Biden’s populist budget marks the overdue end of trickle-down economics

A president’s budget proposal is seldom passed into law. Instead, it’s an expression of the priorities the president promises to fight for, often coming on the heels of an agenda laid out in the State of the Union address.

In his recent State of the Union speech, President Biden previewed his economically populist priorities when he said “the days of trickle-down economics are over.” 

Trickle-down refers to the idea that tax cuts for the wealthiest “trickle down” to the rest of us. It’s long been a popular idea in Washington, but it’s just not true. A few years ago, the London School of Economics studied 50 years of such “trickle-down” policies in 18 industrialized nations, including the U.S., and found that their only result was increasing the wealth of the already wealthy. 

So how do we get prosperity for the rest of us? By taxing extreme wealth and investing those revenues in social goods like education, housing, food and health care. President Biden’s recently released federal budget plan follows that blueprint, putting the value of investing in American families and communities ahead of slashing taxes for the rich.

The budget for the fiscal year 2025 would generate about $5.3 trillion in revenues over the next decade. That’s a $388 billion boost compared to last year’s budget — and it all comes from fairer tax policies targeting wealthy individuals and large corporations. Households earning less than $400,000 would see no tax increases, with many seeing reductions.

The proposed budget invests $2.3 trillion towards essential public services for hard-working families while reducing the national debt by almost $3 trillion. That’s a great start toward filling critical investment gaps for families and communities. 

Take housing. The National Low Income Housing Coalition reports a shortfall of more than 7 million affordable housing units for poor and low-income Americans. Biden is requesting $33 billion for the Housing Choice Voucher program, which currently helps over 2 million households afford housing and would expand access to homeownership for first-time homebuyers. His request will help to support the existing vouchers and add about 20,000 more. 

Though much more is needed, this effort to reduce homelessness by providing access to safe affordable housing in a tight housing market — with high rent prices and often insufficient wages — is a step in the right direction.

The president’s budget request also tackles hunger and poverty. As food costs have risen, so has participation in the program for Women, Infants, and Children which supplies crucial food assistance. The program has shown immensely positive impacts on the health, cognitive development and nutrition of babies and young children, as well as supporting the health and well-being of pregnant, postpartum and nursing people. The Biden budget proposal keeps funding apace with increased need and protects access to fresh fruits and vegetables in the program.

The Biden budget also expresses that families should be able to afford child care. It would create a new program that would guarantee safe, quality, affordable child care for children from birth to age five, with most families paying no more than $10 a day, and the lowest income families having free access. All children would be eligible for free, universal Head Start or preschool, with supplements to the Child Care and Development Block Grant to increase the number of child care centers and funding to increase the pay of Head Start, pre-K and elementary school teachers.

Critically, the president’s budget would restore the expanded Child Tax Credit from the pandemic-era American Rescue Plan, which increased payments, expanded eligibility and made the payments monthly, all resulting in slashing child poverty in half for the duration of the program. Similarly, the Biden budget would restore the expanded American Rescue Plan Earned IncomeTax Credit for low-income working adults without dependent children.

These are just a few of the proposed policies that would significantly impact the lives and communities of U.S. families and children. The budget would also protect Social Security, Medicare and Medicaid while lowering prescription drug prices and subsidizing healthcare premiums under the Affordable Care Act, providing health coverage assistance, increasing the affordability of higher education, and much more.

However, in one key respect, the values in this budget are significantly out of step: military spending.

As the National Priorities Project shows, nearly 70 percent of annual discretionary spending in Biden’s budget proposal is spent on the militarized portion of the discretionary budget, leaving just 30 percent to invest in most domestic programs outside Social Security, Medicare and Medicaid. It follows that if the administration believes those domestic priorities are worth investing in, then Biden should invest more in those programs and less in the military, which is already vastly overfunded.

While much more needs to be done, a budget document with tax and investment priorities reflecting the needs of the people rather than ever-increasing corporate profit and excessive wealth is a good step in the right direction.

Karen Dolan is a fellow of the Institute for Policy Studies.