President Joe Biden gave up his crown jewel to reach a debt ceiling agreement. Democrats will likely run to regain it in the 2024 presidential elections.
Markets breathe relief in early June as the Washington House of Representatives passed the 99-page debt limit bill. The impasse risked plunging the United States into its first default, wreaking havoc on the entire world economy.
Five days before the American debt matures, only the Senate needs to approve the bill before President Joe Biden can sign it into law.
The debt ceiling impasse has paralyzed American politics for weeks. Secretary of the Treasury Janet Yellen warned that there was not enough liquidity to meet debt maturity on June 5th, forcing the US to take on more debt. That, however, would have meant spending above the $31,4 trillion debt ceiling, so Congress had to pass a law to extend it.
Congressional control has been divided between the Republican-controlled House and the Democratic-controlled Senate since the 2022 midterm elections. This allowed Republican House speaker Kevin McCarthy to advance his party’s demands before approving a debt ceiling raise.
After weeks of negotiations, McCarthy and Biden reached an oral agreement last Sunday, mostly addressing Democratic priorities.
However, Biden was forced to concede on one issue: taxation, likely setting up the Democratic campaign platform.
How the 2024 campaign will focus on taxes
The President wanted to keep large public spending and welfare benefits with a vast tax hike for the super-wealthy. Policies like student debt relief or healthcare benefits expansion, as well as Biden’s $1,2 trillion infrastructure plan.
While welfare remained almost unaffected by the debt bill, Biden agreed on limited spending for 2024 in every sector except defense (which will increase by 3%). He also gave up on the $3,5 trillion increase in tax revenues, a plan that targeted the highest income percentiles.
Specifically, Biden’s plan included a 7% increase in corporate tax (to 28%), a 15% corporate minimum tax, and a 2.6% increase in income taxes for individuals earning more than $1 million/year (to 39.6%).
This bill was particularly dear to the most progressive wing of the Democratic party. They’ll now fight for this issue to be a major component of the 2024 presidential campaign.
So far, Joe Biden is the only credible Democratic candidate for president. Focusing on tax increases for the super-wealthy might draw uncertain voters their way: according to polls, the economy is the most relevant issue for average Republican voters.
With the Republican party divided between Ron DeSantis and Donald Trump, Joe Biden should be able to focus Democratic attention on a few major agendas.
Other than taxing the rich, Democratic voters also consider abortion rights a top priority. The Supreme Court overturned Roe v. Wade last year, leaving the decision on abortion legalization to individual states. Biden is now trying to convince his electorate that victory in both chambers is necessary to legalize abortion nationwide.
