CRFB Reacts to the President’s FY 2024 Budget
President Biden released his Fiscal Year (FY) 2024 budget request moments ago, outlining his tax and spending priorities over the next decade.
Under the budget, debt would grow by $19 trillion to $43.6 trillion by 2033. Debt as a share of Gross Domestic Product (GDP) would rise from 98 percent at the end of this year to a record 110 percent by 2033. Compared to baseline levels, the budget would reduce deficits by $3 trillion over a decade, lowering debt by 8 percent of GDP. The budget would also extend the Medicare Hospital Insurance trust fund through a combination of prescription drug savings, revenue increases, and a transfer of revenue into the trust fund.
A preliminary analysis of the budget is available here, and a full analysis will be sent out soon. The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
The President’s budget would borrow $19 trillion through 2033 and increase the debt-to-GDP ratio from 98 percent at the end of 2023 to 110 percent by 2033, past the record set in this nation just after WWII. It would spend $10.2 trillion on interest payments on the national debt alone – more than it will spend on defense or Medicaid over the same time period. Most of this massive borrowing is the result of policies put in place years ago by Democratic and Republican administrations and Congresses alike, but it will require presidential leadership to enact real changes, and this budget does not go nearly far enough to make reining in our dangerous debt levels a top national priority.
The President does deserve real credit for putting forward $3 trillion of deficit reduction in addition to paying for his new priorities. While the $3 trillion of savings proposed in the budget would only go a fraction of the way toward fixing the debt, it is directionally correct and an achievable target for upcoming budget negotiations.
President Biden should also be commended for suggesting measures to extend the life of the Medicare Hospital Insurance trust fund. Unfortunately, some of that savings comes from diverting funds from the rest of the budget – robbing Peter to pay Paul – rather than from common-sense health savings that both parties agree on. When it comes to fixing the debt, this is by no means an award-winning budget, but the President deserves at least a participation trophy.
It is good to see that the President’s budget would begin deficit reduction immediately, saving $173 billion in 2023 and 2024 and another $226 billion in 2025. Given current damaging levels of inflation, fiscal policy should be crafted to help the Federal Reserve fight inflation through substantial near-term deficit reduction.
However, in the longer term, debt would grow by $19 trillion through 2033 under the President’s budget and reach a record share of the economy in only four years. The President should have a plan to truly bring the debt under control before suggesting trillions of dollars in new spending and tax breaks. $3 trillion of deficit reduction is welcomed, but since taking office, the President has approved over $5 trillion of new debt from legislation and executive actions; we desperately need to change course.
Spending in this budget is excessive. At $6.9 trillion, spending next year would be higher than any time during the pandemic and about $2.5 trillion above the pre-pandemic level, representing growth of 55 percent. Despite the nearly $600 billion of prescription drug, defense, and other savings, the budget would spend about 25 percent of the economy per year – unheard of outside of a national emergency. There is nothing wrong with having a spending wish list, but we should wait to implement major new spending or tax cuts until the nation’s fiscal situation is stabilized – a plan that still requires $19 trillion of borrowing is nowhere near under control.
The budget also contains a glaring omission – it includes no plan to address Social Security. The Social Security trust fund is projected to be insolvent within the next dozen years, and delaying action puts those who depend on the program the most at risk. If we do nothing, Social Security will have an over 20 percent across-the-board benefit cut, truly harming those who depend on the program. By failing to suggest increases in Social Security revenues or adjustments and reforms to future benefits in his budget, the President is implicitly endorsing the 20 percent benefit cut plan while claiming to be the protector of the program and attacking those who suggest we make changes.
In terms of the deficit reduction in the budget, we see the President’s $3 trillion in savings as a minimum savings target for any upcoming fiscal agreement, understanding that future budget deals will then be necessary to put our debt on a sustainable path.
It would take roughly $16 trillion of deficit reduction to balance the budget in ten years. While we wish this were possible, it is not close to realistic. Policymakers need to pick an aggressive but realistic fiscal goal to pursue rather than chasing a fiscal pipedream.
The blueprint we offered aimed to stabilize the debt at its current share of the economy, which would require roughly $8 trillion of savings. Another reasonable goal would be $3.9 trillion in savings to offset the costly unpaid-for 2017 tax cuts and the inflationary and excessive 2021 American Rescue Plan.
With the President’s budget now released, the House and Senate Budget Committees need to put out their budget plans. As budget negotiations are complicating the debt ceiling increase, it is critical that the budget committees do their jobs and release their budgets in a timely manner. Failing to do so will greatly complicate the process of needed negotiations about where to get necessary savings.
We urge lawmakers of both parties to stop delaying, stop justifying, stop blaming, and start negotiating a real package of budgetary savings.
For more information, please contact Kim McIntyre, Director of Media Relations, at email@example.com.