Biden's Budget: How the Politics of the Federal Deficit Are Changing

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President-elect Joe Biden speaks during an event at The Queen theater in Wilmington, Del., Friday, Jan. 8, 2021, to announce key administration posts. (AP Photo/Susan Walsh)
January 13, 2021
President-elect Joe Biden signaled on Friday, in a speech finalizing his economic team, that his administration would not be reigning in the federal deficit anytime soon. He cited a growing consensus among economists that more government spending is essential to getting out of the current crisis.
"Every major economist thinks we should be investing in deficit spending in order to generate economic growth," Biden told reporters. 
The president-elect also said the bipartisan stimulus package passed in December was "just a downpayment," and that more direct funding to households, businesses, and state governments would be necessary for the recovery. "$600 is simply not enough when you have to choose between paying rent, putting food on the table, keeping the lights on," he said.  
After a year of near-constant wrangling over the size and scope of the COVID-19 response, calls for additional stimulus have become a common refrain among Democrats. But for Biden, who previously worked with Republicans to cut spending and balance the budget, the announcement reflects a deeper shift in how lawmakers, economists, and regular Americans think about the federal debt and deficit.
Across the political spectrum, economists are endorsing higher government spending over austerity measures to combat the pandemic and its economic impact.  
Laurence Boone, chief economist for the Organisation for Economic Co-operation and Development (OECD), told CNBC in December that countries should continue fiscal support into 2021 regardless of ballooning global debt. 
"It's not that we don't care about the debt, but 2021 is not the right time to look at it," she said.
Other global financial institutions changed their tune as well. The International Monetary Fund (IMF) warned against cutting spending amid the crisis, and the World Bank’s chief economist said even developing countries should increase their borrowing for the time being. 
In the same context, President Donald Trump joined Democrats last month in pushing for $2,000 stimulus checks, even as Senate Majority Leader Mitch McConnell quashed the idea.
This is a far cry from the legislative brinkmanship over debt ceilings and government shutdowns that followed the Great Recession nearly a decade ago. So what exactly changed?

Deficit Spending Becomes More Palatable

While the unprecedented impact of the coronavirus pandemic may be the obvious answer, some economists believe the current reassessment of the importance of federal deficits has been years in the making. 
"If we go back not too many years, the level of the federal debt and federal deficit was a really central concern in U.S. politics, and a lot of unpopular policies were adopted because of the view that they were necessary," J.W. Mason, associate professor of economics at John Jay College-CUNY, told Cheddar. 
Mason, who is also a researcher for liberal think tank The Roosevelt Institute, said the Obama administration is partly to blame for the turn away from budget-first politics. 
When the U.S. economy was still reeling from the housing crisis, he said, Obama chose to reassert the importance of bringing spending under control, even going so far as to propose a "grand bargain" with Republicans that would have cut entitlement spending. 
"That was a real choice that they made at that time, and I think it had real long-term consequences in terms of generating a much slower recovery than the country otherwise could have had," he said. "When I talk to younger budget staff people on the Hill, I think there's a recognition that was a real mistake." 
Then came the contradictions of the Trump years. After eight years of nixing new spending on budgetary grounds, Republicans presided over a massive expansion of the federal debt. Trump, who campaigned on the promise of erasing the federal debt in eight years, increased spending and cut taxes. The federal deficit jumped 26 percent to nearly $1 trillion in 2019. 
"During the economic expansion of the Trump years prior to COVID, there was really a reckless disregard for fiscal responsibility," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a bipartisan public policy organization. "You don't need to, nor should you, worry about your debt when you're in an economic crisis like we are now, but in turn, you then have to try to get control of it when the economy's strong."

When to Rethink the Deficit?

When exactly budgetary concerns should return to the forefront of lawmakers' agendas is likely to become a highly-politicized question in the coming years, she added. 
"There will be a huge propensity to lean toward calling for more deficit spending by the majority party, even once the economy's strong enough," MacGuineas said. "There's also a very strong risk the minority party, the Republicans in this case, will call to worry about the deficit prematurely while we still need to be worrying about how to help a struggling economy." 
Mason said the fight could come sooner rather than later, with Republicans trying to reassert concerns about the federal deficit as soon as Biden takes office. 
"On January 20, if not before, we're going to have Republicans stepping forward and saying, 'Oh we've got to focus on getting the deficit under control,' but I think there's going to be a lot less willingness on the Democratic side to let that trump priorities," he said. 
Biden, for his part, hinted in Friday's speech that continued fiscal support for the economy may be necessary even after the coronavirus pandemic is under control. The extra stimulus would not just serve as a way to "get to the other side of this painful crisis, but a larger purpose to avoid a broader economic cost that exists out there," he said. 
It remains to be seen if Biden will follow through on this agenda, but the rhetoric at least is a break with the former vice president's record in the Senate. 
As a senator in the 1980s, Biden co-sponsored legislation to freeze federal spending for a year. He also sided with Republicans in the 1990s in backing a balanced budget amendment to the Constitution, which would have required the federal government to end deficit spending. Though both measures failed, Biden continually cited concerns about federal spending as a lawmaker. 
This background matters less today, explained Mason, with a new generation of Democrats pushing the party in a different direction. Members of the "Squad," such as Representative Alexandria Ocasio-Cortez, have called on the government to embrace Modern Monetary Theory, which asserts that federal spending doesn't matter for countries that print their own money. 
"Whatever Biden's personal politics are, there's a much more active left in the Democratic Party that's going to put a lot of pressure on him to expand spending," he said. 
Even critics of Biden admit it's difficult to predict what he'll do given the unique circumstances facing him and the country.  
"If you go by Biden's record, namely his history as a leading Democratic budget-cutter and deficit hawk and some of what he and his advisers have said over 2020, the likely outcome would be either austerity or a kind of Obama 2.0, where the federal government spends big to deal with the crisis, but not big enough for what the circumstances call for," said Branko Marcetic, a journalist and author of Yesterday's Man, a political biography of Biden. "But Biden's sent contradictory signals over the course of the pandemic, and he's recently said he wants to forget about the deficit and invest trillions in new spending." 
Marcetic said he is nonetheless optimistic given the consensus among economists and politicians that increased government spending is necessary for the foreseeable future. 
Echoing Mason, he also pointed to the way Biden was pressured to champion $2,000 relief payments by a more populist Congress. "We'll see how long this lasts," he said. 
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