WASHINGTON - The Concord Coalition today welcomed President Biden’s goal of reducing federal budget deficits but cautioned that the path of deficit reduction reflected in the administration’s newly released Fiscal Year 2023 Budget is based on optimistic economic assumptions and unlikely policy outcomes. Moreover the amount of projected deficit reduction is roughly what could be expected by simply shutting off COVID-related emergency programs and returning to a pre-pandemic budget “norm.” This old norm, however, would still result in unsustainable levels of deficits and debt because no one–neither Congress nor the President–has yet to put forward a plan that addresses the long-standing structural imbalance between federal revenues and spending. Stabilizing and reducing the debt as a share of the economy will require an aggressive effort to rein in mandatory spending and raise new revenues.
“The goal is good but the path is suspect,” said Concord Coalition executive director Robert L. Bixby. “The budget assumes, for example, that GDP growth will remain high, that inflation will quickly fade and that interest rates will stay low. This is an unlikely combination of factors. The budget also assumes an implausible gusher of revenues from the expiration of the 2017 tax cuts for individuals, a higher corporate tax rate, and several new taxes on the ultra-wealthy. Even if these revenues materialize, however, less than half will go to deficit reduction. Of the $2.5 trillion in projected new revenue, $1.5 trillion will be used to finance new spending.”
The Concord Coalition appreciates that this budget is coming out at a time of great uncertainty, which makes budgeting more difficult. What is certain, however, is that the budget was already on an unsustainable path before the pandemic hit. While the president’s FY2023 budget claims to reduce projected deficits, it does not acknowledge or face up to the magnitude of the spending restraint and revenue increases that will be needed to put the budget on a sustainable path over the long-term.