Beneath the hood of Biden's budget
President Biden is asking Congress to spend $6 trillion next year, as part of a sweeping budget proposal that incorporates some, but not all, of his campaign promises, including the $4 trillion for infrastructure, social and education spending he announced this spring.
The big picture: Presidential budgets are aspirational and rarely survive first contact with Congress, but they help the White House articulate its priorities and amplify its agenda.
- "Where we choose to invest speaks to what we value as a nation," Biden said. "This year’s budget, the first of my presidency, is a statement of values that define our nation at its best.
- Biden’s proposal largely hews to the $2.3 trillion American Jobs Plan and his $1.9 trillion American Families Plan, which call for new investments in hard infrastructure, as well as $400 billion for caregivers, extended tax breaks for families and a commitment to provide another four years of free education to all Americans.
Why it matters: Biden’s budget doesn’t shy away from embracing the federal government as a robust force to achieve his stated policy objectives. And he’s clearly comfortable with deficit spending for the next 10 years.
- At the end of Biden’s budget window in 2031, he expects federal spending to increase to $8.2 trillion with annual deficits never dipping below $1.3 trillion, and ending at $1.6 trillion in 2031.
- Total taxes raised will nearly double, from $3.4 trillion in 2021 to $6.6 trillion in 2031, which would be approximately 20% of GDP.
- While deficits would persist, annual deficits as a percentage of GDP will decline, coming down to around 5% of GDP.
- In President Trump’s final year in office, the deficit ran at $4.2 trillion after Congress passed several COVID relief packages and the economy cratered after nationwide lockdowns. Deficit as as a percentage of GDP climbed to 16% in 2020.
The intrigue: While Biden will call on Congress to lower the eligibility for Medicare to age 60, his budget won’t make a specific dollar request for the expansion, a policy proposal that Biden adopted under pressure from Sen. Bernie Sanders.
By the numbers: The budget projects real GDP growth of 5.2% this year and estimates that it will decline to 3.2% in 2022, before leveling off at, or below, 2% for the remaining eight years.
- It predicts an unemployment rate of 4.1% for next year and then 3.8% through 2031.
- Interest payments to service the public debt will rise from 1.6% of GDP in 2020 to 2.9% of GDP in 2031, with publicly held debt around 120% of GDP.
Go deeper: By increasing the corporate tax rate, both at home and abroad, Biden hopes to capture an additional $2 trillion over 10 years.
What we are watching: Biden is proposing a Pentagon budget of $715 billion, a modest increase from this year’s $704, but below the $722 that Trump offered in his final budget.
- It also includes $8.7 billion for the Centers for Disease Control and Prevention to help prepare for emerging global threats.
- Most of the federal workforce will grow, with the Commerce Department taking a 7.4% decrease next year and the Labor Department expecting a 13.5% increase.
The bottom line: Biden is asking Congress for a lot of money and explaining how he’ll raise taxes to pay for his priorities.
- Now it’s Congress’s turn.