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Biden’s big budget comes with modest growth prospects for an aging country
President Joe Biden’s first budget proposal comes at a steep price – at $ 6 trillion, about 50% more than pre-covid-19 federal spending – but, at least for now, projects a relatively modest long-term recovery in the economy, likely reflecting concerns about aging of the American population.
The administration’s spending plan for the fiscal year ending September 2022 would increase spending on infrastructure, education and climate change, echoing the familiar priorities of the first-term Democrat.
But with it comes short-term growth forecasts that do not reflect the rapid improvement in the economy so far this year. With the help of $ 1.9 trillion in additional stimulus spending approved earlier this year, the economy grew at an annualized rate of 6.4% in the first quarter, a pace that projections from the Survey of Professional Forecasters and Federal Reserve officials see persist throughout the year.
In contrast, Biden’s budget sets growth this year at just 5.2 percent. Council of Economic Advisers President Cecilia Rouse said the forecast underlying the budget was stalled in early February, administration officials plan to return later this year.
We should also note the rapid deceleration of growth expectations after next year, between 1.8% and 2% each year from 2024 to 2031. While this is very much in line with longer-term production estimates by Fed officials, it is at least a quarter of a percentage point lower than the consensus among private forecasters, and about a full point south of amplified projections of the Trump administration finale. budget proposal two years ago, before the covid-19 pandemic.