The President's Budget for Fiscal Year 2016
Middle Class Economics: The Presidentfs Fiscal Year
2016 Budget
February 2, 2015 - The White House
The President's 2016 Budget is designed to bring middle class economics into
the 21st Century. This Budget shows what we can do if we invest in America's
future and commit to an economy that rewards hard work, generates rising
incomes, and allows everyone to share in the prosperity of a growing America. It
lays out a strategy to strengthen our middle class and help America's
hard-working families get ahead in a time of relentless economic and
technological change. And it makes the critical investments needed to accelerate
and sustain economic growth in the long run, including in research, education,
training, and infrastructure.
These proposals will help working families feel more secure with paychecks
that go further, help American workers upgrade their skills so they can compete
for higher-paying jobs, and help create the conditions for our businesses to
keep generating good new jobs for our workers to fill, while also fulfilling our
most basic responsibility to keep Americans safe. We will make these
investments, and end the harmful spending cuts known as sequestration, by
cutting inefficient spending and reforming our broken tax code to make sure
everyone pays their fair share. We can do all this while also putting our Nation
on a more sustainable fiscal path. The Budget achieves about $1.8 trillion in
deficit reduction, primarily from reforms to health programs, our tax code, and
immigration.
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WHAT THE PRESIDENTfS BUDGET DOES:
MIDDLE CLASS ECONOMICS FOR THE 21ST
CENTURY
In last monthfs State of the Union, the President laid out his vision for
middle class economics: restoring the link between hard work and opportunity,
and ensuring that every American has the chance to share in the benefits of
economic growth. To achieve this, the Budget invests in helping working families
make their paychecks go further, preparing hardworking Americans to earn higher
wages, and creating the infrastructure that allows businesses to thrive and
create good, high-paying jobs.
Helping Middle-Class Families Get
Ahead
Middle class economics means ensuring that all Americans have the opportunity
to succeed in our global economy and all working families can afford the
cornerstones of economic security: child care, college, health care, a home, and
retirement. The Budget supports working families by reforming the tax code to
help middle-class families get ahead, tripling the child care tax credit,
expanding child care assistance, encouraging state paid leave initiatives,
ensuring access to quality, affordable health care, making two years of
community college tuition-free for responsible students, bolstering job training
so it leads to careers, expanding access to child care and early education,
supporting and rewarding work, and helping families save for retirement.
Improving Access to High-Quality Child Care and Early Education –
High-quality child care and early education for young children
serves the important functions of supporting parents in the workforce and
helping support healthy child development and school readiness. The Budget aims
to ensure that children have access to high quality learning starting at birth,
making several key investments:
- Expands access to quality, affordable child care. The
Budget proposes a historic investment in child care to ensure that quality,
affordable care is available to all eligible low- and moderate-income working
families with young children, as opposed to the small share of children who
receive this help today. This proposal will expand access to high-quality care
for more than 1.1 million additional children under age four by 2025 and help
States build a supply of quality care that families can access.
- Cuts taxes for families paying for child care with a credit of up
to $3,000 per child. The Budget triples the maximum Child and
Dependent Care Tax Credit (CDCTC) for families with children under age five
and makes the full CDCTC available to families with incomes of up to $120,000,
benefiting families with young children, older children, and dependents who
are elderly or have disabilities. The child care tax reforms would benefit 5.1
million families, helping them cover costs for 6.7 million children.
- Increases the duration of Head Start programs and invests in high
quality infant and toddler care. The Budget expands access to
high-quality care for tens of thousands of additional infants and toddlers
through Early Head Start-Child Care Partnerships, and provides over $1 billion
in additional funding for Head Start to make sure children are served in
full-day, full-year programs that research shows lead to better outcomes for
children.
- Supports universal preschool. The Preschool for All
initiative, in partnership with the States, provides all four-year-olds from
low- and moderate-income families with access to high-quality preschool, while
encouraging States to expand those programs to reach additional children from
middle-class families and establish full-day kindergarten policies.
- Lays the groundwork for Preschool for
All. The Budget provides $750 million for the
Department of Education's Preschool Development Grants, a substantial increase
of $500 million over the 2015 level. Preschool Development Grants are
currently helping 18 States develop and expand high-quality preschool programs
in targeted communities; the Budget will increase that number to over 40
States.
- Invests in voluntary, evidence-based home visiting. The
Budget extends and expands evidence-based, voluntary home visiting programs,
which enable nurses, social workers, and other professionals to connect
families to services to support the child's health, development, and ability
to learn.
Improving Opportunity for All Students – Title I is
the Department of Education's largest K-12 grant program and the cornerstone of
its commitment to supporting low-income schools with the funding necessary to
provide high-need students with access to an excellent education. The Budget
increases Title I funding by $1 billion and proposes additional funding to
support districts that are using their Federal formula funds for evidence-based
interventions. The Budget also makes other important investments in improving
K-12 education, increasing. For example, it:
- Increases funding for special education and efforts to assist
English language learners. The Budget provides additional funding to
help students who face academic hurdles meet rigorous academic standards so
that all students can succeed.
- Provides broad support for educators at every phase of their
careers. The Budget invests in developing strong teachers before they
reach the classroom and supporting their growth and success throughout their
careers.
- Invests more than $3 billion on science, technology, engineering,
and math (STEM) education. The Budget provides strong support for
STEM education, including a new $125 million competitive program to promote
the re-design of America's high schools by integrating deeper learning and
student-centered instruction, with a particular focus on STEM-themed high
schools that expand opportunities for girls and other groups underrepresented
in STEM fields.
Reforming the Tax Code to Reward and Support
Work – When both spouses work, a family incurs
additional costs in the form of commuting costs, professional expenses, child
care, and, increasingly, elder care. To address these challenges, the Budget
proposes a new $500 gsecond earnerh tax credit, which will benefit 24 million
dual-earner couples. It also proposes to expand the Earned Income Tax Credit
(EITC) for workers without children and non-custodial parents, promoting
employment while reducing poverty and hardship for 13.2 million low-income
workers struggling to make ends meet. In addition, the Budget continues to
propose making permanent improvements to the EITC and Child Tax Credit that
augment wages for 16 million families with 29 million children each year but are
scheduled to expire at the end of 2017. Allowing these benefits to expire would
result in a roughly $1,700 tax increase for a full-time minimum wage worker with
two children.
Encouraging State Paid Leave Initiatives –
Too many American workers must make the painful choice between caring
for their families and a paycheck they desperately need. A handful of States
have enacted policies to offer paid leave. The Budget encourages additional
States to develop paid family leave programs by providing funding for the
initial set-up and half of the benefit costs for as many as five States through
the Paid Leave Partnership Initiative. It also provides support and technical
assistance to those States that are still building the infrastructure they need
to launch programs in the future through the State Paid Leave Fund.
Ensuring Access to Quality, Affordable Health
Care – The Budget supports the Affordable Care
Act, which is already providing coverage for millions of Americans through the
Health Insurance Marketplaces, the delivery of tax credits to make coverage
affordable, and the expansion of Medicaid.
Helping All Workers Save for Retirement –
Millions of working Americans lack access to a retirement savings plan
at work. Fewer than 10 percent of those without plans at work save in a
retirement account on their own. In 2015, retirement security will be one of the
key topics of the White House Conference on Aging. The Budget would make it easy
and automatic for workers to save for retirement through their employer – giving
30 million more workers access to a workplace savings opportunity. The Budget
also ensures that long-term part-time employees can participate in their
employersf retirement plans and provides tax incentives to offset administrative
expenses for small businesses that adopt retirement plans.
Partnering With Communities to Expand Opportunity –
The Budget improves the coordination of resources to meet unique community needs
and growth opportunities, including through the Administration's Promise Zones
initiative, which is creating partnerships between the Federal Government, local
communities, and businesses to create jobs, increase economic security, expand
educational opportunities, increase access to quality, affordable housing, and
improve public safety. The President named the first five Promise Zones in 2014
and will designate an additional 15 Zones by the end of calendar year 2016. In
support of Promise Zones, the Budget requests $250 million for the Department of
Housing and Urban Development's Choice Neighborhoods program and $150 million
for the Department of Education's Promise Neighborhoods program. The Budget also
includes Promise Zone tax incentives to stimulate growth and investments in
targeted communities.
Supporting Innovative Projects to Improve Upward Mobility
– Building on Promise Zones, the budget also includes a new
initiative, the Upward Mobility Project, that will allow up to ten communities,
States or consortia of States and communities to combine funds from four
existing block grant programs designed to promote opportunity and economic
development and reduce poverty to test and validate promising approaches to help
families become more self-sufficient, improve children's outcomes, and
revitalize communities so they can provide more opportunities for their
residents. Projects must utilize evidence-based strategies, track program
performance, and evaluate intervention effectiveness. The funding streams that
States and communities can apply to use – including the Department of Health and
Human Services' Social Services Block Grant and Community Services Block Grant,
and the Department of Housing and Urban Development's Community Development
Block Grant, and HOME Investment Partnerships Program – share a common goal of
promoting opportunity and reducing poverty. In addition to these funds,
participating communities will be eligible to receive a total of $1.5 billion in
new funding over five years, to combine with the added flexibility with
currently provided resources.
Helping Americans Upgrade Their
Skills
America's education system led the world in the 20th Century, when we sent
generations to college and cultivated the most educated workforce in the world,
supporting an unparalleled period of economic growth and rising middle-class
incomes. Since then, other countries have followed our lead to develop globally
competitive education systems. As our economy changes, we need to ensure that
Americans are prepared with the skills and knowledge necessary to compete in the
21st Century economy. The Administration invests in affordable post-secondary
education and builds on the bipartisan Workforce Innovation and Opportunity Act
(WIOA) with investments that connect workers with good jobs and prepare them
with skills employers need.
Making a High-Quality College Education More Affordable
An estimated two-thirds of job openings will require some postsecondary
education and training by 2020. The Budget:
- Provides Tuition-Free Community College for Responsible Students.
The President's America's College Promise proposal creates new
federal-state partnerships to provide two years of free community college to
responsible students, while promoting key reforms to improve the quality of
community college offerings to ensure that they are a gateway to a career or
four-year degree. If all states participate, an estimated 9 million students
could benefit from this proposal.
- Ensures that Pell Grants Keep Pace with Inflation. Pell
Grants are central to our efforts to help low and moderate income students
afford college. Since 2013, Pell Grants have been adjusted for inflation
annually, but unless Congress acts, this will end in 2017 and the value of
Pell Grants will start to erode. The Budget continues the Presidentfs
commitment to college affordability by ensuring that Pell Grants keep pace
with inflation.
- Keeps Student Loans Manageable. The Administration is
helping student borrowers with existing debt manage their obligations through
income-driven repayment plans, such as the Pay-As-You-Earn (PAYE) plan, which
caps student loan payments at 10 percent of monthly discretionary income. The
Budget proposes to extend PAYE to all student borrowers and reform the PAYE
terms to ensure that the program is well-targeted and to safeguard the program
for the future.
- Simplifies and Expands Education Tax Benefits. While the
creation of the American Opportunity Tax Credit (AOTC) in 2009 made college
more affordable for millions of students and their families, our system of tax
incentives for higher education is complex, and families are sometimes unable
to take full advantage of the benefits. Building on bipartisan reform
proposals, the Budget would simplify, consolidate, and expand higher education
tax credits. It would cut taxes for 8.5 million families and students,
simplify taxes for the more than 25 million families and students that claim
education tax benefits, and would provide students working toward a college
degree with up to $2,500 of assistance each year for five years. Building on
recent bipartisan legislation, the Budget also includes a proposal to
significantly simplify the Free Application for Federal Student Aid
(FAFSA).
- Drives Performance and Innovation in Higher Education.
The Budget invests in evidence-based efforts at colleges and universities to
dramatically improve educational outcomes for all students through the First
in the World Fund, which recognizes that leading the world in education
requires higher college graduation rates, not just attendance.
Expanding Technical Training Programs for Middle Class
Jobs. Community colleges, like those in Tennessee and Texas,
that build strong employer partnerships and offer training in in-demand fields
are creating career pathways to the middle class. The Budget requests $200
million for a new American Technical Training Fund to create or expand
innovative, evidence-based job training programs in high-demand fields that
provide a path to the middle class for hard-working, low-wage
Americans. Projects would emphasize strong employer partnerships,
work-based learning opportunities, accelerated training, and flexible scheduling
for students to accommodate part-time work. Programs could be created within
current community colleges, other innovative, non-traditional training
providers, or these entities in partnership with secondary programs. This
initiative would be housed in the Career and Technical Education Innovation
Fund, jointly administered by the Department of Education and the Department of
Labor and builds on the Trade Adjustment Assistance Community College and Career
Training Grants (for which 2014 was the final year of funding).
Creating Pathways to High-Growth Jobs – Building on
the important improvements to the Nationfs job training system through the WIOA,
the Budget proposes to support more in-person career counseling and employment
services that help unemployed workers find a career-path job or the training
they need to prepare for one. It will double the number of workers receiving
training through the workforce development system, with a focus on training
partnerships for skills needed in industries and occupations experiencing
significant growth in the years ahead.
Expanding Apprenticeships and Employer-Validated
Credentials – The Budget makes investments to
achieve the goal of doubling Registered Apprenticeships across the United States
over the next five years to allow workers to learn skills while they are earning
a paycheck, and ensures that training leads to high-quality jobs by investing in
projects that feature strong industry partnerships and incent additional
employer investment in worker training.
Helping Americans Launch and Sustain Their Own Businesses
– The Budget funds training to launch and sustain
businesses, including the business practices entrepreneurs need to translate a
good idea into a growing business. The Small Business Administration's Boots to
Business initiative that provides veterans transitioning to civilian life with
the training and tools they need to start their own businesses and the
Entrepreneurship Education initiative helps small business owners gain the
skills and networks they need to grow their business and create new jobs.
Creating a 21st Century
Economy
Creating jobs that pay good wages is the best way to grow our economy and the
middle class. To compete in the 21st Century economy and make America
a magnet for job creation and opportunity, we need to invest in American
innovation, strengthening our manufacturing base, keeping our Nation at the
forefront of technological advancement, and leading in the development of clean
energy alternatives and the promotion of energy efficiency while moving toward
energy security through safe and responsible domestic energy production. Because
a 21st Century economy requires 21st Century
infrastructure, the Budget proposes to modernize our ports and build stronger
bridges, better roads, faster trains, and better broadband, creating jobs for
thousands of construction workers and engineers, strengthening our communities,
and making it easier to do business.
Expanding the National Network of Manufacturing
Institutes – To create jobs, continue growth in
the industry, and strengthen Americafs leadership in advanced manufacturing
technology, the Budget provides the resources to launch seven more institutes in
2016, building on the nine institutes already funded through 2015, and calls for
the full investment required to complete a national network of 45 manufacturing
institutes.
Investing in Home Grown Products and Ideas – The
Budget launches a public-private investment fund for advanced manufacturing
start-ups, known as the American Made Scale-Up Fund, to help ensure that if a
technology is invented in the United States, it can be made in the United
States. The Scale-Up Fund will help emerging American-made advanced
manufacturing technologies reach commercial scale production in the United
States, creating manufacturing jobs for the future and helping to ensure that
America keeps making things the rest of the world wants to buy.
Rebuilding Our Infrastructure with Transition Revenue from
Business Tax Reform – To create jobs, spur economic growth and
provide States and localities the certainty they need to plan for the future,
the Budget includes a $478 billion, six-year surface transportation
reauthorization proposal paid for with transition revenue from pro-growth
business tax reform. This transition tax would mean that companies have to pay
U.S. tax right now on the $2 trillion they already have overseas, rather than
being able to delay paying any U.S. tax indefinitely. The proposal would allow
us to repair existing roads and bridges and modernize our infrastructure with
new investments in highways, freight networks, and bus, subway, rapid transit,
light rail, and passenger rail systems in our cities, fast-growing metropolitan
areas, small towns and rural communities across the country.
Boosting Private Investment through a Rebuild America Partnership
– The Budget boosts private investment in infrastructure through a
Rebuild America Partnership by establishing an independent National
Infrastructure Bank to leverage private and public capital to support
infrastructure projects of national and regional significance. The Budget
creates America Fast Forward Bonds, which build on the successful Build America
Bonds program of taxable bonds. It also creates the new tax-exempt Qualified
Public Infrastructure Bonds, which will help states and local communities to
attract new sources of capital for infrastructure investment projects.
Cutting Red Tape in the Infrastructure Permitting
Process – The Administration continues
to modernize and improve the Federal permitting process for major
infrastructure projects, cutting through red tape and getting more timely
decisions on Federal permits and reviews while ensuring that projects lead to
better outcomes for communities and the environment.
Investing in Innovative Research and Development –
Our long-term economic competitiveness depends upon continued
robust investment in R&D. The Budget provides a 6 percent increase for
R&D, including significant investments in basic research and advanced
manufacturing technology. The Budget invests in biomedical research—like the
BRAIN initiative, which is developing tools and technologies to offer new
insight into diseases like Alzheimerfs, and Precision Medicine, which can
improve health outcomes and better treat diseases. It also emphasizes
agricultural research, looking at climate resilience and sustainability.
Investing in Homegrown Clean Energy – In order to
secure America's energy future and protect our children from the impacts of
climate change, the Budget invests in clean energy, improving energy security,
and enhancing preparedness and resilience to climate change. These investments
support the President's Climate Action Plan, helping to expand American
leadership in the clean energy economy with new businesses, jobs, and
opportunities for American workers.
Keeping Americans Safe at Home and
Abroad
Economic growth and opportunity can only be achieved if America is safe and
secure. The Budget provides $561 billion in base discretionary funding for
national defense—$38 billion above sequestration levels—and $58 billion for
Overseas Contingency Operations to provide the resources needed to sustain the
Presidentfs national security strategy, protecting the countryfs security and
well-being both at home and abroad.
Degrading and Defeating the Islamic State of Iraq and the Levant
(ISIL) – The Budget provides the necessary
resources to degrade and ultimately defeat ISIL, address the ongoing
humanitarian crisis in the region, continue efforts to train and equip the Iraqi
security forces, support regional partners, and bring stability and promote the
conditions for a negotiated settlement to end the conflict in Syria.
Countering Russian Pressure and Aggressive Action Together with
our European Allies – In response to the Russian Federationfs
aggressive acts, the Budget includes proposals for political, economic, and
military support to NATO allies and partner states in Europe, including the
governments most targeted by Russian pressure. This includes funding
to support efforts to bolster democracy and good governance, increase the
capabilities of security forces, strengthen the rule of law and anti-corruption
measures, and promote European Union integration, trade, and energy
security.
Promoting Prosperity, Security and Good Governance in Central
America – The Budget provides $1 billion to support a long-term,
comprehensive strategy for Central America designed to contribute to the
evolution of an economically-integrated Central America that is fully
democratic, provides greater economic opportunities to its people, promotes more
accountable, transparent, and effective public institutions and ensures the
safety of its citizens, addressing the challenges that have resulted in an
influx of migration from the region.
Protecting our Nation Against Cyber-Attacks – No
system is immune to infiltration by those seeking to steal commercial or
Government information and property or perpetrate malicious and disruptive
activity. The Budget provides $14 billion to support cybersecurity efforts
across the Government to strengthen U.S. cybersecurity defenses and make
cyberspace more secure, allowing the Government to more rapidly protect American
citizens, systems, and information from cyber threats.
Confronting the Threat Posed by Infectious Diseases
– The Budget provides resources to support the Global Health
Security Agenda, increases funding to eradicate polio and other global health
challenges, and creates a new Impact Fund for targeted global HIV/AIDS efforts.
In addition, the Budget increases funding for domestic preparedness efforts to
more effectively and efficiently respond to potential future outbreaks here at
home. The Budget also makes investments to address the domestic HIV epidemic to
help States develop HIV implementation plans to support the goals of the
National HIV/AIDS Strategy.
Combatting Prescription Drug and Heroin Abuse – The
Budget includes more than $100 million in new investments across HHS to reduce
abuse of prescription opioids and heroin, which together take the lives of
20,000 Americans per year. These new resources will increases funding for every
state to expand existing Prescription Drug Monitoring Programs; expand and
improve the treatment for people who abuse heroin and prescription opioids; and
support dissemination of naloxone, an opioid antagonist that reverses the
effects of opioid overdose, by first responders in an effort to prevent overdose
deaths in high risk communities.
Honoring Our Commitment to Veterans – The Budget
invests in the five pillars the President has outlined to support our Nationfs
veterans: providing the resources and funding they deserve, ensuring
high-quality and timely health care, getting veterans their earned benefits
quickly and efficiently, ending veteran homelessness, and helping veterans and
their families get good jobs, education, and access to affordable housing.
Creating a Government for the
Future
The President is committed to creating a Government that makes a significant,
tangible, and positive difference in the economy and the lives of the American
people, and to driving lasting change in how Government works. This
Administration has launched successful efforts to eliminate wasteful IT
spending, reduce the Federal real property footprint, modernize and improve
citizen-facing services, and open tens of thousands of Federal data sets to spur
innovation in the private sector.
Supporting the Presidentfs Management Agenda – The
Budget includes initiatives to improve the service we provide to the American
public; to leverage the Federal Governmentfs buying power to bring more value
and efficiency to how we use taxpayer dollars; to open Government data and
research to the private sector to drive innovation and economic growth; to
promote smarter information technology; create new Idea Labs to support
employees with promising ideas, and, to attract and retain the best talent in
the Federal workforce.
Supporting Digital Service Delivery for Citizens –
In 2014 the Administration piloted the U.S. Digital Service, a unit of
innovators, entrepreneurs, and engineers. This team of Americafs best digital
experts has worked in collaboration with Federal agencies on their high impact,
citizen-facing programs to improve how citizens and businesses experience
government services. The Budget includes $105 million to scale and
institutionalize this approach and create digital services teams in 25 key
agencies. It also includes increased funding to scale up the central USDS team
to aid in building the agency teams, increase oversight and accountability for
IT spending, improve IT procurement, and improve agency cybersecurity and cyber
readiness.
Building Evidence and Encouraging Innovation
– The Budget invests in developing and testing
effective practices, recruiting social and behavioral sciences experts, and
providing better information on what works in key areas ranging from improving
college completion to creating greater accountability for job training programs
to improving the data available on Indian Country.
Reforming the Government to Win in the Global Economy
– The Budget also includes proposals to consolidate and reorganize
Government agencies to make them leaner and more efficient, and it increases the
use of evidence and evaluation to ensure that taxpayer dollars are spent wisely
on programs that work.
Achieving Fiscal Sustainability and Promoting
Sustainable Growth
This yearfs Budget supports the Presidentfs ambitious vision for supporting
growth and opportunity, and does so while meeting a key test of fiscal
stability: reducing deficits to below 3 percent of GDP, stabilizing debt as a
share of the economy, and putting it on a declining path. It achieves these
goals by replacing mindless austerity with smart reforms, paying for all new
investments, and obtaining $1.8 trillion in deficit reduction primarily from
health, tax, and immigration reforms.
Reversing Mindless Austerity – Returning to the
mindless austerity of sequestration in 2016 would bring discretionary funding to
its lowest level, adjusted for inflation, since 2006. The Budget proposes to end
sequestration, fully reversing it for domestic priorities in 2016, matched by
equal dollar increases for defense funding. These investments are more than paid
for with smart spending cuts, program integrity measures, and commonsense
loophole closers – including, for example, targeted reforms to crop insurance
programs; program integrity investments across a range of programs; and closing
the gcarried interesth tax loophole.
While many of the investments described above are made possible by reversing
sequestration, the contrast between what can be achieved under sequestration
versus under the Presidentfs Budget is particularly stark in a few key
areas:
- Research and Development. Under 2016 sequestration levels,
assuming roughly current funding patterns, research funding adjusted for
inflation would reach its lowest levels since 2002 – other than when
sequestration was in full effect in 2013. By comparison, the Presidentfs
Budget would increase R&D funding by nearly 6 percent over 2015, including
investments in Precision Medicine, the Brain Initiative, and other areas.
- Early Learning. The last time sequestration took full effect in
2013, more than 57,000 children lost access to Head Start and Early Head
Start, with enrollment falling to the lowest level since 2001. Researchers
have established that supporting children during this critical stage yields
benefits that far outweigh the costs of the investment. The Presidentfs Budget
makes major investments in early learning (described above), including, for
example, making sure children can be served in full-day, full-year Head Start
programs that research shows lead to better outcomes for kids.
- National Security. The Joint Chiefs have made clear that a return
to sequestration-level cuts would significantly reduce the militaryfs ability
to fully implement the Presidentfs defense strategy. The military would be
unbalanced and eventually too small and insufficiently modern to meet the
needs of our strategy, leading to greater risk of longer wars with higher
casualties for the United States and our allies and partners. In contrast, the
Budget makes the investments needed to protect the Nationfs security and
well-being both at home and abroad.
Paying for all new investments – Every investment
in the Budget – including the new and expanded tax credits for middle-class and
working families, and mandatory investments in community college and preschool –
is more than fully paid for through spending or tax reforms. In particular, the
Budget pays for many of its investments in helping middle class families get
ahead through three important reforms to the tax system. First, it would
eliminate what may be the largest single loophole in the tax code – a provision
known as gstepped-up basish that lets wealthy households avoid taxes on hundreds
of billions in capital gains taxes each year. Second, it would raise the top
capital gains and dividend rate for high-income households to 28 percent, the
rate under President Reagan. Third, it reforms financial sector taxation to make
it more costly for large, highly-leveraged financial firms to finance their
activities with excessive borrowing, reducing risks to the broader economy.
Reducing Deficits through Health, Tax, and Immigration Reform –
While the Budgetfs new investments are paid for with smart reforms
across a range of programs, as well as commonsense tax loophole closers, the
$1.8 trillion in deficit reduction in the Budget is achieved primarily by
focusing on the key drivers of our Budget challenges: health care cost growth
and inadequate revenue levels in the face of an aging population. Specifically,
the Budget includes:
- $400 Billion in Health Savings. Over the last few years, wefve
seen historically slow rates of health care cost growth, which are already
yielding fiscal dividends. The Budget includes $400 billion in health savings
that build on the Affordable Care Act to help maintain slower cost growth
while improving health care quality – complementing the Administrationfs other
efforts on delivery system reform. Notably, the Budgetfs health savings grow
over time – raising about $1 trillion in the second decade, and extending the
Medicare Hospital Insurance trust fund solvency by approximately 5 years.
- $640 Billion in Net Deficit Reduction from Tax Reforms. The
Budget raises about $640 billion in net revenue for deficit reduction from
curbing high-income tax expenditures. These savings come from limiting tax
benefits that are not efficient in achieving social goals, raising revenue
without raising tax rates.
- $160 Billion in Savings from Immigration Reform. This yearfs
Budget again reflects the Presidentfs support for commonsense, comprehensive
immigration reform along the lines of the bipartisan Senate-passed bill. In
part because it helps balance out an aging population, immigration reform
helps both the Budget – by almost $1 trillion over two decades – and the
Social Security Trust Fund, closing about 8 percent of the Trust Fund
shortfall and moving insolvency out two years. It also strengthens the economy
by boosting GDP growth, reducing the deficit, raising average wages for
U.S.-born and immigrant workers, increasing the size of the labor force, and
raising productivity.
Through these policies, the Presidentfs Budget brings annual deficits well
below the 40-year historical average of 3.2 percent of GDP during every year of
the budget window. A key test of fiscal sustainability is whether debt is stable
or declining as a share of the economy, resulting in interest payments that
consume a stable or falling share of the Nationfs resources over time. The
Budget meets that test, showing that investments in growth and opportunity are
compatible with also putting the Nationfs finances on a strong and sustainable
path.