaw-dropping 32% more than just four years ago cuts the deficit in half. Only because the press spent so much in 2021, the board wrote. That includes the Democrats' $2 trillion COVID stimulus package when the economy needed no stimulus and so fueled today's rampant inflation, plus the $1.2 trillion infrastructure bill, though not the $5 trillion the press wanted for the Build Back Better bill, which he still hopes to pass.

Biden's supposed deficit reduction also relies on crushing new taxes, raising corporate rates from 21% to 28%, raising corporate rates from 21% to 28%, plus a bid to set a minimum 20% tax on households worth more than $100 million that would hit income and unrealized gains on stocks and other assets, it added. It's likely unconstitutional, probably unworkable, and won't pass since at least two Democratic senators voiced opposition the last time the idea came up. Another knee-slapper? Biden touts his new plans new outlays for national defense and law enforcement, yet his national security spending, including outlays for the Pentagon, would rise by just 4.5 percent, less than inflation. And while he'd pump $32 billion more into what he calls crime fighting, much of it is for stuff like community violence intervention

that does little to help our cities. The Wall Street Journal editorial board said so much for Biden's pivot to the political middle. The fiscal 2023 budget he unveiled Monday reproposes most of the bad ideas that haven't passed Congress and adds a new one, a tax on wealth that he refused to endorse as a candidate in 2020. Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu,

a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. On the economy, he's pivoting further left, presumably to fire up Solon Progressives in November. The White House is proposing a new billionaire minimum income tax, which the Federal Trade Commission would call false advertising

if a private company tried that description. The tax isn't limited to billionaires, and it applies to more than income. It's a new tax on Americans with $100 million or more in assets whose effective tax rate in any year is less than 20% of their income. But these taxpayers already pay a 23.8% tax rate on capital gains and a 37% tax on ordinary income, it said. The average tax rate for the top 1% of taxpayers in 2019 was 25.6%. Here's the Biden trick. The 20% minimum tax rate would apply both to ordinary income and the increase in value of assets in a given year. This means taxing unrealized capital gains, which currently aren't taxed until assets are sold and income is actually realized. The administration says the tax would only apply to the top 0.1%, meaning hundreds of

successful entrepreneurs and small business owners who accumulated wealth over the decades of innovation and hard work. But these new taxes always start out applying to a few and then spread to millions. The income tax in 1913 applied a 7% top rate on taxpayers making more than $500,000, which is about $14.5 million today. The alternative minimum tax was created in 1969 as a flat 10% tax on the uber-rich, but grew to cover tens of millions in the middle class. In The Atlantic, Corey Shackey said it sends the wrong message. Russia has invaded a country on NATO's borders,

its leader has repeatedly invoked a specter of nuclear war, and its military is mercilessly bombing civilian targets, Shacockey wrote. China, meanwhile, is ramping up its defense spending, has overtaken the United States in some important areas on defense technology, and just signed a treaty of friendship with Russia. Elsewhere, North Korea is testing missiles that can reach the U.S., Iran continues to be a malign actor in the Middle East, and terrorist groups have not gone away. Yet, in its latest budget request for defense, the Biden administration has sought to downplay the U.S. military's role in national security and the resources it has asked for are insufficient for even that reduced role. The budget for defense, excluding funding for the intelligence community and the Department

of Energy, which is responsible for America's nuclear weapons, also assumes that inflation for the coming fiscal year will only be 2.3%, but inflation is running at 7.5%, Schake wrote, so the Department of Defense is losing ground to inflation. The president's budget also shifts money within the defense budget from procurement of equipment to potential future developments and includes new priorities such as climate change and global health, which will have to compete for resources with actual military requirements. Alright, that brings us to my take. So I'll start with the big news here, which seems to be the wealth tax.

Then I'll explain what I think this budget means for the politics of the next year. There is a basic emotional element to this for me, which is that I find the left's argument that the richest Americans have somewhere between obscene and immoral wealth pretty compelling. I know an increasing number of conservatives are feeling this way too, though they tend to express that concern by focusing on the quote working class Americans getting screwed rather than the wealthiest Americans hoarding all the money and resources. I really see this as two sides of the same coin. But when you understand that some 44% of US workers are employed in low-wage jobs paying a median salary of $18,000, it's pretty hard to feel bad for a single person getting taxed on $100 million in assets, which is the equivalent of $5,555, $18,000 salaries. I grew up around a

lot of middle class and lower middle class Americans, and I hear every day from readers who can't afford $5 a month or $50 a year to pay for Tangle, which is part of why I keep most of the newsletter and podcasts free. It's easy to empathize with the idea that we should redistribute wealth to those folks, or at least to the services they use. I view those Americans as my Americans, the people I know and love, and I have very little attachment to any of the top.01% or whatever. The counter-argument that I find most compelling, though, is not that this would destroy businesses or stop entrepreneurship.

It's that, historically speaking, there seems to be little doubt that these taxes will ultimately expand and reach. Once the government collects this money, they rely on it, and once they rely on it, they need more people to be covered by these taxes to get more money. Simply put, that is what has happened over and over. The beast, in essence, is never satiated. As the Journal noted, the income tax in 1913 applied a 7% tax to the wealthiest Americans, those making the equivalent of $14.5

million in today's cash. In 2021, the lowest income tax rate was 10% on anyone making $0 to $9,950. I really just don't know how I feel about this. The upside in the immediate seems obvious, so long as the new revenue goes towards the programs I like. The inevitable expansion of this tax, though, seems hard to deny. I appreciated Jason Furman's piece in the Wall Street Journal defending the plan, which I thought made a great argument for the tax while also conceding the constitutional issues it's going to run into, namely that the whole thing might just be illegal. As for the budget on the whole, it looks like an obvious pivot to me. I know the New York Post and Wall Street Journal editorial boards may not feel this way, but what I see when reading this budget is something that could have

easily been crafted by Senator Joe Manchin, the Democrat from West Virginia. The obvious intent is to inoculate the administration from claims it doesn't care about crime, inflation, or the military, and it should serve that purpose well. Certainly enough progressives are pissed off about it that you'd think some moderates would still be satisfied. But will it win any votes? I'm skeptical. In the near term, what Biden needs to do is turn out voters in the midterms, an election cycle that relies heavily on the most partisan and active voters in America. He may have been better off playing to the Democratic base. To me, this budget looks like a winning agenda in 2024, but 2022? I'm much less certain. Just look at the closing line in Jill Filipovich's piece. Quote, budgets are indeed statements of values, and Democrats

would be justified in wondering if Biden's values align with ours. For Biden's sake, he'd better hope that is not the question at the top of mind for his base of voters. All right, that is it for my take, which brings us to your questions answered. This one is from an anonymous reader in Fayetteville, Arkansas, who asked, how does the Fed raising interest rates help combat inflation? So the Federal Reserve's mandate is to promote maximum employment, keep prices stable, and shoot for inflation to be around 2% annually. One of the strongest tools it has for doing this is raising interest rates.

In simple terms, interest rates are the amount a lender charges a borrower on the money it lends. So a 10% interest rate on $100 means a borrower has to pay back $10 of interest on that loan in addition to the money lent, which totals $110. Because inflation is driven in part by consumers' ability to spend a lot of money, changing the interest rates can impact inflation because it reduces or increases how much we're willing to borrow to spend. When interest rates are low or zero, as they have been for a while, it encourages borrowing, investing, and spending. When they are high, it discourages that same borrowing because it's now more expensive. When there's less money to borrow, people are less

likely to spend large amounts on houses and cars and other things like that. So the Fed gets to set short-term interest rates for commercial banks, which the banks then pass on to consumers. By raising the interest rates, the hope is that consumers and businesses will borrow or invest less, which reduces demand, which brings prices down. The risk many economists warn about is that if interest rates are raised too quickly or too much, it could do so much damage to the economy that it triggers a recession. That's the major thing the Fed is trying to navigate right now. All right, that's it for our reader question. That brings us to our story that matters for the day. In a new bipartisan House bill, Americans will be able

to boost savings in their 401ks. The bill, dubbed Secure Act 2.0, passed 414 to 5 in the House and raises a contribution limit for older workers. It also lets companies offer employees a small cash bonus for simply signing up for the plan, and it raises the age people are required to begin withdrawing money from 72 to 75 over the next decade. When people are required to withdraw the money, they also have to pay taxes on it. For aging people with healthy bodies and healthy bank accounts, the plan would provide significant advantages, the journal reports. In the short term, it feels like a tax cut, said Mark I. Rio, senior fellow at the Brookings Institution. The Wall Street Journal has a story about these

changes linked to in today's newsletter if you're interested and want to hear about how your retirement plan may have just changed. All right, next up is our numbers section. These are all tied to the new budget that just got released. The amount of money in Biden's budget proposal that will go toward affordable housing is $50 billion. The amount of money in Biden's budget proposal that will go toward affordable housing is $50 billion. The amount of money requested for the national defense budget is $813 billion. The amount of money requested for the Justice Department's antitrust division is $287 million, which is a 49% increase from what Congress enacted this year. The amount of money requested to address worsening wildfires, floods, and storms caused by climate change is $18 billion. The amount of money requested to help other nations transition to solar and wind energy sources is $11 billion. The amount of money requested over

five years for pandemic preparedness and biodefenses is $81.7 billion. All right, last but not least, our have a nice day story. This one is about Chloe Campbell, a teenager in Dufftown, Scotland, who went from waiting tables at the Coffee Pot Cafe to owning the whole place. The 19-year-old was 15 when she started working at the cafe. She put nearly all of her paychecks into a savings account while living with her parents. And in September, while talking to the owners about one day opening her own cafe, they made an astounding offer. She could buy the one they were standing in. Campbell says she was able to take over the business and pay the monthly

lease, and she's now learning to manage the Coffee Pot's six employees. BBC News has a story about this remarkable tale. You can check it out. There's a link to it in today's newsletter. tale. You can check it out. There's a link to it in today's newsletter. All right, everybody, that is it for today's podcast. As always, if you want to support our work, go to the episode description and do that. Just, you know, do it. Support us. All right. See you guys tomorrow. Peace. our newsletter is written by isaac saul edited by bailey saul sean brady ari weitzman and produced in conjunction with tangle's social media manager magdalena bakova who also helped create our logo the podcast is edited by trevor eichhorn and music for the podcast was produced by diet 75 for more from tangle subscribe to our newsletter or check out our content archives at www.readtangle.com.

Thanks for watching! inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+.