U.S. President Joe Biden on Friday will ask Congress for the authority to spend nearly $6 trillion in 2022, which would give him the resources to begin implementing an ambitious agenda of infrastructure investment and expanded social programs. However, the blueprint would also increase federal spending to a nearly unprecedented share of the U.S. economy and drive the national debt to new highs.
The budget request will forecast continued increases in federal spending over the next decade, eventually rising to $8.2 trillion in 2031, according to The New York Times. Much of that increase reflects the $2.3 trillion infrastructure plan and $1.8 billion education and families plan the president wants to begin rolling out, though neither has yet passed Congress.
Much of the new spending would be paid for with proposed tax increases on the wealthy and on corporations. However, the administration projects that the federal government will still run deficits of more than $1.3 trillion per year over the coming decade before the budget begins to trend back toward balance.
The budget is an important statement of the president's policy goals and ambitions, but it's up to Congress to determine how much will actually be spent in the coming year and how that government spending will be financed. Democrats currently hold slender majorities in the House and Senate, but Republicans will have an important say on spending and tax decisions in the coming months.
In remarks delivered Thursday in Cleveland, Biden made the case for what he describes as an investment in the country's future.
"Now is the time to build [on] the foundation that we've laid to make bold investments in our families and our communities and our nation," he said. "We know from history that these kinds of investments raise both the floor and the ceiling over the economy for everybody."
No big surprises
The budget request is not expected to contain many surprises when the full details are released Friday. In April, the administration released a detailed description of its plan for fiscal 2022 discretionary spending — that is, funds the government is not obligated to spend under existing law as it must for entitlement programs such as Social Security and Medicare.
The budget will reflect a sharp divergence from the priorities of former President Donald Trump's administration, which sought major cuts in many government agencies shortly after Trump took office. For example, the Department of Education budget would grow by 41% under Biden's plan, the Commerce Department would get a 28% increase, the Department of Health and Human Services would get a 24% increase, and the Environmental Protection Agency's budget would jump by 21%.
Next year's budget beginning October 1 will be free of spending caps, in place since 2013, which had kept discretionary defense spending and discretionary nondefense spending growing at approximately the same rate. The administration is expected to propose a 16% increase in nondefense outlays to $769 billion next year, but only 1.7% more in defense spending, bringing the Pentagon's annual budget to $753 billion.
Some priorities omitted
There are a number of items on Biden's broader agenda that are conspicuously absent from the proposal, including a pledge to forgive up to $10,000 per person in federal student loans.
Also left out are funds for a "public option" health insurance plan that would allow Americans to buy into Medicare coverage, and measures to reduce the cost of prescription drugs. However, in presenting the budget, Biden is expected to encourage Congress to authorize such a program.
Critics note that those programs would entail further government spending that would have to be paid for by tax increases, more deficit spending or reduced spending elsewhere.
Approaching WWII spending levels
The extraordinary efforts by the government to blunt the economic impact of the coronavirus pandemic in 2020 temporarily drove government spending as a percentage of economic output to the highest level since World War II.
While the Biden budget will gradually reduce government spending as a share of the economy from the current highs, it still anticipates spending well above average levels for the past 70 years.
The budget plan relies on economic growth forecasts that see the U.S. economy growing at a rapid pace in the near term as it recovers from the pandemic, but then reverting to a growth rate of less than 2%. Biden's plan would have the government spending nearly 25% of GDP on average over the next decade.
Soaring national debt
The total federal debt held by the public was already in excess of 100% of GDP when the pandemic struck, and the combination of lower output and even more borrowing drove it higher.
However, even when the economy has recovered, the Biden budget forecasts a decade in which the debt stays well above the size of the GDP, cresting at an estimated 117% in 2031.
"That's a big debt number," said Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget. "Prior to the Great Recession, debt was 40% of GDP. Prior to the pandemic, it was 80%. This year, it started the year at 100%, and 106% is our World War II record — 117% just blows past that. That's a lot more borrowing."
He pointed out that in addition to ignoring some of the administration's other stated goals, such as student loan forgiveness and unemployment insurance reform, those numbers also assume no more crises that require government spending, such as another pandemic, a recession or military conflict, potentially leaving the country without the fiscal space to respond.
"I don't think that their plans are going to do enough to reduce our long-term structural debt, which is really going to require getting the costs of health and retirement programs under control and or fully financed," Goldwein said.Original Article