Skinny Budget, Heavy Lift?

Update 522 — Skinny Budget, Heavy Lift?
President Outlines FY2022 Spending Plans

Last Friday, the Biden administration released its “skinny budget,” the initial framework for its FY2022 discretionary funding request. Although not elaborate, the $1.52 trillion budget gives us the first clear glimpse into President Biden’s priorities. 

The administration calls for increased spending levels across the board after years of statutory budget caps. It reflects a paradigm shift in thinking about government — spending levels and priorities, its role, even its mission. Below, we evaluate Biden’s budget proposal, compare it to last fiscal year’s budget, and examine the path ahead for the FY2022 appropriations process.

Best,

Dana

——————-

Overtones and Toplines

President Biden’s budget proposal calls for a significant expansion in spending on domestic programs. The plan would reverse years of underinvestment in the nation’s education, healthcare, and social programs. Because this proposal represents annual discretionary appropriations, the $1.52 trillion would be supplemental to the already-enacted $1.9 trillion American Rescue Plan Act (ARPA) and the $2.3 trillion American Jobs Plan (AJP) for the nation’s infrastructure. 

Many provisions bolster long-standing programs like Pell Grants, government-supported child-care programs, and housing vouchers; others expand initiatives stood up in the ARPA, like assistance to homeless families and new funding for public health programs aimed at addressing racial inequities.

Source: Government Executive, OMB

Despite calls from the progressive wing of the Democratic Party to reduce the military budget, Biden’s proposal requests $715 billion in defense spending, up slightly from last fiscal year. Meanwhile, the $769 billion in non-defense discretionary spending would represent a 16 percent increase from FY2021, in which $663.7 billion was enacted. Notably absent from Biden’s budget proposal are any changes made to the tax code.

Key Changes and Increases from FY2021

Biden’s first budget comes after 10 years of statutory spending caps set by the Budget Control Act (BCA). The product of a deal struck between President Obama and Congressional Republicans to end the 2011 debt ceiling crisis, the law established limits on annual discretionary spending through FY2021. In a letter to Congressional committee chairs detailing the request, Acting Budget Director Shalanda Young wrote “Over the past decade, due in large measure to overly restrictive budget caps, the Nation significantly underinvested in core public services, benefits, and protections.” 

The fiscal austerity orientation of the BCA era saw non-defense discretionary spending as a share of GDP shrink from 4.4 percent in 2010 to a record low 3.1 percent in 2019 and slowed the economic recovery from the Great Recession. The expiration of the caps, according to Young, offers an opportunity to reverse the consequences of “broad disinvestment” and gives the Biden administration more leeway to request greater spending on domestic programs. 

Under Biden’s initial proposal, each cabinet department and most federal agencies would receive funding increases compared to FY2021. The cabinet departments with the largest increases are Education (+40.8 percent), Commerce (+27.7 percent), and Health and Human Services (+23.1 percent). 

In terms of education, notable changes in the proposal include a significant increase in Title I grants for under-resourced schools — the largest yearly increase for the program since its inception — as well as an increase in the maximum Pell Grant and funding for Historically Black Colleges and Universities, Tribally Controlled Colleges and Universities, Minority-Serving Institutions, and Community Colleges. These increases demonstrate Biden’s commitment to expanding access to education for underserved communities.

Spending increases for HHS include increased funding for the Centers for Disease Control and the Strategic National Stockpile, creating a new Advanced Research Projects Agency for Health to research diseases such as cancer and Alzheimer’s, and increased funding for mental health resources and fighting the opioid epidemic.

Reflecting a major change in priorities from the Trump administration to the Biden administration, Biden’s budget emphasizes new funding to address racial equity and climate change. The focus on equity includes a boost in grants for minority-owned businesses and funding for Community Development Financial Institutions, expands the Housing Choice Voucher program and increases funding for rental housing, and boosting funding for civil rights offices across federal agencies. The EPA would receive a 21.3 percent increase in funding from 2021, including $1.8 billion to fight climate change and funding for a new Accelerating Environmental and Economic Justice initiative. 

The proposal does not include significant details about revenue. But it does call for a 10.4 percent increase in funding for the IRS designed to boost enforcement and compliance. This comes as a recent IRS study found that tax avoidance by high-income individuals is widespread, with the top one percent of households failing to report an estimated 21 percent of their income. Just yesterday, IRS Commissioner Charles Rettig testified to Congress that unpaid, legally owed taxes may exceed $1 trillion annually. 

Legislative Path Ahead

Already, Biden’s proposal has secured support from key Congressional Democrats. Appropriations Chairs DeLauro and Leahy have signaled their support for the budget and praised Biden for prioritizing “working families and the vulnerable.” Supporters of the request’s defense spending have argued that the proposed 1.7 percent increase “will sustain readiness and modernization while we also focus on divesting from ineffective legacy programs and eliminating wasteful spending,” according to Defense Subcommittee Chair McCollum

While Democrats appear largely supportive of Biden’s across-the-board increases in spending on domestic programs, several progressives have criticized the increase in funding for the Pentagon. Sen. Sanders, Rep. Mark Pocan, and Rep. Rho Khanna have expressed their concerns with further increasing military spending. Republicans have said the increase in defense spending is not enough, citing a Trump-era Pentagon directive calling for a three-to-five percent increase in defense spending for FY2022. As a result of these concerns, a debate on defense spending can be expected before the product passes. 

The legislative path ahead for Biden’s budget could be rocky, as the filibuster gives the Senate minority significant bargaining power in annual spending bills. And even as congressional Democrats have signaled support for Biden’s budget, they will likely use their prerogative to shape the contents of the appropriations bills. Additionally, the return of earmarks this Congress will give members added incentive to include their input in the budget. 

Congress must pass the FY2022 appropriations bills before the end of this fiscal year (September 30), or else a continuing resolution will be necessary to avoid a government shutdown. Congress will also need to vote to raise the debt limit at some point in the summer to avoid defaulting on the debt.

What’s Behind the Budget 

Annual White House budget proposals, while mandated by the Budget and Accounting Act of 1921, are increasingly seen as irrelevant, partisan documents. All of President Trump’s proposals were considered (by Republicans) “dead on arrival” and disregarded as starting points in appropriations negotiations by conservative subcommittee chairs. But Biden’s proposal, while ambitious, is popular and reasonable; it already enjoys the support of prominent Democrats across the ideological spectrum. 

The proposal’s emphasis on correcting inequities and supporting clean energy reforms demonstrates the administration’s commitment to these issues. As Biden has said for years, “don’t tell me what you value, show me your budget, and I’ll tell you what you value.” Biden’s budget signifies that his administration values using the levers of government to address pressing social problems and that budget austerity has been put on the backburner, or off the burner altogether. 

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