Biden budget expands government’s role in economy

President Biden’s budget proposal sets the government to take on an expanded role in the economy for years to come, underscoring the White House’s desire to push forward with progressive policies that would reform taxes and the social safety net.

The plan, due out Friday, will increase the share of the economy taken up by government spending to nearly 25 percent, according to a report in The New York Times, the highest sustained level of government spending since World War II, when it spiked to 40 percent.

In the decades since, it has largely hovered between 15 and 22 percent, with exceptions around major economic catastrophes.

The blueprint is the latest sign of how far the pendulum has swung from the Reagan Revolution, which framed government as an impediment to growth and opportunity.

Biden, a self-described moderate, is not only arguing that the government has a role to play in an emergency, but that it should have a sustained role in building infrastructure, reducing inequality and more forcefully supporting families and the poor.

The proposition is at the core of the twin proposals to rebuild infrastructure and bolster support for families that Biden unveiled earlier this year and will be carried home in his budget.

Those proposals — the $2.3 trillion American Jobs plan and $1.8 trillion American Families plan — would invest in traditional infrastructure such as roads, ports and bridges, build a green energy system, and fund child care and paid leave options to help struggling working parents, among other things.

Biden also proposed a whopping 16 percent jump in annual nondefense spending for 2022, boosting everything from housing assistance and education to agriculture and veterans affairs.

Progressives, who say the government has taken too much of a hands-off role for too long, said plans on the scale Biden is proposing are long overdue.

“I think it’s a good thing. What we have seen over many, many decades at this point is a shrinking government in ways that can help people,” said Maura Quint, executive director of Tax March, a progressive advocacy group. “Fundamentally, I think we need to go very big, and we’re only going to be better served individually and as a whole if we make investments of this size now.”

Progressive groups point to rising inequality, stagnant wages, ongoing racial and gender disparities, and other social ills to argue that the government should play a larger role, and the pursuit should be funded by higher taxes on the wealthy and corporations.

But the approach has its fair share of critics.

“We haven’t seen anything close to this since the Great Society and Lyndon Johnson,” said Douglas Holtz-Eakin, president of the right-leaning American Action Forum and a former director of the Congressional Budget Office.

Holtz-Eakin argues that an expanded federal government will weigh down the economy.

“With that spending comes a whole lot of red tape. You have to have a lot of regulation to see who the recipients are, how it can be used, and that comes with a lot of costs as well,” he said.

The additional government spending will also come with either higher taxes and more borrowing to pay for it.

Biden’s plan would reportedly allow deficits to remain well above $1 trillion over the coming years and bring the nation’s debt burden to its highest point in history by the end of the decade, infuriating deficit hawks.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, called the deficit proposals “dangerous.”

“This is a massive expansion of federal spending — well above historical levels,” she said. “It may sound appealing on the promises side, but we have to keep in mind the huge price tag that comes with, and so far the administration has not gone nearly far enough in spelling out how it would be fully paid for.”

The budget is also only expected to include proposals Biden has already rolled out as president, meaning that it does not take into account other plans that he promised on the campaign trail, such as creating a public option for health care.

“I would expect that future proposals from President Biden will come later, including on health care,” said Seth Hanlon, a budget expert at the left-leaning Center for American Progress.

Biden on Thursday argued that his economic plan is already helping to revive the economy, which is expected to grow this year at a clip not seen since the early 1980s. But he argued that further investments are needed in order to help foster growth and outcompete other nations like China.

“These are generational investments. Private sector does not make these kinds of investments. We’ve neglected that kind of public investment for much too long,” Biden said in remarks at a community college in Cleveland on Thursday afternoon.

“The pandemic exposed just how badly we need to invest in the foundation of this country and the working people of this country,” Biden said.

White House press secretary Jen Psaki declined to confirm the top-line number of the president’s budget proposal on Thursday but said it would reflect his priorities to defeat the pandemic and create jobs.

“Those proposals — the American Jobs Plan, the American Rescue Plan, the American Families Plan — will put us on better financial footing overtime,” Psaki told reporters aboard Air Force One.

Like all presidential budget proposals, the Biden budget is seen as a messaging document, setting the parameters for a tough negotiation with Congress over passing 12 annual spending bills that will keep the government running in fiscal 2022, which begins Oct. 1.

Senate Appropriations Committee Chairman Patrick Leahy (D-Vt.) said Thursday that Congress should hammer out top-line spending numbers in June, which could differ dramatically from what’s proposed in the budget.

GOP press releases declaring the document “dead on arrival” are already being written in anticipation of the budget’s official release Friday.

“This budget’s chances of becoming law are revealed by the fact that they’re dumping on Friday before Memorial Day,” Holtz-Eakin said. “It’s dead, and they know it.”

Biden already has lopped $500 billion off his infrastructure proposal in talks with Republicans, who have only signaled a willingness to support a plan less than half the original size.

Moderate Democrats, such as Sen. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.) have laid down markers over Biden’s tax proposals, and are likely to demand reductions in any spending that the Senate might try to pass through budget reconciliation.

That process can freeze out the GOP, but in an evenly divided Senate, it needs the vote of every Democrat.

Biden’s proposals mark a shift in the political landscape, but in the end, they won’t matter much unless his proposals get through Congress.

“The risk is not trying to go big,” Biden said in a recent interview. “If we stay small, I don’t know how we change our international status and competitive capacity.”

Via The Hill

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