When President Biden formally unveiled his budget last week in Philadelphia, he took direct aim at the political football that is entitlement reform. “I guarantee you I will protect Social Security and Medicare without any change,” the president said.
But analysts say looming shortfalls will put those commitments to the test.
“They’re really two choices, very straightforward. You can increase revenues going in, or you can reduce benefits being paid out,” said Andrew Eschtruth, associate director for external relations at the Center for Retirement Research at Boston College.
“The president’s budget did not go into any detail other than to say that it was absolutely not going to propose any benefit reductions and would fight any benefit reductions that were proposed by the Congress,” Eschtruth added.
He was among a panel of speakers during an Ethnic Media Press briefing last week examining the president’s proposed budget.
Biden wants high-income workers to pay more taxes to ensure the nation’s popular Social Security program will have stable financial footing in the future. Social Security is the backbone of the retirement and disability income systems in this country, providing inflation-adjusted benefits to more than 65 million people.
According to Eschtruth, based on incoming payroll taxes the program could continue to pay full benefits until 2035, at which point it would only be able to pay about 80% of benefits.
One potential option would be to remove the $160,000 cap on taxable income, which would take care of three fifths of the projected shortfall, says Eschtruth. Putting a flat tax of 1.7% on everybody, including employers, would eliminate it. Neither of those solutions are on the table.
Impossible to know what will happen
Under the Constitution, Congress has the power of the purse so the President can’t order them to pass his budget. He must persuade them, says one prominent economist who has worked on Capitol Hill for many years.
“President Biden has presented a visionary budget proposal which recognizes that meeting the needs of the United States in the 21st Century requires more revenues and bolder program initiatives than we currently have,” says Chad Stone, Chief Economist at the Center on Budget and Policy Priorities.
Last year’s budget was no walk in the park. “It wasn’t like the President said, ‘This is what I want’, and Congress said, ‘Here you are’. Even so, Stone says a lot of good legislation got passed.
“Frankly, it’s impossible to know what will happen in the Republican-controlled House,” he said.
Stone noted Congress votes to fund many programs every year. That’s discretionary spending. Some things like Social Security, Medicare, and much of the Defense budget are paid for by dedicated taxes. Those programs are mandatory spending.
“I really don’t know how things are going to play out. We live in interesting times,” Stone said, adding support for Ukraine is not going to be a budget buster and China is the one place where both sides agree.
Defense spending & investments in families
Biden’s request on defense spending is $842 billion, $35 billion higher than last year. Defense officials are calling it the “largest, nominal-dollar peacetime budget ever.” If you add another $44 billion for the Department of Energy to upgrade nuclear weapons, it’s a total of $886 billion. That is still less than the $1.3 trillion spent on social welfare last year.
“The budget does propose to make some really important investments in children, families, seniors, workers, particularly those with low and moderate income, and it’s a particularly important moment, because a lot of the pandemic era programs are winding down,” says Elizabeth Lower-Basch, a social policy director at the Center for Law and Social Policy in Washington.
She said that costs for food, child care, and healthcare are continuing to rise. “So families are feeling the pinch. The President’s budget does propose to bring back the enhanced child tax credit which was rolled out in 2021 as part of the American rescue plan.”
Biden wants to bring it back permanently. And he wants to close the “Coverage Gap” for low-income families and individuals who make too much to qualify for free insurance under the Affordable Care Act (ACA).
Lower-Basch said Biden’s budget would require all states to expand Medicaid for postpartum women for 12 months. Right now, 11 states have not expanded Medicaid and the President’s proposal would require them to do so.
“The budget also calls to invest an additional $150 billion over 10 years for seniors and people with disabilities so that they can get care at home or in community settings rather than having to be cared for in a nursing home,” she said.
Investing in food security
Biden’s budget puts a high priority on federal nutrition food security programs, including school meals. The WIC program provides new moms with baby formula and pregnant women with groceries. The Supplemental Nutrition Assistance Program (SNAP) helps poor families buy healthy food. A two-person family with a $1,526 monthly income qualifies.
“The Farm Bill is up for reauthorization this year. That’s usually a bipartisan bill, so the SNAP program is one area where there might be some opportunity for legislation to actually happen,” says Lower-Basch.
Other things on the President’s wish list include 12 weeks of paid family and medical leave for all workers. Child Care and early childhood programs would get large increases — $600 billion over 10 years for childcare. Sixteen million children would get affordable childcare and four million 4-year-olds would go to preschool.
Lower-Basch says there’s going to be a lot of fighting and back and forth when Congress starts to debate Biden’s budget.
“These are proposals that didn’t quite make it to the finish line last year, even when Democrats did control both the House and the Senate, so they’ll definitely be more challenging to get through this year,” she said.
