This week on Facing the Future, we took a close look at President Biden’s much-awaited Fiscal Year 2022 federal budget. My first guest was Marc Goldwein, Senior Vice President and Senior Policy Director of the Committee for a Responsible Federal Budget. Later, I was joined by Steve Robinson, Chief Economist of The Concord Coalition.
President Biden has been rolling out a series of major policy proposals since taking office, but last week was the first time we got to see them all put together in one place when he unveiled his Fiscal Year 2022 budget, which covers the years 2022 through 2031. The budget projects annual deficits in excess of $1 trillion for each of those years and increases the debt as a share of the economy from 110 percent this year, a record high, to 117 percent in 2031.
In total, for the coming 10 years, the Biden budget would increase spending by $5 trillion and increase revenues by $3.6 trillion, meaning that total deficits would go up by about $1.4 trillion, from a baseline of $13.1 trillion to $14.5 trillion.
This is the first presidential budget since Fiscal Year 2009 that does not seek to reduce total deficits or lower the debt-to-GDP ratio from 10-year baseline projections. However, the administration contends that the policies in the budget would begin to reduce projected deficits toward the end of the coming 10 years and continue reducing them in the second decade (2032-2041).
“The budget does, over the very long-term, start to reduce debt relative to its projections, but debt remains on a pretty strong upward path,” Goldwien said. “There is no plan in this budget to turn around the debt projection so it’s going in the right direction.”
Goldwein gives the administration credit for sticking with the principle that things should be paid for and he likes the fact that a lot of specific offsets are included in the budget, but he worries about breaking with the tradition that things should be paid for over 10 years. It could be a “slippery slope,” he warned, where “10 years becomes 15 years, becomes 17 years, becomes 40 years.”
He also expressed concern that some policies, such as the expanded Child Tax Credit and a portion of the 2017 tax cuts, are assumed to expire, creating budget savings on paper that might never actually materialize if these policies were extended. He did, however, credit the administration for not using overly optimistic economic assumptions to make the budget numbers look better.
Robinson said, “At first glance, it would appear that the Biden Administration has vastly over-promised in terms of what they would hope to provide for child care, elderly care and community college relative to the amount of money they have put forward.”
It is very difficult, he said, to know what the new programs are going to cost before they are enacted because of the many unknowns about implementation and participation.
“The Biden Administration is committed to paying for this stuff, but if it turns out costing a lot more than they think, or hope, or expect, which I think there is a great risk of, there are going to be problems.”
In Robinson’s view, the biggest risk is interest rates. “If interest rates rise because of a risk premium because investors are concerned about inflation, I’m afraid that the optimistic assumptions about debt and the sustainability of their budget proposal is not going to come to pass.”
Regardless of whether you support or oppose the president’s proposals and how they add up, this is likely to be a very impactful budget. It certainly proposes some big ideas and with the House and Senate both in control of the Democrats, there is a greater chance that this budget will be taken seriously on Capitol Hill.
Hear more on Facing the Future. I host the program each week on WKXL, NHTalkRadio.com (N.H.), and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.