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The good, the bad and the ugly of the Biden budget

The good, the bad and the ugly of the Biden budget
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One had to wonder how serious the White House was about their budget when they released it at the very moment everyone was heading out of town for a long-overdue three-day weekend. Questionable timing aside, budgets are a statement of an administration’s priorities, and there is a lot to learn from this one. 

Perhaps most notable is the very significant growth in the size and reach of government. The budget includes roughly $5 trillion in new spending and targeted tax breaks over the decade to reflect President BidenJoe BidenExpanding child tax credit could lift 4 million children out of poverty: analysis Maria Bartiromo defends reporting: 'Keep trashing me, I'll keep telling the truth' The Memo: The center strikes back MORE’s proposed American Jobs Plan ($2.6 trillion), American Families Plan ($1.7 trillion) and discretionary spending increases ($600 billion). 

Spending would increase from $4.4 trillion in 2019 (the last year of spending pre-COVID) to $6 trillion next year. As a share of the economy, it would grow from 21 percent of GDP in 2019, to 25.6 percent next year and to an average of 24.5 percent over the decade. The historical average has been 20.6 percent of GDP. The only times that spending has been this high as a share of the economy before the COVID pandemic was during World War II, the year after and during the Great Recession, and it has never been this high for a full decade as it would be if this budget were enacted. 

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Also notable is the shift in priorities. The clear priority is new investments in the broadly defined infrastructure space and child-oriented policies. It is hard to argue against these in principle as important priorities, many of which are overdue. However, the massive price tag has yet to be justified, and already there are many stories popping up of industries and agencies admitting they have no idea how to possibly spend this much money. The risk of massive waste coming out of this tidal wave of new spending should not be ignored. One option is to have a greater reliance on experts (not advocates) on what spending is most needed and would result in the highest return. Another is to use outside panels of non-political experts to help direct the spending (infrastructure in particular too often ends up being directed to politicians’ pet projects). There is plenty of room for keeping these priorities but scaling-back the size of these packages.  

The administration impressively sets out the important benchmark of paying for these new initiatives. While the proposals are partially offset by $3.6 trillion of tax increases and $200 billion of spending reductions and would pay for the new investments over a longer time period, they still fall short by $1.4 trillion over the 10-year window. This is a tremendous amount of unjustified borrowing on top of the $5.2 trillion we understandably borrowed for COVID. And it comes on top of the $13.2 trillion in planned borrowing already built into the budget, that the administration should take steps to address, but about which this budget instead retains.  

Biden’s budget also is silent on proposals to secure the major federal trust funds, four of which are projected to go insolvent in just over a decade. Insolvency of these trust funds would trigger massive benefit cuts in highway spending, Medicare payments and disability and retirement benefits. The budget also does not address how to pay for and deal with a number of temporary tax and spending measures — whether we extend them with offsets, reform them, phase them out, or let them expire — there must be a concrete plan in place. 

Under this budget, debt held by the public as a share of GDP would reach 117 percent by the end of the decade — more than the historical record we set just after World War II. This is the wrong direction. After the massive run up in the debt during the past two recessions, the aging of the population, the many threats we are contending with from competition with China to new forms of cyber warfare, it is nothing short of reckless to be leaving ourselves so fiscally vulnerable. 

A budget is designed to be a statement of values and priorities. Clearly the president is focusing on investments in the future — a praiseworthy goal, however, one that will not be effective in practice if at the same time we are increasing the mountain of debt our kids are slated to inherit. 

Maya MacGuineas is president of the bipartisan Committee for a Responsible Federal Budget.