President Biden Wants to Debate Debt Stabilization, Not Enact a Plan

President Biden’s press office has let it be known that the White House relishes a debate with the GOP over the parties’ competing visions for controlling federal debt. It is a curious display of bravado, given the administration’s seeming vulnerability on fiscal matters.

Congress was fully under Democratic control in 2021 and 2022, and yet the Biden administration made no serious effort to narrow future budget deficits. Quite the contrary. The House and Senate worked with the White House to pass bills that will require trillions of dollars of additional borrowing, and then the president unilaterally made the problem worse with a large student loan forbearance program. That is the actual record that the president will need to defend in 2024.

The administration understandably wants to frame the discussion differently. Their strategy is to pick a fight with House Republicans over which side has a better debt slowdown plan on paper. How the problem came about is not their concern. Nor do they care if their plan has a realistic chance of ever passing. They only want to convince some voters, prior to next year’s election, that they could solve the problem if only the GOP would get out of the way.

Top White House aides point to the fiscal year 2024 budget, which was updated in July, as evidence of a politically viable strategy for slowing rising debt. They also attack the House Republican Study Committee’s plan because it does not exempt the nation’s largest entitlement programs from restraint.

What the administration does not acknowledge is that there is opposition to the president’s ideas within his party and no support in the GOP. When presented with the administration’s tax hikes two years ago, Democratic moderates — and not just Senators Joe Manchin and Kyrsten Sinema — balked. A similar bloc is likely to remain opposed to a tax-heavy plan even if the Democratic party sweeps the 2024 election.

The budget’s top-line figures justify the reticence of the dissenters. Over the period 2024 to 2033, the president wants to increase federal taxes by $4.8 trillion and spending by $3.3 trillion. In other words, his primary objective is to dramatically expand federal activity, which he couples with a modest amount of deficit reduction. Even if adopted in full, which is unlikely, the plan would leave an annual deficit in 2033 of 4.9 percent of GDP, and total debt would reach 107.3 percent of GDP. The average deficit from 1962 to 2008 was just over 2.1 percent of GDP.

The administration also wants voters to forget that two pieces of legislation it highlights as major achievements were paid for in part with more borrowing. Just after taking office in 2021, the White House hurried another COVID-focused measure through Congress, which cost $1.8 trillion and included no offsetting taxes or spending cuts. Then, in 2022, Congress passed the Inflation Reduction Act,which the Congressional Budget Office (CBO) estimated would cut future deficits but now seems more likely to increase them. With student loan forgiveness thrown in, this administration is directly responsible for multiple trillions of dollars in new federal borrowing.

The persistent gap between spending commitments and tax receipts expected in the coming years is the result of many decisions by both parties, some of which occurred decades ago. Still, this administration has added to the problem. In 2021 and 2022 alone, the federal government borrowed $4.2 trillion, and it is on track to borrow $3.1 trillion more in 2023 and 2024, with no real prospect of an improvement in the coming years.

The White House downplayed fiscal concerns when pushing its initial agenda, even as the evidence was mounting that rising debt was rapidly becoming a serious economic threat. CBO’s most recent long-term forecast shows debt rising to 181 percent of GDP in 2053 under current law. If the tax cuts enacted in 2017 are extended and appropriated spending stays fixed at its current percentage of GDP (instead of falling), debt will rise to 250 percent of GDP in three decades.

The president wants to contrast his budget plan with one prepared by a group of House Republicans because it includes Social Security and Medicare reforms. The administration attacks these ideas as harming seniors and claims the programs can be made solvent with new taxes on higher-income households while protecting all current and future benefit payments.

And yet the president has not presented an actual plan to prevent the Social Security retirement fund from depleting its reserves in about ten years. If Congress does not step in, beneficiaries would get only about 70 to 75 percent of what they are owed when the fund balance falls to zero.

The administration has been more forthcoming with a plan to prevent the Medicare hospital insurance (HI) trust fund from falling into insolvency. The president proposes raising certain existing taxes on high-income households along with redirection of savings from drug pricing cuts and some existing tax revenue. The plan would break from the traditional system of program financing focused on employer and employee payroll taxes. Vulnerable Democrats will find it difficult to support this plan because, without substantial savings on the spending side, the GOP’s anti-tax criticisms will resonate with some voters.

It is natural and healthy for the parties to compete over their plans for slowing debt accumulation, but that competition should be conducted with a view toward striking a deal when the time is right. For now, President Biden seems to be so focused on the election that he is making it less likely he can pass something meaningful if he wins.