Joe Biden, who’s warned about the dangers of budget deficits for decades, will inherit one of the biggest in U.S. history if he becomes president—and he’ll be in no rush to pare it back.
That’s the signal the Democratic candidate is sending after his campaign rolled out a $3.5 trillion economic program over the past month that promises to invest in clean energy and caregiving, buy more made-in-America goods, and start narrowing the country’s racial wealth gaps.
The bill for this agenda is modest compared to the universal health-care and student loan forgiveness plans backed by some of Biden’s primary season rivals. Still, it would come right after the U.S.’s multitrillion-dollar effort to pull its economy out of a pandemic slump. This year’s budget shortfall is forecast to exceed 17% of gross domestic product, the most since the country mobilized to fight World War II.
All that red ink might have been a problem for past incarnations of Biden. First elected to the U.S. Senate in the 1970s, he has a history of urging fiscal restraint. In the 1990s he twice voted for unsuccessful Republican efforts to make balanced budgets compulsory by amending the Constitution. And as a presidential candidate in 2007 he signaled that he would consider trimming spending on Social Security and Medicare in the interest of sound public finances.
Since then there’s been a sea change in American politics and economics. It began while Biden was vice president in the Obama administration. Concerns that too much stimulus was being pumped into the economy and might trigger higher inflation proved unfounded. Instead, the drawn-out recovery highlighted the opposite risk: premature belt-tightening after a recession. “It took us 11 years to get back to full employment. One key reason was that lawmakers went from fiscal support to fiscal austerity much too quickly,” says Mark Zandi, chief economist at Moody’s Analytics. “It’s pretty clear that was a mistake, and hopefully we don’t make that mistake again.”
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August 10, 2020