President Joe Biden’s budget proposal released Friday would extend rare and extreme levels of deficit spending not only through his term as presidency but halfway into the next term.
The budget proposal forecasts budget deficits that are higher than five percent of Gross Domestic Product, a level rarely seen except in a recession or its immediate aftermath, in each year until 2027.
The budget would make Biden the first U.S. president to ever preside over a government running a deficit that never dipped below 5 percent, assuming Biden is not re-elected. It will also set a record for the first post-WWII presidency to preside over three years of greater than 5 percent of GDP budget deficits. If Biden were to be elected for a second-term, the budget would make him the president with the longest running budget hole of that size, surpassing Franklin Delano Roosevelt’s Great Depression and World War Two record.
The budget deficit has rarely exceeded five percent of GDP in the post-war era. Reagan presided over one year in which it did, 1983, at the tail end of the recession provoked by Fed chair Paul Volcker’s war on inflation. The end of the Bush years and early Obama years also saw deficits that exceeded five percent of GDP thanks to the financial crisis. Donald Trump’s final year saw a deficit in excess of all those after 1945 due to high levels of spending to fight off a pandemic depression.
Each time, in other words, the above five percent of GDP deficit was due to an emergency response to an economic crisis.
Unlike those deficits, however, Biden’s are not seen as a response to a crisis. Uniquely in U.S. history, the elevated deficits are purely due to plans to spend far more than the government collects in taxes and fees. No emergency needed.
Under the “baseline” used for Biden’s budget, which does not include his administration’s big spending plans, the budget deficit would fall below 5 percent of GDP in 2023 and then climb down to 4 percent in 2027.
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