Via Teleconference
(March 9, 2023)
10:08 A.M. EST
MODERATOR: Hi there, everybody. Thanks for hopping on. This will be an on-the-record press call about the President’s fiscal year 2024 budget.
We are joined today by OMB Director Shalanda Young and Chair of the Council of Economic Advisers Cecilia Rouse. They will each make some brief comments at the top and then we’ll get to your questions.
Again, this call and the materials that we provided prior to the call are embargoed until noon, Eastern time, today.
And with that, I will turn it over to Director Young.
DIRECTOR YOUNG: Thanks so much, Rob, and thanks to all of you for joining us on Budget Day.
This year’s budget comes at a critical moment for our country and a time when the President’s economic strategy is working. The economy has added 12 million jobs. The unemployment rate has fallen to the lowest level in more than 50 years. And we just had the two strongest years for new small business applications on record.
The President’s budget details a roadmap to build on that progress and finish the job. It’s built on four key values: lowering costs for families, protecting and strengthening Social Security and Medicare, investing in America, and reducing the deficit by ensuring that the wealthiest in this country and big corporations begin to pay their fair share, and cutting wasteful spending on Big Pharma, Big Oil, and other special interests.
It does all of that while ensuring that no one earning less than $400,000 per year will pay a penny more in new taxes.
Let me say a few words about each of the values I laid out.
First, the budget builds on the Inflation Reduction Act, which some congressional Republicans are trying to repeal, and continues lowering costs for families.
We’ve been encouraged by the recent slowdown in inflation, but we know there is more work to do. Families need a little breathing room, and that’s why the budget includes proposals to bring down the costs of everyday necessities.
It lowers healthcare costs, including by making permanent the expanded ACA premium tax credits that the IRA extended.
It lowers prescription drug costs by capping the price of insulin at $35 for a monthly prescription and strengthens Medicare’s newly established negotiation power.
And it lowers housing costs by increasing affordable housing supply and expanding access to affordable rent through the Housing Choice Voucher program to well over 200,000 more households.
Second, at a time when congressional Republicans have talked about cutting Medicare and Social Security, this budget protects and strengthens of these programs that seniors have paid into their entire lives.
It strengthens Medicare by extending the solvency of the Medicare Trust Fund by at least 25 years, without cutting any benefits or raising costs for beneficiaries.
And it rejects benefit cuts to Social Security and instead ensures that seniors and people with disabilities quickly and efficiently get the benefits they earned.
The budget also makes clear that the President is committed to working with Congress to ensure both of these programs remain strong, now and in the future. But benefit cuts are not on the table.
Third, the budget invests in America and in working people. It will boost Ameri- — American manufacturing, provide national paid leave, cut taxes for working families, make our communities safer, drive medical breakthroughs in cancer, deliver for our veterans, and a whole lot more.
That’s the right way to continue growing our economy from the middle out and the bottom up.
And fourth, the budget builds on the President’s record of fiscal responsibility.
Remember, this President took office at a time of historically high deficits. The previous administration passed a $2 trillion unpaid-for tax cut skewed to the wealthy and large corporations.
President Biden has taken a very different approach. During his first two years in office, the deficit fell sharply. And the Inflation Reduction Act will reduce the deficit by hundreds of billions of dollars more over the next 10 years.
This year’s budget cuts — cuts the deficit by nearly $3 trillion over the next decade by asking the wealthy and big corporations to begin to pay their fair share and by cutting wasteful spending on Big Pharma, Big Oil, and other special interests.
It does this in part by reforming our tax code to reward work, not wealth, including by ensuring that no billionaire pays a lower tax rate than a teacher or a firefighter, and by quadrupling the tax on corporate stock buybacks.
That’s a very clear contrast with congressional Republicans, who have put forward policies that would add $3 trillion to the debt over 10 years with more giveaways to the wealthy and big corporations.
Congressional Republicans keep saying they want to reduce the deficit, but they haven’t put out a comprehensive plan showing what they’ll cut. Will it be Medicare or Social Security? The Affordable Care Act? Veterans benefits? We don’t know until they put out a plan.
So we’re looking forward to seeing their budget so the American people can compare it to what we’re putting out today, this President’s vision.
With that, I’ll turn things over to Chair Rouse to talk about the budget’s economic outlook and forecast.
CHAIR ROUSE: Thank you. Thank you, Director Young. And thank you for joining us today.
So, I want to use this opportunity to highlight three key elements to consider alongside this budget: the economic motivation behind the policies, the economic assumptions underlying our economic forecast, and the ways in which economic conditions have changed since then and the subsequent implications for this proposal.
So, this budget builds on the solid economic gains of the first two years of this administration. The challenges faced by the American economy these past two years have been extraordinary. The dual human tragedies of COVID-19 and Russia’s unprovoked invasion of Ukraine continue to reverberate through every facet of the country — from public health, to labor supply, to remote work, to global supply chains, to what consumers bought and for how much.
Despite these and other challenges, the U.S. economy has remained resilient. The United States ended 2022 with an economy 5 percent bigger in real terms than it was just before the pandemic, the strongest three-year performance of any G7 economy.
This robust recovery has put us in a solid position today. The unemployment rate is at a more than 50-year low. Since President Biden took office, over 12 million jobs have been created, the fastest jobs recovery from a recession in the last three decades.
At the same time, inflation remains too high and policymakers have more work to do to lower it. Nevertheless, we see some signs that inflation is gradually easing: Annual inflation, as measured by the Consumer Price Index, has fallen for seven months in a row and is now a third lower than it was in last June.
The FY24 Budget builds on this solid economic growth in two ways.
First, as Director Young emphasized, this budget is fiscally responsible, reducing the deficit by nearly $3 trillion over the next decade.
Second, the budget takes steps to further support our workforce and invest in human capital. Policies such as paid leave and child care will bring more workers into the labor force and improve productivity. Investments in early education, mental health, and community college not only expand our economy’s productive capacity, but pay dividends for generations to come.
I’d like to close with a word about our forecast.
The administration finalized its forecast last November. Since then, more data have become available and some of the data from 2022 and even earlier were revised for technical reasons.
With every new release and revision of economic data, we have learned something new and tweaked what we thought before.
For example, I think if you had told most conventional macroeconomists last June that we were about to get seven straight months of declining annual CPI inflation, they would have told us that the unemployment rate would rise over that time. But instead, the unemployment rate in January was 3.4 percent, or 0.2 percentage points lower than it was in June. We’ll learn February’s unemployment rate tomorrow.
The economy looks healthier today than it did than in other ways too. Job growth has averaged 356,000 per month over the last three months, and real GDP growth was 2.7 percent at an annualized rate in Q4 of 2022, both well above what private forecasters were expecting.
Of course, we’re not out of the woods, and we have much more work to do. But we’ve also learned a lot since last November about just how unconventional this recovery has been. If we were producing our Troika forecast today, we’d incorporate those lessons.
We will, however, incorporate those new data and the future ones that will come over the coming months when we update our economic forecast later this year as part of the Mid-Session Review. We will also continue to pay close attention to outside forecasters, including from the private sector and from government entities such as the Federal Reserve.
As I’ve emphasized repeatedly, we’re confident we’ll get back to steady and stable growth, however the road there will continue to be a bumpy one.
But let me end where I began: The strength of our recovery has put us on solid ground to weather economic shocks. Americans are back to work and the economy is stronger than anyone, including the federal government and private forecasters, imagined it would be when President Biden took office.
The President’s 2024 Budget presents a fiscally fair and responsible approach to continue the progress we’ve made so far to invest in America and to meet our future challenges.
MODERATOR: Great. Thank you, both. Moderator, we are happy to open it up to questions now.
Q Happy Budget Day. Thank you so much for doing this. Republicans will look at the $5.5 trillion in tax increases in this plan and say that those will hurt growth. What would your response be on that growth question and the impact these taxes would have on the economy with regards to the entire budget?
DIRECTOR YOUNG: Look, clearly, when any administration offers up a budget, this is the start of a healthy dialogue.
When you look at this President’s view of the world and what this budget puts forward, it shows you what he values. And that’s what this is going to be about that. And we’re happy to have that debate with anybody: Who are you for?
This President clearly believes that the way to grow this economy is investing in the middle class and working families, and that we have to grow the economy from the bottom up and the middle out.
He doesn’t just say that; he believes it. And all the policies built here, including our tax policy, is a direct reflection of his view that he has had since he was candidate Biden.
So, absolutely, we will see tax policies here that say to the richest Americans and large corporations — you know, some of whom, until we passed the Inflation Reduction Act, paid no taxes — that you have to begin to pay your fair share. And that way, we can continue to invest in working families in this country and we can continue to make sure the middle class can prosper, all while being fiscally responsible and bringing down the deficit by nearly $3 trillion.
That’s what we’re going to talk about over the coming months. And we’re happy to have that debate.
CHAIR ROUSE: Can I also say — this is Cecilia Rouse. Can I just also follow up to say that, actually, the empirical evidence behind the impact of such tax cuts on economic growth is far from — really suggests that that’s not the conclusion.
If you look, for example, at the tax cuts from 2017, especially on the wealthiest, that really has had no impact that economists have been able to discern on economic growth. It’s been exaggerated (inaudible).
Q Hi, there. Thanks for taking my question. I’m curious: You all have been talking, the President has been talking for quite some time about the success he has had in reducing the budget deficit. But you now see the deficits spiking back again to $1.8 trillion in fiscal 2024. How is that compatible with what the President has been talking about in terms of fiscal responsibility?
DIRECTOR YOUNG: Look, let’s remember this President inherited historically high deficits from the previous administration: $2 trillion dollars in tax cuts, not paid for. And this President has presided over deficit reduction his first two years of $1.7 trillion.
So, his record speaks for itself on being fiscally responsible, all while holding the key tenet that those making under $400,000 should not pay a penny more in new taxes.
And, look, as we effectively make the transition to stable and steady growth, which we’ve also talked about a lot over the past month, having wound down emergency programs from the pandemic and gotten our economy back on track, we would not expect to continue to see large deficit reduction year to year, just as we do not expect to see the rapid economic growth or job creation we saw in 2021 before. All of this is expected, given how far we’ve come.
The goal here is to look at the trajectory we are on. With this President’s policies, what cannot be denied is: Over a 10-year period, we’ve put forward a path to see nearly $3 trillion in deficit reduction. And that’s what we’re focused on as we transition to the stable and steady growth.
And that’s in contrast to our friends on the other on the other side of the aisle. You talked about a year-to-year bumps and bringing down the deficit by nearly $3 trillion? Well, we’ve (inaudible). They actually have a plan to raise the deficit by $3 trillion. I’ll take our plan as fiscally responsible any day.
Q Hey, guys. Thanks so much for doing this. I really appreciate it. Obviously, it was interesting to see the administration come out with the Medicare solvency plan. I wondered: Did you guys consider doing something similar for Social Security? I don’t see anything in here that would address that looming shortfall. And if not, why not? Thanks.
DIRECTOR YOUNG: Hey, look, I would love to be in the part of the debate where we can have serious discussions about proposals. But let’s not forget: We are — the number one threat to Social Security and benefits for folks like my 94-year-old grandmother is those on other side of the aisle who said they want to cut benefits. That’s why this budget takes the position that that is not on the table.
So, when we talk about protecting Social Security, that’s what this budget does. It ensures that this President’s vision is reflected, that folks who have paid into the system their entire working lives should not have the threat of benefits pulled from out — from under them. And we are answering that call to make sure people know his position (inaudible).
Q Yes, hi. I have a question about closing Medicare loopholes. President Biden himself exploited a Medicare loophole to avoid paying up to $500,000 in taxes on income in 2017 and 2018. I’m wondering if the President has any plan to reimburse the Treasury Department for that amount that he’s not paid, given he’s proposing closing loopholes?
DIRECTOR YOUNG: Let me be very clear about what President is doing on Medicare. This President not only is protecting Medicare from those on the other side of the aisle who want to cut Medicare benefits from seniors in this country — not only did he say no to that, he has put forward the proposal, as you mentioned, to close loopholes that the wealthiest have exploited in order to not pay their fair share or anything close to it. So, we’re going to close those.
We’re also going to ask the wealthiest to pay a little more to ensure that this program is around for at least 25 more years for our seniors who need it. We make absolutely no apologies about putting these proposals forward, because it’s the right thing to do.
Q Hi. The question was just if there was any opportunity in here for a compromise with the GOP and what your strategy is for getting this to a Congress that you don’t control. Thank you.
DIRECTOR YOUNG: Thanks. Look, I spent the majority of my career working on Capitol Hill and budget negotiations. This isn’t new. I know we’re having a (inaudible) the two parties never talked. We just talked to success in December, where we passed the government funding bill that was quite successful in investing in the American people. So, we’re prepared to do that.
I came from that environment, and we’re going to do it again. And I have faith that bipartisan members, the majority of them, will find a way to deliver for the American people, because that’s the highest value beyond, you know, our own ideological differences.
I think what you’re hinting at is: What is the connection to the debt ceiling? There are some who want to use spending negotiations — which we should absolutely do, because we do it every year — as a threat, as leverage against lifting the debt ceiling. That’s what we think is unacceptable.
That should be handled without conditions, just like congressional Republicans did for the last President three times. Do it for this President. Do it for the country. We’re saying, “Don’t wreck this economy over politics.”
And there’s a time and a place to talk about spending. We do it every year, and we’re going to do it again this year.
Q I have a question on Table S-8. You’re showing a 7.3 percent in nondefense discretionary. It’s double the amount of defense. You talk a lot about parity. Could you just explain why your increase for nondefense is so much higher and where that money is mostly going to?
DIRECTOR YOUNG: Hey, Eric. We’re putting forward a proposal on nondefense discretionary that is similar percentage — the same percentage as was passed by Congress in December. So, we’re saying: If that’s what Congress came together to do in December, they should do it again this year from an investment level.
And remember, we’re talking about two different bases. We can absolutely talk about, you know, whether there should be parity and percentage. The defense is $886 billion. We think that’s the right level to be at for defense programs because we are basing and building that program from requirements, what is that national defense strategy.
And we’re investing responsibly while reducing the deficit. We’re more than paying for all of our proposals in nondefense and defense. But defense was built based on what our national defense strategy is built on.
In NDD, we also looked at what’s necessary. We have almost a billion dollar increase in childcare block grants. I think anybody will tell you: When you look at the childcare system in this country, that probably doesn’t even meet the mark on what we should be doing.
So, there are a lot of needs in both defense and nondefense. But I think the important thing to know is that all of our proposals are paid for and we’re doing this in a fiscally responsible manner.
MODERATOR: Great. Thank you all for joining again. Reminder, this call was on the record and embargoed until noon, Eastern time, today, as were the materials that we provided to you prior to the call. If you’ve got other questions, feel free to follow up with our team.
Thanks very much.
10:30 A.M. EST
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