Biden releases $6T budget that foresees decade of trillion-dollar deficits

President Biden on Friday proposed a budget that would entrench deficits in excess of $1 trillion for the next decade, pushing the nation’s debt burden to record highs.

The blueprint released by the White House ties together three major spending proposals already announced by Biden: the $2.3 trillion American Jobs Plan, the $1.8 trillion American Families Plan and $1.5 trillion in discretionary spending for fiscal 2022.

Combined with mandatory spending programs, the 2022 budget would spend $6 trillion, about $300 billion more than current projections for the year, with much of the spending going toward education, health, science research and infrastructure.

“The country had been weakened by decades of underinvestment in these areas, squeezed by budget caps,” acting Office of Management and Budget Director Shalanda Young said Friday.

Nondefense spending would increase by 16 percent in 2022, with defense budgets expanding by 1.7 percent.

In 2022 alone, Biden’s budget projects a $1.8 trillion deficit, half of the record $3.6 trillion deficit expected for this year. In the following years, that would fall to a range of $1.3 trillion to $1.6 trillion, higher than all but a few years following the Great Recession.

But the budget also calls for tax increases on the wealthy and corporations that are designed to pay for the cost of Biden’s proposals, which would start bringing deficits down by 2030, and lop $1.7 trillion off current projections by 2041.

The White House said the budget plan put the country on a “responsible fiscal course” by investing in the economy now while paving the way for deficit reduction in the long-term.

“A Budget that added to long-term deficits would worsen fiscal health, while a Budget that reduced deficits today by underinvesting in the American people would result in slower, more stratified growth that would cause more damage than one that invests appropriately,” the budget proposal said. “The President’s Budget responsibly balances these needs and risks by charting an economically and fiscally sound course for the near term and the long term.”

By 2030, the cost of servicing the debt alone would become the largest contributor to the deficit, growing to $914 billion by 2031 — 11.1 percent of total spending and 58 percent of the total deficit.

Young said that once inflation and low interest rates were taken into account, the real cost of interest would still be low by historical standards.

Many of the deficits on the books were already baked into the baseline, though critics say Biden’s budget should focus on finding a path to sustainability in the nearer term rather than postpone it for a decade.

While the budget is intended to be a unified proposal of Biden’s agenda and how it affects the economy in the coming years, some portions of the document were known before Friday’s release.

Congress has the final say on spending, taxes and policy proposals, and often diverges from a president’s budget request.

“The President’s proposal is simply that — a proposal,” Senate Appropriations Committee Vice Chairman Richard Shelby (R-Ala.) said Friday, slamming what he called a blueprint for higher taxes, overzealous spending and an underfunded military. “In the forthcoming weeks, Congress will exercise its Constitutional power of the purse in crafting appropriations bills that, I hope, will appropriately prioritize our nation’s spending.”

Negotiations over the major investment plans Biden has already proposed are already introducing significant changes.

Republicans have offered a proposal below $1 trillion, while Biden has brought his offer down by $500 billion. But the GOP has drawn a red line at increasing taxes to pay for infrastructure, which could potentially lead to higher deficits.

Moderate Democrats in the evenly divided Senate have also shown they are willing to flex their muscles to rein in plans they see as too expensive or too progressive, creating an obstacle to passing his plans through procedures that could bypass a GOP filibuster.

Beyond the regular dynamics between the executive and legislative branches, however, the quickly changing economic and political landscape has already undermined aspects of the budget.

Cecilia Rouse, chairwoman of the White House’s Council of Economic Advisers, was quick to point out that economic expectations were already higher than those forecast in the budget, which relied on estimates put together in February.

“The recovery and real GDP have outperformed our expectations so far,” she said, noting that some forecasts for annual economic growth for 2021 were as high as 7 percent, well above the already high 5.2 percent level in the budget.

Rouse also said that some of the expected economic boosts from the proposals were not incorporated in the forecast.

“The forecast does not fully reflect the policies proposed in the budget,” she said.

The White House left several key questions unanswered as to its future plans. While Biden supports a public option for health care, the budget did not assume the passage of any such proposal, leaving out key questions about costs and how to pay for it.

Similarly, the budget assumes that individual tax cuts from the Trump tax reform would expire as scheduled in 2025, thus lowering the deficit projections in the budget. 

But Young said that Biden would stick to his campaign pledge not to raise taxes on those earning below $400,000 a year, and would propose a future plan to avert those cuts from expiring.