If Mr Biden’s plans went into effect, the government would spend nearly a quarter of the country’s total economic output each year for the next decade. It would generate tax revenues of just under a fifth of the economy as a whole.
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May 26, 2021, 4:06 p.m. ET
In each year of Mr Biden’s budget, the government spent more than part of the economy than any but two years since World War II: 2020 and 2021, which were marked by trillions of dollars in federal spending to help people and businesses, too pass the pandemic-induced recession. By 2028, when Mr Biden could end a second term, the government would be collecting more tax revenue as part of the economy than almost any other point in modern statistical history. The only other comparable period was the end of President Bill Clinton’s second term, when the economy roared and the budget was in surplus.
The documents also demonstrate the conservative approach that Mr Biden’s economic team has taken in forecasting economic growth relative to that of his predecessor. Mr Biden’s advisors predict that even if his full agenda were passed, the economy, after factoring in inflation, would grow close to 2 percent a year for most of the decade. This rate is similar to the historically sluggish pace of growth the nation has averaged over the past 20 years. Unemployment would fall to 4.1 percent by next year – from 6.1 percent today – and remain below 4 percent in the following years.
Former President Donald J. Trump consistently tabled budget proposals that predicted his policies would propel the economy to a sustained annual rate of nearly 3 percent for an entire decade. In his four years in office, annual growth only reached this rate once. The final budget presented by President Barack Obama as Vice President predicted annual growth averaging 2.3 percent over a decade.
The Biden projections continue to show that his government has little fear of a rapid burst of inflation across the economy, although recent data shows a rapid jump in prices as the economy reopens after a year of suppressed activity amid the pandemic. The Biden team predicts that consumer prices will never rise faster than 2.3 percent a year, and the Federal Reserve will only increase interest rates gradually from their current lows in the coming years.
Mr Biden has taken up the idea that now is the time to make large upfront investments that are paid for over an extended period of time, with interest rates low and the nation rebuilding after the recession. His budget shows that the federal government’s net interest cost remains below historical averages over the decade. Interest rates are controlled by the Federal Reserve, which is independent from the White House.
Even if interest rates remained low, payments on the national debt would consume an increased portion of the federal budget. Net interest payments would double as a proportion of the economy from 2022 to 2031.
A White House budget bureau spokesman declined to comment on Thursday.
Administration officials in Washington on Friday will detail the entire budget, which will be hundreds of pages. On Thursday, Mr. Biden will address the Cleveland economy.