A recent analysis shows that Biden’s $6 trillion proposal for the 2022 fiscal budget would “slash economic growth in the long run, even as it substantially reduced the public debt level.” The Penn Wharton Budget Model projected the budget would cause the nation’s GDP to shrink by 1.5% by 2050. The budget request includes $2.3 trillion for the American Jobs Plan, $1.8 trillion for the American Families Plan, and a $1.5 trillion request for annual operating expenditures, which includes the Pentagon and other federal agencies. In other news, stock futures were flat on Tuesday but gold prices were up 1%, rising above $1,800.
Fox Business/Megan Henney
Biden’s $6T budget would cut GDP but reduce nation’s debt over long term, study shows
President Biden has unveiled a sweeping $6 trillion budget that would slash economic growth in the long run, even as it substantially reduced the public debt level, according to a new analysis published Tuesday morning.
The fiscal 2022 budget request – the first of Biden’s presidency – tallies up the administration’s eight-year, $2.3 trillion American Jobs Plan and the $1.8 trillion American Families Plan and incorporates them into Biden’s $1.5 trillion request for annual operating expenditures, which includes the Pentagon and other federal agencies.
The Penn Wharton Budget Model, a nonpartisan group at the University of Pennsylvania’s Wharton School, projected the budget would cause the nation’s GDP – the broadest measure of goods and services produced in the country – to shrink 1.5% by 2050. At the same time, the proposal would substantially pay down the public debt, which would decrease by 5.1% over the next three decades.
“This drop is relatively modest,” Richard Prisinzano, director of policy analysis for the Penn Wharton budget model, told FOX Business. “There’s a lot of spending in this. And I think when you initially hear the number they want to spend, you think ‘This is really going to put a big drag on the economy. It’s going to be a big negative.’ But they raise revenue through places that make sense.”
Biden has called for roughly $4 trillion in new spending, which would be paid for by a slew of tax hikes, including: raising the corporate tax rate to 28% from 21%, nearly doubling the capital gains tax rate paid by wealthy Americans to 39.6% from 20%, restoring the top individual income tax rate to 39.6%, eliminating the stepped-up basis at death and imposing a global minimum of 15% on U.S. companies foreign profits.
The money would be allocated toward dramatically expanding the government-funded social safety net, such as providing free community college and universal pre-kindergarten, extending tax credits for low- and middle-income families, bolstering care for elderly and disabled Americans and combating climate change.
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CNBC/Maggie Fitzgerald and Yun Li
Stock futures are flat to start the week, energy stocks rise after oil hits six-year high
Stock futures were flat on Tuesday as Wall Street gets set to kick off the holiday-shortened week with the S&P 500 at a record high.
Futures on the Dow Jones Industrial Average fell 16 points. S&P 500 futures fell 0.05% and Nasdaq 100 futures were fractionally higher. U.S. markets were closed for the July 4 Independence Day holiday on Monday.
West Texas Intermediate crude rose to a six-year high as a key meeting between oil producer group OPEC and its partners on crude output policy has been called off. The postponement came as the United Arab Emirates rejected a proposal to extend oil production increase for a second day.
At one point on Tuesday, WTI crude hit as high as $76.98, which was the highest price since November 2014, after pulling back before the opening bell. International benchmark Brent crude rose 0.2%, or 16 cents, to $77.32 per barrel, the highest level since late 2018.
The oil jump was boosting energy stocks in premarket trading. The SPDR Oil & Gas Exploration & Production ETF jumped 1.8% in premarket trading. Shares of Occidental Petroleum, APA and ConocoPhillips were all higher. Chevron and Pioneer Natural Resources also rose in extended trading.
“We’re in depletion mode we really haven’t drilled for new oil we still have it here and this is why some of the big boys, the Chevrons the Pioneers, they’re going to do really well because they can produce this oil pretty quickly and really at good profit margins too,” Sarat Sethi, portfolio manager at DCLA, said on CNBC’s “Squawk Box” on Tuesday.
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Gold firm above $1,800/oz on faltering dollar
Gold prices were up 1% on Tuesday, having risen above the key $1,800 level, once again supported by a weaker dollar, as investors looked to minutes from the Federal Reserve’s June meeting for more insights into policy decisions.
Spot gold rose 0.8% to $1,805.51 per ounce by 0905 GMT, after touching its highest since June 17 at $1,808.91.
U.S. gold futures jumped 1.2% to $1,805.20.
“Gold seems to be drawing strength from a weaker dollar,” said Lukman Otunuga, senior research analyst at FXTM.
“While (last week’s) mixed jobs data has somewhat eased rate hike fears, these concerns may be revived by higher energy costs and economic data pointing to rising inflationary pressures,” Otunuga added.
The dollar index dipped 0.1%, moving further away from a three-month high hit last week, making gold less expensive for other currency holders.
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