Biden’s had many surprises this term — the budget crisis isn’t one of them

President Biden’s State of the Union Address largely focused on Russia’s invasion of Ukraine, ongoing inflation concerns, and recovery from the two-year COVID-19 pandemic. That agenda is understandable since these issues are on the minds of many Americans.  

In a broader sense, however, they also reflect a stark reality for any president: Stuff comes at you pretty fast and it often comes from unanticipated sources. 

President Trump certainly did not anticipate that he would end up signing five bills totaling more than $3 trillion to fight the worst global pandemic in 100 years. President Biden certainly did not anticipate that he would have to deal with the largest European ground war in almost 80 years and the highest inflation spike in 40 years, both carrying potential economic and budgetary implications that cannot be fully understood at this time.  

National leaders play a dangerous game of policy “chicken” every time they defer corrective action on known challenges, hoping to address them later when it’s more politically expedient. But this “kick the can” strategy risks a slow-moving cumulative disaster as unanticipated calamities (a war, a deadly pandemic, economic upheaval, or all three) pile atop problems that have been ignored.  

A case in point is the long-deferred fiscal challenge.

We have known for many years that the federal budget is on an unsustainable path, yet elected leaders of both parties have delayed, dodged or simply ignored the warnings. In fact, they have recklessly piled on new spending and cut taxes. 

As a result, we have arrived at a critical point with the debt nearing its highest level as a share of the economy since World War II and climbing steadily upward. The nonpartisan Congressional Budget Office (CBO) projects that under current law the debt will double as a share of the economy over the next 30 years, rising from 100 percent of GDP in 2021 to 200 percent in 2051. 

We know — unambiguously — that the main drivers of our debt are our aging population and rising health care costs, which translate into ever-rising spending for popular benefit programs such as Social Security and Medicare. Revenues are projected to rise as well, but not by enough to keep pace with spending. 

As the trustees of those programs warned in their 2021 report, Social Security and Medicare both face long-term cash shortfalls under currently scheduled benefits and financing. Both programs will experience cost growth substantially in excess of GDP growth through the mid-2030s due to rapid population aging. Medicare also sees its share of GDP grow through the late 2070s due to projected increases in the volume and intensity of services provided.” 

This is not “news” to anyone who had been following the trustees’ warnings over several decades, and yet inaction has turned what was once seen as a long-term problem into a much more immediate concern. The trustees project that the combined Social Security trust funds will be exhausted by 2034 and the Medicare Hospital Insurance trust fund will be exhausted by 2026, leaving little time to phase in changes that would prevent sudden benefit cuts, tax increases, or higher deficits.  

Whether it’s the Social Security and Medicare trust funds or the overall federal budget, delay does not just foist the cost onto future generations, it actually increases that cost. According to a 2020 estimate by the Congressional Budget Office, the annual amount of deficit reduction needed to keep the debt at 100 percent of GDP in 2050 would rise from 2.9 percent of GDP to 4.8 percent if actions were delayed by 10 years. 

Historically, spikes in debt are often correlated with major events such as wars and economic disruptions. Deficits went up during the crisis and came down when the crisis passed. We are witness to that dynamic now after the pandemic-induced recession. President Biden said in his State of the Union Address that by the end of this year, “the deficit will be down to less than half of what it was before I took office.” 

But that’s just half the story. The other half is what comes next. The deficit reduction the president promised is a natural phenomenon of an economic recovery. However, it would still leave an annual budget deficit of roughly $1.5 trillion nor would it change the preexisting and long-standing imbalance between revenues and spending. Increasingly, episodic crises will simply add to a trajectory of debt that is already on an unsustainable path.  

One thing is certain. New challenges will arise that will surprise future presidents. And some future challenges should not be surprises at all, such as a new pandemic or a climate crisis. 

We have not put ourselves in a stronger fiscal or economic position to deal with today’s unanticipated events by allowing old problems to fester, nor will we be in a stronger position in the future if we continue forward with our heads in the sand. 

Robert L. Bixby, executive director of The Concord Coalition.