Happy Wednesday! President Biden blasted decades of trickle-down economic policy in a speech in Chicago today, while the Congressional Budget Office warned that the national debt is likely headed higher – much higher.
Here’s what we’re looking at as we wait for our 4th of July party invitations to arrive.
National Debt Projected to Soar Over Next 30 Years
Despite the dramatic showdown over the debt ceiling and the resulting budget agreement that restrains federal spending through 2025, the national debt is projected to rise to record levels over the next 30 years, the Congressional Budget Office said Wednesday.
In its updated long-term budget outlook, CBO said that while the nation’s fiscal trajectory was modestly improved by the recently enacted Fiscal Responsibility Act, debt held by the public will rise sharply nevertheless, climbing to 181% of gross domestic product by 2053 – about three times the average level of debt-to-GDP recorded over the last three decades.
Rising outlays for health care and retirement security play a central role in the debt dynamics. Spending on major health care programs including Medicare and Medicaid will rise from 5.8% of GDP to an estimated 8.6% of GDP by 2053, while Social Security outlays will rise from 5.1% of GDP to 6.2% of GDP. Interest costs on the debt will rise, as well, increasing from 2.5% of GDP now to an estimated 6.7% of GDP in 30 years. Revenues, meanwhile, will remain basically flat.
Saying the outlook is "challenging," CBO warned lawmakers about potential negative effects. "Such high and rising debt would have significant economic and financial consequences," the report says. "It would, among other things, slow economic growth, drive up interest payments to foreign holders of U.S. debt, elevate the risk of a fiscal crisis, increase the likelihood of other adverse effects that could occur more gradually, and make the nation’s fiscal position more vulnerable to an increase in interest rates. In addition, it could cause lawmakers to feel more constrained in their policy choices."
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonprofit group that advocates for deficit reduction, called on lawmakers to address the growing fiscal imbalance. "Today’s long-term projections show that we have made some recent progress, but there is still a tremendous amount of work needed to put our fiscal situation on sound footing," she said in a statement. "Even under the latest projections, debt will eclipse its record level in just six years and reach nearly double the size of the economy in 30 years. This level of debt would be truly unprecedented ..."
Biden Bashes Trickle-Down as He Pitches ‘Bidenomics’ to Voters
President Joe Biden on Wednesday bashed decades of Republican economic policy while trying to convince voters that his approach offers a better path for the American people.
Speaking to a group of supporters in Chicago, the president touted "Bidenomics," his answer to the Reaganomics of tax cuts for the rich and restrained public spending for everyone else. "The trickle-down failed the middle class," he said. "It failed America. It blew up the deficit. It increased inequity. And it weakened our infrastructure. It stripped the dignity, pride and hope out of communities, one after another."
Biden said his approach to the economy offers a restoration of sorts. "Here’s the simple truth about trickle-down economics, it didn’t represent the best of American capitalism, let alone America," he said. "It represented a moment where we walked away … from how this country was built, how this city was built. Bidenomics is about the future … Bidenomics is just another way of saying, restore the American dream."
Highlighting his effort to boost industrial capacity in energy and technology, Biden rejected the idea that public spending always displaces private investment. "Under the trickle-down economic theory was that public investment would discourage private investment. Give me a break," he said. "We went to see a whole lot of major corporations [and] said, ‘are you more or less likely to invest if the government investments?’ Overwhelming, they had it backward," he added. "They said no, ‘we’re more likely to invest if the government invests.’"
Biden also vowed that he would continue to push for a broad program of social spending aimed at the middle class. "I’m determined to keep fighting for universal pre-K and free community college," he said.
Still, although Biden has some solid data to back up his argument, it appears that he has a long way to go to convince Americans that he should get credit for historically low unemployment and continued growth. A new poll from The Associated Press and NORC Center for Public Affairs Research shows that just 34% of Americans approve of the way that President Biden has handled the economy.
Quote of the Day
"If inflation is coming down sharply and we’re confident that it’s on a path to 2%, that would be a different situation. You would begin to think about loosening policy. But we’re a long way from that. That’s not something we’re thinking about now, or in the near future."
— Federal Reserve Chair Jay Powell, speaking on Wednesday at a meeting hosted by the European Central Bank in Sintra, Portugal. Powell said he doesn’t think core inflation will fall back to 2% until 2025, but expects to make steady progress toward that goal in the meantime. Powell also said that there’s a good chance that more monetary tightening in the form of interest rate hikes could be in store, given the ongoing strength of the labor market and consumer spending, and that conditions will remain tight for some time. "Although policy is restrictive, it may not be restrictive enough and it has not been restrictive for long enough," he said.
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Fiscal News Roundup
- Federal Debt to Soar, CBO Predicts, Despite GOP-Led Spending Standoff – Washington Post
- Biden-McCarthy Deal Fails to Tame US Debt as Republicans Demand Cuts – Bloomberg
- Embracing ‘Bidenomics,’ Biden Seeks to Turn an Insult Into a Strength – Washington Post
- Biden Says He Is ‘Turning Things Around’ on the Economy – New York Times
- Roughly 1 in 3 Approve of Biden’s Handling of Economy Amid ‘Bidenomics’ Push: Poll – The Hill
- Powell Signals Fed Open to Two Straight Hikes at Coming Meetings – Bloomberg
- Top Central Bankers Assert Need for Higher Interest Rates to Tackle Persistent Inflation – Associated Press
- Alaska to Receive Most Per-Capita Aid in Broadband Funding Rollout – Roll Call
- Biden Mocks Tuberville for Touting Broadband Funding He Voted Against – The Hill
- McCarthy Feels the Heat as Frustrated Conservatives Grow More Aggressive – The Hill
- Trump Launches FairTax Attacks While Supporters in House Push for Bill – The Hill
- HHS Has Limited Options as Millions Lose Medicaid – Roll Call
- EPA Announces Grant Competition to Fund Residential Solar – Roll Call
- Thousands More Prisoners Across the US Will Get Free College Paid for by the Government – Associated Press
Views and Analysis
- Why Bidenomics Gets No Love From Voters – Greg Ip, Wall Steet Journal
- Here’s What Biden Didn't Say About the Economy – Robert Burgess, Bloomberg
- Is It a ‘Richcession’? Or a ‘Rolling Recession’? Or Maybe No Recession at All? – Christopher Rugaber, Associated Press
- Student Debt Relief: Which Way Will the Supreme Court Go? – Lexi Lonas and Zach Schonfeld, The Hill
- Taxpayers Shouldn’t Be Paying For Religious Schools – Kate Cohen, Washington Post
- Uncertainty Clouds Defense Spending Forecast – John M. Donnelly, Roll Call
- A Child-Care Crisis Is Looming – Sarah Jones, New York
- Parents to Congress: If You Care About Child Care, Show Us the Money – Alyssa Rosenberg, Washington Post
- A New, Sensible Plan for Fall COVID Boosters Is Taking Shape – Leana S. Wen, Washington Post
- The Myth That May Have Doomed the Titan – Naomi Oreskes, New York Times