Biden’s 2023 Budget Looks to Trim Deficits, Boost Defense, Tax the Rich

Biden’s 2023 Budget Looks to Trim Deficits, Boost Defense, Tax the Rich

Reuters/Kevin Lamarque

President Joe Biden on Monday unveiled his budget for 2023, proposing a $5.8 trillion plan that also envisions reducing the federal deficit by about $1 trillion over 10 years.

Yet while the White House blueprint reflects a notably stronger emphasis on deficit reduction, it also includes sizable spending increases across a range of domestic programs, including billions more for police departments and the military.

The budget proposes about $1.64 trillion in discretionary defense and non-defense spending for 2023, which represents a 7% increase over current levels. That includes $813.3 billion in national security spending, an increase of $31 billion, or 4%, over 2022 and about $650 billion for non-defense programs, an increase of $56 billion, or 9.5%. The White House also proposes that medical care under the Department of Veterans Affairs be broken out as its own category, with $119 billion in funding, or a 22% increase.

In all, the White House blueprint includes about $1.4 trillion in new spending over 10 years, and the smaller deficits it forecasts are achieved largely through some $2.5 trillion in proposed revenue increases, including a new minimum tax on billionaires (more on that here).

“Budgets are statements of values, and the budget I am releasing today sends a clear message that we value fiscal responsibility, safety and security at home and around the world, and the investments needed to continue our equitable growth and build a better America,” Biden said in a statement Monday.

A big blank in the budget: The president’s plan avoids detailing cost and revenue projections for some of his agenda, using a deficit-neutral placeholder for a future “Building a Better America” plan that would include proposals to expand health care coverage, lower prescription drug and child care costs and combat climate change. “The deficit-neutral reserve fund is meant to leave the space, the revenue specifically, to allow congressional negotiators the room to do what President Biden has asked,” Shalanda Young, director of the White House Office of Management and Budget, told reporters.

A pivot to deficit reduction: The president’s 2023 budget contrasts markedly with his proposal from last year, when the White House budget would have raised deficits by nearly $1.4 trillion over a decade. This year’s plan would reduce deficits over each of the next 10 years, by more than $1 trillion cumulatively. “It’s clear the administration is, at least in terms of tone and messaging, trying to pivot from expansionary fiscal policy to deficit reduction‚” Ben Ritz, director of the Center for Funding America’s Future at the Progressive Policy Institute think tank, told The Washington Post.

“To say this is a dramatic change compared to Biden’s agenda last year is an understatement,” Politico’s Ryan Lizza wrote. “The midterm messaging from the White House may as well have been written by Sen. Joe Manchin (D-W.Va.): an emphasis on taxing only the wealthiest Americans, a new commitment to deficit reduction, lots more money for cops and the military, and chunks of the old Build Back Better agenda repackaged as inflation-fighting policies. What a difference a year makes!”

Hawks say Biden didn’t go far enough: The budget projects that deficits will fall from 5.8% of GDP last year to as low as 4.4% of GDP by 2029 before climbing to 4.8% in 2032. Yet even as deficits drop from recent highs, they remain high by historical standards and the president’s budget projects that they will rise again both in nominal terms and as a share of the economy by the end of the 10-year budget window, reaching nearly $1.8 trillion by 2032.

Cumulatively, the budget projects deficits will total more than $14.4 trillion over the next decade.

As a share of the economy, debt held by the public will still rise from 102% to 107% by the end of 2032, only slightly below the 108% in the White House baseline — and the White House numbers rely on interest rate projections that do not yet factor in rate hike by the Federal Reserve, which will add to net interest costs.

That has budget watchers warning that Biden’s deficit reduction isn’t enough.

“President Biden deserves credit for presenting a budget that calls for paying for his new initiatives while reducing the deficit below current law levels,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which advocates for deficit reduction. “Unfortunately, this budget leaves debt on an unsustainable path, and lacks important details on how it would structure the core of its agenda or address provisions scheduled to expire. Even taking the budget at its word, debt would rise to a new record by the end of the decade. The budget does not go far enough toward putting the nation’s fiscal house back in order, nor does it tackle the tougher tradeoffs necessary to responsibly prevent Social Security, Medicare, and Highway Trust Fund insolvency.”

Playing deficit politics: The president on Monday criticized former President Donald Trump for “fiscal mismanagement,” adding that the Biden administration is making “real headway cleaning up the fiscal mess I inherited.” Biden also touted economic growth and progress against the pandemic under his presidency as enabling deficit reduction. The deficit for the current fiscal year is on track to fall by more than $1.3 trillion from last year, though that deficit reduction is largely due to the expiration of emergency pandemic spending programs. The Post’s Jeff Stein notes that “Biden’s push on deficits could pose a political challenge to the Republican Party, which has traditionally modeled itself as more fiscally responsible than the Democrats.”

Why it matters: Biden’s budget highlights how the president’s priorities have shifted in some notable ways in the face of persistently high inflation, war in Ukraine and mounting political pressures ahead of November’s midterm elections.

But remember, the president’s proposal is just a request to Congress, and lawmakers in the House and Senate are likely to set tax and spending plans that differ significantly from the White House’s. Republicans are already pressing for larger increases in defense spending, for example, while criticizing the president’s proposed spending, tax increases and deficits. “What this budget shows is that President Biden values more spending, more debt, more taxes, and more pain for the American people,” Rep. Jason Smith (R-MO), the top Republican on the House Budget Committee said in a statement Monday.