No tables, no graphs. The presentation of the finance bill for the 2024 financial year, which starts on 1er October, is for the White House an exercise more political than accounting. “It is not a question of figures on a spreadsheet” but of “values” to defend, had, moreover, explained upstream the director of the administration of the Budget (OMB), Shalanda Young.
“My project is centered on investment in the United States […], including (for) places and people who have been forgotten, ”explained Joe Biden, from Philadelphia (Pennsylvania). The American president presented his proposals there: social measures (childcare, sick leave, housing, etc.), financed by tax increases on the richest and on companies. “I guarantee you that I will protect Social Security and Medicare”, the health insurance for the elderly, he also promised.
As a pledge of its sound financial management, the White House is emphasizing one figure: a reduction in the budget deficit of 3,000 billion dollars within ten years. The climate subsidies passed last summer in the Inflation Reduction Act were, in fact, more than funded by the introduction of a minimum corporate tax rate of 15% and a tightening of the tax audits.
Measures to be voted on
But the imbalance between revenue and expenditure nevertheless remains massive: the cumulative deficit over the coming decade would still reach 17,000 billion dollars, according to budget documents . And the other measures proposed by the White House to reduce the deficit – in particular the increase in the corporate tax rate from 21 to 28% – have in reality little chance of being adopted by parliamentarians.
In the end, the White House’s draft budget shows a public deficit of 6.8% of GDP for 2024, up sharply from the 6% forecast this year and 5.5% last year. In the ten-year forecasts, the public deficit would never fall below 4.6% of GDP.
“The expenses provided for in this budget are excessive, judge Maya MacGuineas, president of the CRFB, an association in favor of “responsible” management of public finances. “At $6.9 trillion, spending next year would be higher than at any time during the pandemic and about $2.5 trillion above the pre-pandemic level, representing a growth of 55 %,” she points.
The rise in interest rates will also increase the burden of repayments to be made. On average over the coming decade, the interest to be paid to finance the debt will thus be higher than defense spending, at 3.1% of GDP against 2.9%.
Post-World War II record
The American budgetary machine was in reality out of order during the mandate of Donald Trump: the budget deficit had jumped 26% over one year during the fiscal year 2019, approaching 1,000 billion dollars. That of the 2024 financial year should reach… 1.800 billion dollars, that is to say a third more in two years, according to the draft budget.
The pandemic has propelled the public debt to around 100% of GDP, but the coming years will not change the situation: the federal public debt is expected to reach $27.8 trillion in 2024, or 102% of GDP, and climb further to 110% of GDP by 2033 – a level that was only reached at the end of the Second World War.
Forecasts from the bipartisan Congressional Budget Office (CBO) are even bleaker, due to less favorable growth and interest rate assumptions. He bets on a federal debt who would climb to 118% by this horizon.
“Most of this massive borrowing is the result of policies put in place years ago by Democratic and Republican administrations and congresses, but it will take presidential leadership to implement real change, and this budget is not going to far enough to make reducing our dangerous levels of debt a top national priority,” criticizes Maya MacGuineas.
The budget committees of the Republican-majority House of Representatives and the Senate will now come up with their own plans and calculations. “I am ready to meet the President of Parliament at any time – tomorrow, if he has his budget, let him present it”, launched, defiantly, Joe Biden at the address of Kevin McCarthy.
Several months of negotiations are to be expected, against a backdrop of arm wrestling between Democrats and Republicans on raising the debt ceiling. The federal debt has already reached the maximum level authorized by Congress in mid-January, and default is only averted thanks to emergency measures taken by the Treasury Department. Measures that will be exhausted in July, according to experts.
Fiscal crises are also likely to multiply. “By not proposing to increase Social Security revenue or adjust and reform future benefits in his budget, the president is implicitly approving the plan to cut benefits,” points out the CRFB. In one of his favorite maxims, Joe Biden nevertheless assured Thursday that he had “never been more optimistic for America than today”.