Top takeaways from Biden’s fiscal 2023 budget request
Discretionary spending, taxes and debt rise while deficit drops
President Joe Biden submitted his budget proposal for the fiscal year that begins Oct. 1 on Monday morning, which will set the tone for the legislative scramble ahead of midterm elections in November.
The ink was barely dry on the $1.5 trillion omnibus spending package for fiscal 2022 before White House budget officials and agency program managers had to put their new proposals to bed. Here are some initial observations to help understand what Biden is pitching to lawmakers:
Discretionary spending: The White House is asking for about $1.64 trillion in appropriated funds for fiscal 2023, a nearly 9 percent increase over the $1.51 trillion enacted for the current year, over five months late. Including various budgetary add-ons to the "base" budget request, including disaster relief money and changes to mandatory programs that free up discretionary funds, domestic and foreign aid agencies and programs would receive roughly $829 billion in fiscal 2023, a nearly 14 percent increase from the comparable levels enacted this year. Defense programs, largely at the Pentagon, would get $813 billion, a roughly 4 percent boost.
Deficits: This year's budget shortfall would drop to about $1.42 trillion, from $2.78 trillion in fiscal 2021, falling further to around $1.2 trillion the next two years before starting to rise again. Still, the administration estimates a little north of $1 trillion in deficit reduction over the next decade if its policies are enacted.
Debt: Federal debt held by the public, excluding government trust funds, would keep rising — by about $14.7 trillion from the end of this fiscal year to fiscal 2032. Debt subject to the statutory borrowing cap, which includes intragovernmental debt, would surpass the current $31.4 trillion ceiling before the end of the year, though the Treasury Department could deploy "extraordinary measures" to avoid breaching the limit.
Overall spending: Counting all of the mandatory programs and federal benefits that flow automatically, largely independent of the appropriations process, the Biden budget envisions spending $5.8 trillion next year, or a hair lower than the current year. Spending would rise by about $1.4 trillion overall during the next decade under Biden's budget, compared with baseline spending policies; that doesn't include what might constitute a revived "Build Back Better" legislative package, which was a fixture of last year's Biden budget but stalled in the Senate.
Tax increases: Federal revenue, even without any proposed tax increases, is estimated to surge by more than 9 percent this year, to over $4.4 trillion, before growth slows down next year and in the coming years. Tax revenue would rise by $2.5 trillion over the next decade, including recycled proposals like a corporate tax increase and new ones like a "billionaire minimum income tax." As with new spending initiatives, tax increases outlined in the budget would be on top of any agreed to in talks to resuscitate the Build Back Better climate and safety net package.
Economic projections: The White House's economic forecasts were finalized in November, so they might be taken with a grain of salt. But the administration's view of the landscape back then showed inflation moderating substantially next year, to a 2.3 percent rise in the Consumer Price Index, down from an average 4.7 percent this year. Interest rates may also end up a little north of where the White House expects, with a 2.1 percent average rate on 10-year Treasury notes this year, rising to 2.5 percent next year; meanwhile, 10-year Treasury yields were bouncing between 2.4 and 2.5 percent during Monday morning trading. Inflation-adjusted economic growth, forecast at 3.8 percent measured from the fourth quarter of last year, will decline to 2.5 percent next year, but the unemployment rate will continue to drop, from 3.9 percent this year to 3.6 percent in 2023, the budget predicts.