President Joe Biden’s $6.8 trillion budget proposal, released Thursday, is more than just a Democratic wish list for government spending, taxation, and deficit reduction.
It’s a statement of values. It’s an opening bid in critical negotiations with Republicans over Social Security and other increasingly insolvent safety-net programs and, most urgently, the need to raise the statutory limit on the federal government’s ability to borrow money. And it’s a signal moment in the soft launch of President Biden’s expected 2024 reelection campaign.
Why We Wrote This
President Joe Biden’s budget proposal is a statement of values – an opening bid in negotiations with Republicans over programs like Social Security, and most urgently, the federal debt limit. Think, also, of his expected 2024 reelection campaign.
The pandemic has raised the stakes. Government spending, by Presidents Donald Trump and Biden, to help struggling Americans and businesses has ballooned the deficit and debt to a place once thought unfathomable.
By 2033, the nonpartisan Congressional Budget Office (CBO) projects, the federal debt will clock in at close to $52 trillion. Today, the debt stands at an already astounding $31 trillion. It’s reached the point where the numbers are so massive that they almost feel meaningless.
But to some members of Congress, the debt and deficit do matter – because they have real-world implications for the government’s ability to function. On Social Security, which the CBO projects is headed for insolvency by 2033, a bipartisan group of senators is working privately on a compromise to set the program on a sustainable path.
President Joe Biden’s $6.8 trillion budget proposal, released Thursday, is more than just a Democratic wish list for government spending, taxation, and deficit reduction.
It’s a statement of values. It’s an opening bid in critical negotiations with Republicans over Social Security and other increasingly insolvent safety-net programs and, most urgently, the need to raise the statutory limit on the federal government’s ability to borrow money. And it’s a signal moment in the soft launch of President Biden’s expected 2024 reelection campaign.
But for now, it’s an opportunity to examine exactly what Mr. Biden is trying to do with federal spending and priorities at a fraught moment in the nation’s history.
Why We Wrote This
President Joe Biden’s budget proposal is a statement of values – an opening bid in negotiations with Republicans over programs like Social Security, and most urgently, the federal debt limit. Think, also, of his expected 2024 reelection campaign.
In a speech in Philadelphia, the president took the fight to Republican House Speaker Kevin McCarthy, saying, “Show me your budget. I’ll tell you what’s your value.”
The United States is arguably more politically polarized than it’s been in decades. That does not bode well for the ability to do seemingly simple things like establish the outlines of a federal budget.
Certain functions enjoy broad public support, such as national defense and providing for those who truly can’t provide for themselves. But in the new normal of the post-pandemic era, the ability to allocate spending for much else is open to negotiation.
The pandemic itself has raised the stakes. Large sums of government spending, by Presidents Donald Trump and Biden, to help struggling Americans and businesses have ballooned the deficit and debt to a place once thought unfathomable.
By 2033, the nonpartisan Congressional Budget Office (CBO) projects, the federal debt will clock in at close to $52 trillion. That’s trillion with “t.” Today, the debt stands at an already astounding $31 trillion. And that’s not the deficit – annual overspending by the federal government. That’s the debt, the accumulation of annual deficits, which has become much more expensive to service of late, with the rapid rise in interest rates.
It’s reached the point where the numbers are so massive that they almost feel meaningless.
SOURCE:
White House Office of Management and Budget, U.S. Social Security Administration, Congressional Budget Office
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Jacob Turcotte and Mark Trumbull/Staff
But to some members of Congress, the debt and deficit do matter – because they have real-world implications for the government’s ability to function. On Social Security, which the CBO projects is headed for insolvency by 2033, a bipartisan group of senators is working privately on a compromise to set the program on a sustainable path. Sens. Bill Cassidy, Republican of Louisiana, and Angus King, an independent from Maine who caucuses with the Democrats, are collaborating privately with some 10 other senators to work out a solution. Fixes to Medicare, the nation’s health insurance program for seniors, are also a pressing concern. The senators’ proposal for both programs is expected in May.
The retirement of the massive baby-boom generation is driving the need for reform of the public retirement system. But the challenges in federal budgeting go far beyond that. Defense spending is also under the microscope, with the Biden administration committed to aiding Ukraine following the Russian invasion a year ago.
In its initial release on the 2024 budget, the White House highlighted what it says would be nearly $3 trillion in deficit reduction over 10 years. To help pay for that, the administration advocates $5 trillion in tax increases on wealthy individuals and corporations, including a new 25% minimum tax on billionaires and an increase in the corporate tax rate, from 21% to 28%.
For longtime advocates of bipartisan problem-solving and fiscal responsibility, today’s budget challenges seem as tough as ever.
“Ironically, as the situation has gotten worse, the desire to compromise has lessened,” says Bob Bixby, executive director of the nonpartisan Concord Coalition, which encourages fiscal responsibility.
But Mr. Bixby finds some solace in his group’s continuing efforts to engage Americans in the search for solutions.
“We find people are still open to a mix of tax increases and benefit changes,” he says. “When you get people outside a highly partisan atmosphere, looking at options, they’re usually willing to look at it in a very rational way.”
Shai Akabas, director of economic policy at the Bipartisan Policy Center in Washington, expresses frustration over a budget process that he says “has largely devolved into a political exercise.”
Spending has become an “easy answer” for both parties, Mr. Akabas says, “because you’re giving out money and you’re not telling anyone they need to pull back.”
But he is somewhat optimistic that there are serious, private, bipartisan discussions in the Senate over Social Security and Medicare, referring to the Cassidy-King group – ”frankly, more serious conversations than I’ve seen at any time in the last decade.”
“It doesn’t mean something’s going to pass this year,” Mr. Akabas says. “But the first step toward solving the problem is having serious discussions about the ways that we can solve the problem.”
The United States is barreling toward a showdown with the looming budget process. With political gridlock in Washington and economic instability around the world, the mother of all budget showdowns may be upon us.
The US budget has been a source of political strife for several years, fueled by divided government and a lack of compromise between the parties. To make matters worse, the current administration’s tax and spending policies have fueled both the deficit and the national debt. With a wide divide between the parties regarding both taxes and spending, finding a balance between the two appears to be increasingly difficult.
The coming months will prove to be a critical juncture for the US budget process. As the budget is set to expire at the end of the year, Congress will have to agree on a spending and tax package that can secure enough support to pass. Failure to do so could have catastrophic consequences, resulting in a government shutdown and disrupting the global economy.
With both sides seemingly entrenched in their positions, prospects are bleak and the future of the budget process remains uncertain. In order to avert a budget showdown of epic proportions, both parties will need to come together to find a compromise that can pass in Congress. Until then, all eyes will be on the budget process to see what progress can be made.
