US President Joe Biden will propose a $6 trillion (€4.9 trillion) budget on Friday that would take the United States to its highest sustained levels of federal spending since the Second World War as he looks to fund a sweeping economic agenda that includes large new investments in education, transportation and fighting climate change.
Documents obtained by The New York Times show that the budget request, the first of Mr Biden’s presidency, calls for total spending to rise to $8.2 trillion by 2031, with deficits running above $1.3 trillion throughout the next decade.
The growth is driven by Mr Biden’s two-part agenda to upgrade the nation’s infrastructure and substantially expand the social safety net, contained in his American Jobs Plan and American Families Plan, along with other planned increases in discretionary spending.
Investments
The proposal for the 2022 fiscal year and ensuing decade shows the sweep of Mr Biden’s ambitions to wield government power to help more Americans attain the comforts of a middle-class life and to lift US industry to better compete globally.
The levels of taxation and spending in Mr Biden’s plans would expand the federal fiscal footprint to levels rarely seen in the postwar era to fund investments that his administration says are crucial to keeping the United States competitive. That includes money for roads, water pipes, broadband internet, electric vehicle charging stations and advanced manufacturing research.
It also envisions funding for affordable child care, universal prekindergarten and a national paid leave program. Spending on national defence would also grow, though it would decline as a share of the economy.
Mr Biden plans to fund his agenda by raising taxes on corporations and high earners and the documents show budget deficits shrinking in the 2030s. Administration officials have said the jobs and families plans would be fully offset by tax increases over the course of 15 years, which the budget request backs up.
Perhaps most notably, the documents forecast that Mr Biden and Congress will allow tax cuts for low- and middle-income Americans, signed into law by President Donald Trump in 2017, to expire as scheduled in 2025.
Mr Biden has said he will not raise taxes on people earning less than $400,000 a year. It is possible that he could propose to extend the Trump tax cuts for those earners in a future budget, potentially coupled with additional tax increases on high earners or businesses.
Budget
While his plan estimates additional tax revenue down the line, the United States would run significant deficits as it borrows money to finance his plans. Under Mr Biden’s proposal, the federal budget deficit would hit $1.8 trillion in 2022, even as the economy rebounds from the pandemic recession to grow at what the administration predicts would be its fastest annual pace since the early 1980s.
The deficit would recede slightly in the following years before growing again to nearly $1.6 trillion by 2031.
Total debt held by the public would more than exceed the annual value of economic output, rising to 117 per cent of the size of the economy in 2031. By 2024, debt as a share of the economy would rise to its highest level in US history, eclipsing a World War II-era record.
The budget is simply a request to Congress, which must approve federal spending. But with Democrats in control of both the House and Senate, Mr Biden faces some of the best odds of any president in recent history in getting much of his agenda approved, particularly if he can reach agreement with lawmakers on parts of his infrastructure agenda.
Those talks appear unlikely to produce bipartisan agreement, with Republicans offering a new proposal on Thursday that still left a wide gap between their ambitions and Mr Biden’s. But the White House remains convinced it can enact significant parts of its agenda with just Democratic support using certain procedural moves.
Republicans warned on Thursday that Mr Biden’s spending and tax plans would saddle the economy with dangerous levels of debt. “Biden’s budget has the highest debt/GDP ratio in American history,” Senator. Cynthia Lummis,said. “Congress needs to wake up. We can’t continue spending future generations into oblivion.”
Mr Biden’s budget, like those proposed by his predecessors, includes assumptions about how the economy will perform if his policies are enacted. But in a break from the recent past, the Biden team is conservative in its forecasts ? predicting small gains in economic growth even if Congress approves trillions of dollars in new spending.
The president’s aides predict that even if his full agenda was enacted, the economy would grow at just under 2 per cent per year for most of the decade, after accounting for inflation.
Growth
That rate is similar to the historically sluggish pace of growth that the nation has averaged over the past 20 years. Unemployment would fall to 4.1 per cent by next year – from 6.1 per cent today – and remain below 4 per cent in the years thereafter.
The forecasts continue to show his administration has little fear of rapid inflation breaking out across the economy, despite recent data showing a quick jump in prices as the economy reopens after a year of suppressed activity amid the pandemic.
Consumer prices never rise faster than 2.3 per cent per year and the Federal Reserve only gradually raises interest rates from their current rock-bottom levels in the coming years.
Mr Biden has pitched the idea that now is the time, with interest rates low and the nation still rebuilding from recession, to make large upfront investments that will be paid for over a longer time horizon.
His budget shows interest costs for the federal government remaining below historical averages for the course of the decade. Interest rates are controlled by the Federal Reserve, which is independent of the White House.
Even if interest rates stay low, payments on the national debt would consume an increased share of the federal budget. Net interest payments would double, as a share of the economy, from 2022 to 2031. – New York Times Service
