Biden's new budget ditches FDR-style spending ambitions
When President Biden released his first budget, he drew comparisons to Franklin Delano Roosevelt. His second appears designed to keep him from becoming Herbert Hoover.
Why it matters: The budget blueprint Biden released Monday is an attempt to address the deep economic uncertainty caused by inflation, and avoid an electoral wipeout in the midterm elections. Instead of transformational social spending, there's a smaller placeholder — for projects to be named later.
- By focusing on deficit spending as a cause of inflation, administration officials are starting to parrot an argument Sen. Joe Manchin (D-W.Va.) made in rejecting Biden’s Build Back Better agenda: new programs that aren’t fully offset can drive up prices.
- The president also wants to assure Americans he'll increase defense spending in the face of new threats from Russia, and fund the police to keep Americans safe at home.
- A year ago, historians Biden hosted at the White House spoke of an election mandate they saw propelling a new New Deal. "I'm no FDR, but … " Axios co-founder Mike Allen quoted him as telling Doris Kearns Goodwin.
What they are saying: In previewing the FY23 budget, officials took credit for the $1.3 trillion deficit drop in 2022.
They also promised to reduce deficit spending by another $1 trillion over the next 10 years.
- “A lower deficit will help ease long-term inflationary pressures and make our fiscal trajectory more sustainable,” Council of Economic Advisers chair Cecilia Rouse told reporters Monday morning.
- “Last year, they were going to pay for their investments over 15 years, and only start to reduce the deficit in the ninth year,” said Joel Friedman, a senior vice president for federal fiscal policy at the Center on Budget and Policy Priorities.
- “And now, they are reducing the deficit in every year.”
But, but, but: The White House still cites the pandemic, broken supply chains and Russia’s invasion of Ukraine as the primary drivers of inflation.
- “We see this inflation across the developed world,” Rouse said.
- And Biden officials say the $1 trillion bipartisan infrastructure bill will make delivering goods easier while lowering inflation.
- They’re also confident Congress will pass a China competitiveness bill to transform America's semiconductor industry — another legacy accomplishment for the president.
The intrigue: Biden has a placeholder — which officials described as a “deficit-neutral reserve fund” — for any revised climate and social spending bargain he may be able to strike with Manchin and fellow 2022 holdout Sen. Kyrsten Sinema (D-Ariz.).
- The president said in a tweet Monday: "My father had an expression: 'Don’t tell me what you value. Show me your budget — and I’ll tell you what you value.'”
- But Manchin has told colleagues he wants half of any new taxes on corporations and wealthy Americans to go toward deficit reduction — not fresh spending.
The big picture: Even with the unemployment rate below 4% and GDP above 5%, voters appear to be blaming Biden for the higher prices they encounter in everyday life.
- Gas is over $5 a gallon in many places and grocery bills are up week after week.
- Biden’s overall approval rating fell to 40% in a new NBC News poll, with only 33% of respondents giving him good marks for his handling of the economy.
- 62% of voters think their family’s income is falling behind.
Between the lines: Biden’s plan to impose a 20% minimum tax on the income and unrealized capital gains of households with more than $100 million in assets is a nod toward both progressives and deficit hawks.
- The proposal has echoes of the signature wealth tax pushed by Sen. Elizabeth Warren (D-Mass.), even though Biden is only targeting income.
- He’s also dedicating the additional $360 billion in revenue for deficit reduction — a priority for centrists.
Go deeper: The president's move to the center extends beyond deficit spending.
- He also proposed more than $32 billion in new spending to fight crime, putting a price tag on his State of the Union call to fund — not defund — the police.
- He's also calling for some $813 billion for military spending, a 4% increase from this year, and additional money for Ukraine.