Biden Seeks Huge Spending Boost in First Budget

By Yuval Rosenberg

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.

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