Biden Seeks Huge Spending Boost in First Budget
The Biden administration unveiled its first budget proposal on Friday, asking Congress for $1.52 trillion in discretionary spending for 2022, including major boosts in funding for education, health care, public housing and programs to combat climate change as well as a smaller increase in defense spending.
While Congress will ultimately decide on a budget and appropriations — and is likely to significantly change the spending priorities outlined in the president’s request — Biden’s blueprint further highlights the ways in which he wants to expand the federal government as he seeks to address the nation’s economic challenges and reverse what the White House calls years of “chronic disinvestment in crucial priorities” due largely to “overly restrictive” budget caps. Those decade-long caps, set by the 2011 Budget Control Act, will no longer be in place for next year.
“The request is a declaration of Mr. Biden’s belief that expanding, not shrinking, the federal government is key to economic growth and prosperity by directing government dollars toward some of the country’s biggest problems, including poverty and a warming climate,” Jim Tankersley of The New York Times writes.
The big picture on Biden’s big budget request: This is just the White House’s so-called “skinny budget,” an outline of presidential priorities that sets the stage for the president’s full budget request, which will include mandatory spending programs such as Social Security, Medicare and Medicaid, later this spring.
“Like a lot of things labeled as skinny,” Politico’s Ryan Lizza, Garrett Ross and Eli Okun write, “the budget is actually pretty high in calories.”
The president is seeking $769 billion in non-defense discretionary funding for fiscal year 2022, a 16% increase over this year, and $753 billion for defense programs including overseas activities, a 1.7% increase that is below what Republican leaders want. The White House said that the funding request would restore non-defense discretionary spending to 3.3% of GDP, which it said is roughly equal to the average over the last 30 years.
“Every major federal department would see at least a small budget hike under Biden’s proposal, with agencies like the Departments of Education and Health and Human Services receiving some of the largest increases,” Politico’s Caitlin Emma reports.
Overall, the Biden request would raise federal spending on domestic programs by $118 billion, or 8.4%, over this year’s budget, excluding emergency pandemic-related spending — and that increase would be in addition to the $1.9 trillion Covid relief law Biden signed last month, a roughly $2.3 trillion infrastructure package he is pursuing, and another spending proposal focused on social programs expected later this month. The plan released Friday also doesn’t include the tax hikes on individuals that Biden is expected to propose in conjunction with his call for higher social spending.
A sharp break from Trump — and Obama: “The White House is making it clear that fears about deficits are outdated, any pivot to austerity after the recent surge of spending is a non-starter, and the era of budget caps is over,” Politico’s Lizza, Ross and Okun write. “The Biden presidency is clearly a rejection of almost everything that Trump stood for, but what’s not often stated is that, when it comes to economic policy and federal spending, it’s also a rejection of much of what Barack Obama stood for as well.”
The White House emphasized that it is moving in a new direction. “This moment of crisis is also a moment of possibility,” acting White House budget director Shalanda Young wrote in a letter to leaders of the House and Senate Appropriations and Budget committees. “Together, America has a chance not simply to go back to the way things were before the COVID-19 pandemic and economic downturn struck, but to begin building a better, stronger, more secure, more inclusive America.”
The outlook in Congress: Key congressional Democrats praised the budget request. “With austerity caps and an era of chronic disinvestment finally behind us, Congress can turn this proposal into a budget that will help generate a stronger, fairer economy, while truly meeting the needs of our communities,” said House Budget Committee Chair John Yarmuth of Kentucky. But Democrats will need the support of at least 10 Senate Republicans to pass annual appropriations bills, and the higher spending Biden is proposing is certain to meet with resistance from Republicans newly focused on the deficit as well as from lawmakers who object to various elements of the plan, such as the defense budget.
A smaller increase for the Pentagon: Biden’s budget asks for $753 billion for the defense programs, and it breaks with recent practice of keeping boosts to defense and non-defense spending roughly on par. That is already drawing criticism from defense hawks — and pushback from progressives seeking a reduction in Pentagon spending.
“President Biden’s defense spending cut doesn’t even keep up with inflation,” Senate Minority Leader Mitch McConnell (R-KY) and four other Senate Republican leaders said in a joint statement, adding that Biden’s proposal sends “a terrible signal not only to our adversaries in Beijing and Moscow, but also to our allies and partners.”
On the other hand, Sen. Bernie Sanders (I-VT), chair of the Senate Budget Committee, praised Biden’s request for increases in funding for education, affordable housing, health care and other programs but said he has “serious concerns” about the Pentagon funding portion of the budget. “At a time when the U.S. already spends more on the military than the next 12 nations combined, it is time for us to take a serious look at the massive cost over-runs, the waste and fraud that currently exists at the Pentagon,” Sanders said in a statement.
The Hill’s Niv Elis notes that the defense budget was $590 billion when Biden term as vice president ended in 2017.
Biden’s defense proposal would also discontinue the separate Overseas Contingency Operations war funding, making the costs of ongoing war-related operations part of the Pentagon’s regular budget, a move budget watchers have long advocated.
A big boost for education: “Under the proposal, the Department of Education would see a roughly 41 percent increase over its current allocation, reaching $102 billion next fiscal year, with most of the increased funds targeted to the Title I program, which funds high-poverty schools,” The Washington Post says. “The proposal would double federal spending on the Title I program and represent the largest increase since it was created more than 55 years ago.”
More money for the CDC: Biden is seeking a roughly 23% increase for the Department of Health and Human Services, including $8.7 billion for the Centers for Disease Control and Prevention, which the White House says is the largest increase for the agency in nearly two decades.
$14 billion for climate change: The administration is asking for “major new climate change investments” across nearly every agency, including $1.7 billion to make homes, schools and federal buildings more energy efficient.
A 10% boost for the Internal Revenue Service: Biden is seeking $13.2 billion for the IRS, an increase of $1.2 billion, or 10.4%, to help the agency with increased oversight of tax filings by high-income individuals and corporations, a move meant to crack down on tax avoidance and lift revenues.
$6.5 billion for a new research program focused on diseases: Biden’s budget includes money to launch the Advanced Research Projects Agency for Health within the National Institutes of Health. The new agency would focus on diseases including cancer, diabetes and Alzheimer’s.
Deficit picture unclear: Administration officials would not say whether their full budget blueprint would include higher deficits, the Times reports, but Young’s letter to lawmakers said the president’s full budget would address the nation’s challenges “in a fiscally and economically responsible way.” Just what that means won’t be clear until the president provides his full budget request and tax plans.
Read more about Biden’s budget at Axios, Bloomberg or The Washington Post.
March Deficit Third Largest on Record
The federal budget deficit came to $658 billion in March, the Congressional Budget Office estimated Thursday.
One of the largest monthly totals on record, behind only June and April of last year, the deficit was driven in part by the distribution of stimulus checks worth as much as $1,400 per person to millions of Americans, as authorized by the American Rescue Plan Act. The Treasury Department reported that as of April 1, it had made more than 130 million Economic Impact Payments worth roughly $335 billion.
In the first six months of fiscal year 2021, which began last October, the deficit hit $1.7 trillion. That’s nearly $1 trillion more than the deficit recorded in the same period the year before, most of which was before the pandemic took hold. Outlays were 45% higher, due largely to three pandemic-related programs: refundable tax credits, unemployment benefits, and the Paycheck Protection Program for small businesses.
The deficit will hit a record $3.4 trillion this fiscal year, according to the Committee for a Responsible Federal Budget, surpassing the previous record of $3.1 trillion set last year.
The Biggest Boom Since 1946?
Economic forecasters have been offering increasingly optimistic outlooks as the pace of vaccination accelerates in the U.S., indicating that the economy could be headed for its best performance in decades. Axios’s Felix Salmon and Mike Allen put it this way Friday: “America’s financial titans are coming to a consensus: We are on the early edge of the biggest economic boom since World War II, with the promise of years of growth after the privation of the pandemic.”
Goldman Sachs economists are calling for a staggering 8% growth rate for the U.S. in 2021, while analysts at the consulting firm RSM recently upgraded their forecast to 7.5%. JPMorgan CEO Jamie Dimon joined the party this week, saying in his annual shareholder letter that not only will the economy show impressive strength this year, but the growth spurt will have legs. “This boom could easily run into 2023 because all the spending could extend well into 2023,” he wrote.
Economic indicators are starting to back up the rosy forecasts, Bloomberg reported Friday. Some of the sectors hit hardest by the Covid-19 pandemic – including hotels, airlines and restaurants – are rebounding rapidly. The March jobs report showed more than 900,000 new jobs, and the Institute for Supply Management said factory activity is growing at the fastest pace in nearly 40 years.
Some real-time time data is even stronger, suggesting the improvements are accelerating. “High frequency alternative data have been rising sharply for about the last month, and they foreshadowed the strong readings that we have since gotten,” Jesse Edgerton, an economist at JPMorgan Chase, told Bloomberg. “The alternative data already point to another strong job gain for April.”
In an especially hopeful sign for the labor market, which is still millions of jobs below its pre-pandemic level, job openings hit a two-year high in February, according to the Labor Department, and all signs point to continued improvements. “Our data show that the recovery has continued and accelerated since then,” Jed Kolko, chief economist at job site Indeed, told Bloomberg. “Job postings increased at an even faster rate in March than in February.”
Chart of the Day
More than 1.2 million state and local government workers are still out of work due to the Covid-19 crisis, an improvement from the peak of 1.5 million but still a long way from pre-pandemic levels. According to an estimate from Goldman Sachs, about 900,000 of those currently unemployed are expected to be back at work by September, when school starts, thanks in large part to the $350 billion in funding for state and local governments included in the $1.9 trillion economic package President Biden signed into law last month.
Critics of the legislation say it’s an excessive and potentially wasteful bailout of the public sector, but supporters maintain that it provides much-needed relief for workers including teachers and firefighters while also helping avoid the negative effects of reduced public spending seen in the wake of the 2009 recession. The “loss of more than half a million public sector jobs in the early days of the recovery coming out of the Great Recession, actually delayed the recovery by about four years," David Cooper of the Economic Policy Institute told CBS News.
- Key Takeaways From Biden’s $1.52 Trillion Spending Plan – Bloomberg
- Five Takeaways From Biden's First Budget Proposal – Niv Elis, The Hill
- Biden Ends Abuse-Prone Overseas Military Budget – John M. Donnelly, Roll Call
- Where Biden's Infrastructure Plan Could Score Big Points – Lawrence C. Levy, CNN
- Defining 'Infrastructure' Is a Nonsense Argument – Noah Smith, Bloomberg
- Republicans Are Learning That There’s More to Capitalism Than Tax Cuts – Catherine Rampell, Washington Post
- Have the Democrats Begun a New Era of Big Government? – Keeanga-Yamahtta Taylor, The New Yorker
- To Be Taken Seriously, Republicans Need a Serious Bill – Jennifer Rubin, Washington Post
- Biden, Yellen and the War on Leprechauns – Paul Krugman, New York Times
- Krugman Wonks Out: Why Was Trump’s Signature Policy Such a Flop? – Paul Krugman, New York Times
- The Best Explanation of Biden’s Thinking I’ve Heard – Ezra Klein, New York Times
- Fears of a Too Hot Economy Ignore Racial Inequality – Claudia Sahm, Bloomberg
In Another Time, Manchin Might Be Considered a Hero – Kathleen Parker, Washington Post