The Biden Administration Has Approved $4.8 Trillion of New Borrowing
Prior to the pandemic, the U.S. national debt was on an unsustainable path. In 2020, policymakers appropriately enacted $3.4 trillion of additional borrowing to help fight the pandemic and stabilize the economy. Once the economy was strong enough, Congress and the White House should have stopped engaging in new borrowing and pivoted to focusing on implementing reforms to slow the growth of the national debt.
Instead, policymakers have added to the deficit, and borrowing has continued and at a very high level. We estimate the Biden Administration has enacted policies through legislation and executive actions that will add more than $4.8 trillion to deficits between 2021 and 2031, or nearly $2.5 trillion when excluding the effects of the American Rescue Plan. This is on top of the trillions of dollars we were projected to borrow before President Biden took office.
Excessive borrowing will lead to continued inflationary pressures, drive the national debt to a new record as soon as 2030, and triple federal interest payments over the next decade – or even sooner if interest rates go up faster or by more than expected.
The $4.8 trillion of borrowing approved by the Biden Administration is less than the roughly $7.5 trillion President Trump added to the deficit over his term ($4 trillion excluding COVID relief), but much more than the $2.5 trillion President Trump had enacted at this point in his term.
This $4.8 trillion is the net result of roughly $4.6 trillion of new spending, roughly $500 billion of tax cuts and breaks, and $700 billion in additional interest costs, partially offset by $400 billion of spending cuts and $600 billion of revenue-increasing policies. Of the non-interest deficit increases, about $3 trillion is from legislation – including a net $1.6 trillion passed on a partisan basis and $1.4 trillion passed on a bipartisan basis. Another $1.1 trillion comes from executive actions.
The specific policies that have impacted deficits include:
- American Rescue Plan ($1.85 trillion) – The American Rescue Plan Act of 2021 was largely a COVID relief bill, which included funding to state and local governments, $1,400 payments to individuals, an extension of expanded unemployment benefits, new money to combat the pandemic, and other spending. It was regarded by many as larger than necessary given the state of the economy.
- FY 2022 Omnibus Bill ($625 billion) – In March of 2022, Congress agreed to fund the discretionary budget for Fiscal Year (FY) 2022 at 6 percent above 2021 levels. Assuming discretionary spending continues to keep pace with inflation going forward, the Congressional Budget Office has estimated spending will be roughly $625 billion higher than in its prior baseline as a result. Importantly, much of this increase is consistent with keeping pace with inflation.
- Bipartisan Infrastructure Law ($370 billion) – The Infrastructure Investment and Jobs Act of 2021 was a bipartisan package of new spending on transportation infrastructure like roads and bridges as well as on other infrastructure like power, water, and broadband. The package also included several offsets including repurposing of unspent COVID relief funds, delaying implementation of a drug rebate rule, and improving information reporting for digital currencies. However, the bill still added $370 billion to deficits after accounting for those offsets.
- Honoring our PACT Act ($280 billion) – The Honoring our PACT Act of 2022 expanded veterans’ health and disability benefits to veterans who have (or are presumed to have) been exposed to toxic substances while on active duty and have been diagnosed with certain health ailments that could be connected to this exposure. The law was estimated to cost $280 billion and includes no offsets. It would also allow up to $390 billion of discretionary funding to be reclassified mandatory, though that effect is not included in our estimates.1
- SNAP (Food Stamps) Increase ($185 billion) – In August 2021, the U.S. Department of Agriculture announced that it would be revising the Thrifty Food Plan, used for the calculation of Supplemental Nutrition Assistance Program (SNAP) benefits, otherwise known as “food stamps.” The revision increases the reference food plan’s cost by 21 percent.
- Health-Related Executive Orders ($175 billion) – The Biden Administration has announced several executive orders relating to health care that have a combined deficit impact of $175 billion over ten years, assuming all rules are finalized. Early in the Biden Administration, they delayed implementation of a Trump Administration rule regarding prescription drug rebates for a year, saving nearly $15 billion in 2021. They later implemented a different rule requiring pharmacy benefit managers to apply negotiated discounts they receive from pharmacies to the price paid by consumers for drugs under Medicare Part D at a cost of $40 billion. Additionally, President Biden's proposed rule fixing the "family glitch" in Affordable Care Act subsidies will add another $30 billion to deficits, assuming it becomes finalized later this year. Most recently, the Administration proposed a rule overhauling the enrollment process for Medicaid, which we estimate would cost $120 billion over ten years.
- CHIPS and Science Act ($80 billion) – The CHIPS and Science Act of 2022 included more than $50 billion for incentivizing the expansion of the semiconductor manufacturing industry in the U.S. It also increased funding for the Advanced Manufacturing Investment Tax Credit by nearly $25 billion and provided nearly $5 billion for research and innovation. In addition, it included new authorizations not counted in our cost estimate because they would require future appropriations.
- Ukraine Supplementals ($55 billion) – Since Russia invaded Ukraine in February 2022, Congress has approved a total of $55 billion in military, foreign, and humanitarian aid to Ukraine through two supplemental appropriations bills. The first bill passed in March provided $13 billion, while the second bill passed in May provided nearly $42 billion.
- Inflation Reduction Act (-$240 billion) – In August 2022, President Biden signed the Inflation Reduction Act of 2022, a reconciliation bill allowed by the FY 2022 budget. The legislation included spending and tax credits for energy and climate as well as new health spending, but it was more than offset through tax increases, improved tax enforcement, and prescription drug savings, resulting in $240 billion of deficit reduction through 2031.
- Student Debt Relief, Repayment Pauses, and Cancellation ($750 billion) – Over the first 18 months of his Presidency, President Biden extended a pandemic era pause on student debt repayments four times at a cost of roughly $85 billion while also implementing a number of targeted student debt changes that we estimate will cost another $165 billion. More recently, he announced a final pause extension, a cancellation of up to $10,000 to $20,000 per student loan borrower, and a new income-driven repayment plan that we estimate will cost a combined $500 billion.2
- Net Interest ($700 billion) – Increased borrowing results in higher debt and increased federal interest payments. We estimate the legislative and executive actions approved by the President will increase interest costs by $700 billion, with the largest share coming from the American Rescue Plan. This does not account for any interest effects associated with student loan changes, which are generally measured on an accrual basis.
In total, the Biden Administration has added $4.8 trillion to deficits over the 2021-2031 period as a result of legislative and executive actions. With inflation at a 40-year high and debt headed for record levels, substantial deficit reduction will be needed to put the country on a sustainable fiscal course.
1 This $390 billion reclassification could make room for additional discretionary spending that would not have been appropriated otherwise and thus lead to higher overall deficits.
2 We do not include any interest cost for student debt policies, which are measured on an accrual basis.