Biden budget pivots to deficit concerns while boosting military, domestic programs


HR King
May 29, 2001
Bad idea:

President Biden unveiled a $5.8 trillion budget plan on Monday that reflects a major administration pivot to rein in future borrowing, introducing a proposal that would reduce the national deficit by roughly $1 trillion over 10 years.

The White House budget includes substantial funding increases for the military and police, more money for a slew of domestic programs, and a “Bipartisan Unity Agenda” focused on cancer prevention, mental health care, and veteran’s services. The deficit reduction would be achieved in part through changes in the tax code, which could include a new minimum tax on billionaires.
While the debt would continue to grow even if all of the administration’s proposals are enacted, the White House document reflects a major new focus on fiscal prudence. Last year, the White House budget would have increased the nation’s deficits over 10 years by almost $1.4 trillion. By contrast, the White House’s budget this year would reduce the annual deficit by more than $100 billion per year after 2029.


“All told, it is a budget that includes historic deficit reduction, historic investments in our security at home and abroad, and an unprecedented commitment to building an economy where everyone has a chance to succeed,” Biden said in a statement.
The administration’s newfound emphasis on deficit reduction comes amid a potential revival of negotiations over its economic agenda with Sen. Joe Manchin III (D-W. V.), who has repeatedly emphasized his interest in a budget deal that would reduce the nation’s fiscal imbalance. Inflation has also emerged as a key worry of voters emerging from the pandemic, and reducing government spending in the long-term may help allay those concerns ahead of the 2022 midterm elections.
The Biden administration’s new budget includes major new social investments and tax hikes, but excludes the Build Back Better proposals that the president has made the cornerstone of his economic agenda. Among the tax measures incorporated into the budget is a new “Billionaire Minimum Income Tax” that would levy a 20 percent minimum tax on all income — including unrealized capital gains — for Americans with assets worth more than $100 million. Administration officials told reporters on Monday did not incorporate Build Back Better in the budget due to the uncertain status of negotiations, but the White House has pledged its economic spending package will not increase the deficit.

The White House budget includes roughly $2.5 trillion in new tax revenue. Of that $2.5 trillion, roughly $1.5 trillion goes to new spending programs while the remainder goes toward reducing the deficit, said Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget, a group that advocates for lower deficits.
“That’s like a $2.5 trillion swing — last year, the White House was increasing the deficit by $1.4 trillion, and now they’re decreasing it by over $1 trillion,” Goldwein said.
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The White House’s annual budget submission to Congress is often ignored or dramatically changed by the legislative branch before enacted into law. But they still reflect useful indications of the administration’s goals and priorities, as well as how its thinking on key issues has changed over time.

“It’s clear the administration is, at least in terms of tone and messaging, trying to pivot from expansionary fiscal policy to deficit reduction‚” said Ben Ritz, director of the Center for Funding America’s Future at the Progressive Policy Institute, a think tank.
Biden is proposing increasing the military budget to more than $800 billion per year, citing Russia’s invasion of Ukraine as a justification for more spending on the Department of Defense. The White House is also asking Congress for more than $30 billion to fight crime, as the administration seeks to distance itself from some liberals who have called for defunding the police.
The White House is also including a “Bipartisan Unity Agenda” focused on mental health, fighting cancer, and addressing the opioid epidemic.

That agenda includes a provision to ensure that all private health plans cover mental health and substance use disorder. It would also heavily invest in mental health providers, youth mental health and suicide prevention programs, and scholarships to address a shortage of mental health providers.

It also includes a major $119 billion investment in the Department of Veterans Affairs — a 32 percent increase above current levels. The administration is also seeking $3 billion for veterans’ homeless programs, $2 billion for caregivers, and billions more to improve the VA’s health care delivery systems.
The White House budget also includes $82 billion for the Department of Health and Human Services to prepare for pandemics and “other biological threats”; $21 billion for clean energy programs and climate resilience outside the president’s existing Build Back Better proposals; and substantial education funding increases.

The budget also places a heavy emphasis on deficit reduction — without completely closely America’s fiscal imbalance.
The U.S. government spends more money than it brings in through revenue, creating an annual budget deficit. It borrows money to cover this balance by issuing debt, which it must pay interest on. The Obama administration and Republicans in Congress reached a deal a decade ago to scale back future spending, which helped reduce the deficit, but President Donald Trump sought to push the deficit wider during his administration with a big tax cut package and a burst of new spending.

The government’s response to the coronavirus pandemic pushed the deficit to even larger levels, peaking at $3.1 trillion in 2020. The deficit contracted in 2021 because some of that rescue spending expired, but Democrats and Republicans have sparred over how aggressively the deficit should be addressed in the next few years.

The White House projects America’s deficit falling from roughly 12.4 percent of the nation’s overall economy in 2021 to just 4.8 percent by 2032. But deficits would remain high by most historic measures, however, falling to roughly $1.3 trillion per year by the middle of the decade before increasing to close to $1.8 trillion by the end of the decade.
Crucially, Biden is aiming to achieve deficit-reduction without advancing any painful spending cuts. In 2012, former president Barack Obama sought to lower deficits by introducing stark cuts to Social Security, Medicare, and other government spending programs, whereas Biden’s budget envisions spending increases on both military and domestic programs over the next 10 years.
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The White House is also attempting to emphasize the deficit reduction it is achieving now — a message viewed more skeptically by some budget experts.

Congress in 2020 and 2021 approved trillions of dollars in emergency spending programs to protect American households during the coronavirus pandemic. Biden led the passage of the $1.9 trillion rescue plan in March 2021 that was approved only with Democratic votes. Those programs were always intended to expire, but the administration is now claiming their expiration reflects their responsible fiscal stewardship.
“It’s strange to take credit for the expiration of your own deficit-increasing policies as deficit reduction,” Goldwein, of the Committee for a Responsible Federal Budget, said. “What the administration should focus on is the actual savings they’re proposing in this budget.”
The budget also projects that economic growth will slow down after its tremendously fast pace rebounding from the coronavirus pandemic. The White House says the U.S. economy grew by roughly 5.5 percent last year but will slow to 4.2 percent in 2023, before leveling off to closer to below 3 percent for the rest of the decade.
The White House budget is based on interest rate projections from the fall — meaning they do not incorporate rate hikes by the Federal Reserve that are almost certain to make the cost of federal borrowing substantially higher.