By JOSH BOAK – Associated Press
WASHINGTON (AP) — President Joe Biden intends to propose a fiscal 2023 spending plan that would cut projected deficits by more than $1 trillion over the next decade, according to a fact sheet released Saturday by the White House Budget Office.
In his proposal, expected on Monday, the lower deficits reflect the economy’s resurgence as the United States emerges from the pandemic, as well as likely tax law changes that would generate more than enough revenue to offset additional investments planned by the Biden administration. It’s a sign the government’s balance sheet is set to improve after a historic surge in spending to fight the coronavirus.
The ebbing of the pandemic and growth has seen the deficit narrow from $3.1 trillion in fiscal 2020 to $2.8 trillion last year and an expected $1.4 trillion this year . That deficit spending paid off in the form of economic growth of 5.7% last year, the strongest growth since 1984. But inflation at a 40-year high has also accompanied these robust gains, as high prices have weighed on Biden’s popularity.
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For the Biden administration, the proposal for the fiscal year beginning Oct. 1 shows that the spending spurt has helped boost growth, thereby making government finances more stable for years to come. A White House official, who insisted on anonymity because the budget has not yet been released, said the proposal shows Democrats could deliver on what Republicans had previously promised without much success: faster growth and shrinking deficits.
But Republican lawmakers have said the Biden administration’s spending has resulted in greater economic pain in the form of higher prices. The inflation that has accompanied the reopening of the US economy, as lockdowns due to the pandemic began to end, has been compounded by supply chain problems, low interest rates and now disruptions in oil and natural gas markets due to the Russian invasion of Ukraine.
Republican Senate leader Mitch McConnell of Kentucky blamed it on Biden’s coronavirus exoneration as well as his push to move away from fossil fuels.
“The Washington Democrats’ response to these hardships has been as misguided as the war on American energy and the uncontrolled spending that helped create it,” McConnell said last week. “The Biden administration appears willing to try anything but roll back its own disastrous economic policies.”
Biden inherited a budget deficit from the Trump administration that accounted for 14.9% of the entire US economy. But the deficit from next fiscal year will be below 5% of the economy, putting the country on a more sustainable path, according to people familiar with the budget proposal, who insisted on anonymity to discuss forthcoming details.
The planned deficit reduction is in line with current legislation, which assumes some of the tax cuts signed by former President Donald Trump in 2017 will expire after 2025. The lower deficit amounts will also be easier to manage as interest rates rise. Nonetheless, Bidens is offering a blueprint for spending and taxes that eventually will be decided by Congress that could differ from the president’s intentions.
The expected deficit decline for fiscal 2022 reflects the solid recovery in hiring, driven in large part by Biden’s $1.9 trillion coronavirus relief package. The extra jobs mean additional tax revenue, with the government likely to collect $300 billion more in revenue compared to fiscal 2021, a 10% increase.
Still, the country will face several uncertainties that could reshape Biden’s proposed budget, which will include figures that don’t include the recently signed spending omnibus. Biden and US allies are also providing aid to Ukrainians fighting Russian forces, a war that could potentially shift spending priorities and the broader economic outlook.
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