Via Teleconference
(March 11, 2024)
10:04 A.M. EDT
MODERATOR: Good morning, everyone. Thanks so much for joining us. This will be an on-the-record press call about the President's fiscal year 2025 budget.
We're joined today by OMB Director Shalanda Young and Chair of the Council of Economic Advisers Jared Bernstein.
They'll each make some brief comments at the top and then we'll take some questions.
As a reminder, this call and the materials we provided prior to the call are embargoed until noon, Eastern Time, today.
And with that, I'll turn it over to Director Young.
DIRECTOR YOUNG: Thanks, Shelby. I'm not sure they're brief, but I'll do my best.
But thanks to all of you for joining.
This year's budget comes at a time when it's clear that the President's economic strategy of building the economy from the middle out and bottom up is working. The economy has added about 15 million jobs. The unemployment rate has remained under 4 percent for over 2 years in a row — a 50-year record –while inflation has fallen by two thirds.
Under his leadership, the administration is working to bring down costs for the American people, including prescription drug costs, health insurance premiums, utility bills, and costs for everyday goods and services — all while taking on hidden junk fees that some banks, airlines, and other big corporations charge.
At the same time, he has also restored U.S. leadership on the world stage while keeping Americans safe and promoting democracy at home and abroad.
The budget details the President's vision to protect and build on this progress and deliver on the agenda laid out in his State of the Union by lowering costs for families; growing the economy from the middle out and bottom up by investing in all of America to make sure the middle class has a fair shot and we leave no one behind; reducing the deficit by about $3 trillion, including by making our tax code fairer and cutting wasteful subsidies; and protecting and strengthening Social Security and Medicare.
Let me say a few words about each of these.
First, the budget continues the administration's work of lowering costs for families. The President has made lowering costs for hardworking families his top economic priority. Under his leadership, we have seen significant progress bringing down inflation.
But families need more breathing room, and that's why the budget includes proposals to bring down the costs of everyday necessities. It lowers healthcare costs, drug prices, and expands access to prescription drugs.
It cuts taxes for families with children and American workers and lowers childcare costs for hardworking families.
It increases affordable housing supply to reduce housing costs, expands access to homeownership and affordable rent, and reduces down payments for first-time and first-generation homebuyers with the new Mortgage Relief Credit.
And it reduces the cost of college and lifts the burden of student debt.
Second, the budget invests in America and the American people to grow the economy from the middle out and bottom up. The budget invests in all of America to make sure the middle class has a fair shot and we leave no one behind.
It does this by expanding and protecting access to healthcare; supporting America's workforce and boosting manufacturing; confronting the climate crisis while spurring clean energy innovation; providing national paid leave; advancing cancer research; making our communities safer; and more.
Third, the budget reduces the deficit by about $3 trillion by making our tax code fairer.
Congressional Republicans want to increase the deficit by $3 trillion, including by attempting to repeal the parts of the Inflation Reduction Act that take on special interests like Big Pharma and wealthy tax cheats, all while supporting giveaways to big corporations and the richest Americans at the expense of America's seniors.
In contrast, the President's budget ensures that billionaires pay a minimum 25 percent rate, makes large corporations pay their fair share, cracks down on corporate profit shifting, and cuts taxes for tens of millions of low- and middle-income families. The budget also cuts wasteful spending on special interests and cracks down on fraud.
President Biden will fight to stop Republican plans to add trillions to the deficit with giveaways to Big Pharma and tax cuts skewed to big corporations and the wealthy, while ensuring people making under $400,000 will not pay a single penny more in taxes.
And fourth, the budget protects and strengthens Social Security and Medicare.
Social Security and Medicare are more than government programs; they're a promise — a rock-solid guarantee that generations of Americans have counted on that after a life of hard work, you will be able to retire with dignity and security.
The budget honors the President's ironclad commitment to reject Republican efforts to cut both programs and embraces reforms that would protect and strengthen these programs, including by extending the solvency of the Medicare Trust Fund indefinitely.
The President's vision of progress, opportunity, and fairness is in stark contrast to congressional Republicans who have repeatedly fought to slash critical programs the American people count on and increase the deficit by trillions of dollars with giveaways to Big Pharma, the wealthy, and big corporations.
With that, let me turn it over to Chair Bernstein to talk about the budget's economic outlook and forecast.
CHAIR BERNSTEIN: Well, thank you.
Good morning and thanks for joining us.
As nerdy as it sounds, we always find budget release day to be exciting and gratifying.
For one, it's the culmination of the work of hundreds of smart, dedicated people — both here in the EOP and across the agencies — all of whom have put in long hours to produce this document.
Second, it is the most comprehensive and detailed statement of our administration's values — a highly granular exposition of the administration's view of the roles and responsibilities of government.
Third and closest to our hearts at CEA, the budget must implement the President's vision within the existing economic context. And it's that context I'll briefly discuss this morning, along with a few points of the administration's new economic forecast that's also out today.
In his State of the Union Address, the President took us through some remarkable aspects of the current economic expansion, reminding us how far we've come since he took office.
The quick passage of the American Rescue Plan got shots in arms and checks in pockets, prevented massive evictions and business losses, supported state budgets, cut child poverty nearly in half — and, in so doing, ensured that the job market got quickly back to full employment.
Importantly, the U.S. job market did not just get back to full employment; it has stayed there. And even more importantly, given the President's emphasis on creating more breathing room for families through his cost-cutting agenda — an agenda that is well represented in this new budget — this maintenance of tight labor markets has occurred amidst significant disinflation.
As you know, many economists told us this couldn't be done, that to get this much disinflation we'd need to give up many points of unemployment and growth.
President Biden never believed that we could achieve disinflation on the — that we could only achieve disinflation on the backs of working Americans. And as we speak, inflation is down two thirds off of its peak.
Virtually every forecast we've seen expects this trend to continue, and that holds for our forecast as well, about which I'll now say a few words.
The economic forecast in the budget, in table S9, is the work of the Council of Economic Advisers, Office of Management and Budget, and the Treasury. Let me take a moment to thank the dozens of folks here who contributed their deep expertise to this endeavor, with spe- — special mention to Steve Braun, CEA's lead forecaster, who presides over our forecast.
Our team faces a unique challenge in that we must finalize our forecast well before we release it. In this case, it was finalized in early November '23 — 2023. This can sometimes render our near-term predictions stale relative to more up-to-date market forecasts.
However, our new forecast looks pretty good in this regard, as our near-term optimism about transitioning to steady, stable growth was broadly warranted.
On an annual basis, looking Q4 over Q4, we expected real GDP to grow 2.6 percent last year, when the actual was 3.1 percent — meaning the expansion was even stronger than we expected. This is above-trend growth, which means it is helping to generate the ongoing strength jon- — job creation, along with real wage and income gains.
On inflation, things also turned out a bit better than we expected. We thought the CPI would be up 3.4 percent last year, but the actual came in at 3.2 percent — down sharply from north
of 7 percent in 2020 Q4.
On 2023 unemployment and interest rates, we came in very close to the actual results. For '24, our estimates line up well with the most recent blue-chip consensus.
Over the longer term, our forecast is largely unchanged from prior budgets with terminal growth and unemployment rates of 2.2 and 3.8 percent, respectively.
As we discuss in today's release, our terminal growth rate is higher than some other forecasters because we include pro-growth effects of our policies, including investments from human and physical capital, along with affordable childcare, which research shows has the potential to significantly increase caregivers labor supply.
With that, we'll take your questions.
OPERATOR: All right. We'll go to the first caller in queue. Caller, your line is unmuted.
Q Hey, guys. It's Justin Sink from Bloomberg. Thanks for doing this. A couple quick ones. The first was just a gut check that your budget abides by the debt ceiling agreement caps. It looks like it does, but I just wanted to make sure that was true.
The second was if you could talk at all about how it foresees, you know, additional emergency spending, you know, in terms of Israel and Ukraine going forward after this year.
And then, finally, Jared, on the economic assumptions, I know that they've turned out a lot better than you predicted, and you were criticized for rosy expectations last year. But I was wondering, on unemployment specifically, if you could talk through why it seems realistic to have, you know, unemployment never rise higher than 4 percent in the next decade.
Thanks, everyone.
DIRECTOR YOUNG: Hi. This is Director Young. Let me start with FRA. You're absolutely right, someone who spent a large chunk of their year last year helping negotiate that on behalf of the President after the debt ceiling was held hostage for that deal, we absolutely do comply with the Fiscal Responsibility Act, which you — as you know, CBO says would save a trillion dollars in deficit over the 10-year period.
As far as emergency spending, Ukraine, Israel, and border security, you know, the — the unfortunate pieces is — is we had to reinclude, re-ask for the President's supplemental again in this budget because Congress has not passed the President's supplemental.
It is very frustrating. We have been asking for support for Ukraine since September, if you can remember; after October 7th, asked for support for Israel; and just like Ukraine, our border security. We have been asking for — not just in September, but the President has asked over four times for more border security funding to be given (inaudible) during one of his requests and mostly turned down.
So, this budget repeats the President's supplemental ask for Congress. Certainly, our hope had been that Congress would have acted by now. But since they haven't, there was a need to ask again, frankly.
CHAIR BERNSTEIN: On the terminal unemployment rate, I — I think your question was, why does — why do we have 3.8 percent as a terminal unemployment rate? The — that begins in '28 and persists for the rest of the forecast window. That's standard forecast practice, to put your full employn- — full employment unemployment rate in — in the out years of the budget.
And so, the question really becomes — if I understand you correctly, and feel free to correct me if I don't — the question really becomes: Why do you have 3.8 percent as your unemployment rate at — at full employment? This is the unemployment rate that we judge to be consistent with steady and stable growth, stable prices, stable interest rates. And, in fact, if you look at the budget, you'll see that is how those relationships play out.
We can easily defend that as a — as a full employment unemployment rate or sometimes called the "natural rate of unemployment." We can easily defend — defend that as the unemployment rate that's consistent with — with stable growth and — and stable prices.
If you look at the current — probably the best way to make that point is to look at the current dynamics where you see current — the current economy where you see unemployment that's been below 4 percent — so in the 3.8 neighborhood — been below 4 percent for 25 months in a row and inflation certainly not rising, in fact, inflation coming down quite sharply.
So, that looks to us like a reasonable unemployment rate, one that's very consistent with the President's values with a tight labor market generating fair real-wage gains for working families.
OPERATOR: All right. We'll go to the next caller in queue. Caller, your line is unmuted.
Q Hi, this is Josh Boak with AP. Shalanda, Jared, thanks for doing this.
Voters are going to hear from congressional Republicans that their budget plan would balance over a decade and that growth would be 3 percent. What's the difference in your math compared to theirs? And do you — why do you think your math is more trustworthy?
CHAIR BERNSTEIN: I would say that difference is — is reality. We — we think we have a realistic growth forecast. We defend it extensively in the budget. We explain how we got to where we are, and probably a good thing to do would be to talk to outside economists who will generally validate those expectations and that — ask them what they think of — of the Republican ones.
We — we haven't had — you know, we haven't had a period — a sustained period of — of growth is, you know, 3 percent growth in — in this country in a long time. That's more the kind of growth rate you'd typically see in developing economies. We're obviously a — you know, a highly developed economy, and, you know, capacity growth is widely understood to be around 2 percent.
So, you know, you can write down whatever you want to get whatever result you want. But if it doesn't match good, hard economic reality, it's — it's not useful.
DIRECTOR YOUNG: If I could add on — Jared is absolutely correct. The other thing I'd really like folks to focus on is: Congressional Republicans also don't tell you what they cut, who they harm.
This President's budget lays out in great detail every program that he would fund, how he plans on fulfilling his promise of growing the economy from the middle out and the bottom up, through childcare, through universal pre-k, through free community college, through apprenticeships. Everything is detailed in the discretionary budget, mandatory proposals, tax proposals.
And congressional Republicans give us their top lines, which have rosy economic projections that don't fit reality. They also don't tell you they're going to cut the National Institutes of Health. They're going to cut border security. They're going to cut childcare. They're going to cut Head Start. That's the only way you can do it.
And we have to acknowledge that the President is transparent, details every way he's going to — to show he values the American people.
Congressional Republicans hide behind high-level talking points about balancing. Well, who are you hurting in the meantime? What are you cutting? And we're — we're going to tell the American people what those programs are.
OPERATOR: All right. We'll go the next caller in queue. Caller, your line is unmuted.
Q Hi, folks. It's Jim Tankersley of the New York Times. A couple of, sort of, technical questions here. The first is about interest rates. It looks like you have changed your forecast upwards for long-term rates on — on T-bills and — and have more debt service because of that. And I — and I'm just curious why. Is that an expectation that the Fed is going to keep rates higher for longer, or what's — what's going on with that?
And secondly, I — I'm just curious if you can give us a gross number on the tax proposals in here. What — what is the gross tax increase over the 10-year window? Thanks.
CHAIR BERNSTEIN: Thanks. On the interest rate. Yeah, if you go back to our midsession review — which is our most recent previous forecast for this one — the — the 10-year Treasury note — the terminal forecast — or, I mean, in the forecast rate in the last budget year, which was '33 — in the — 2033 — in that — in that mid-session review — 3.4 percent — our terminal rate, which we hit in 2029 in this forecast, is 3.7. So, that's a 30-basis-point increase in the 10-year rate.
And that's not based on any any- — anything from the Federal Reserve. That — you know, first of all, as you know, we don't comment on Federal Reserve monetary policy. But anything in the higher-for-longer space is — is a much more near-term proposition.
What we're looking at is — is higher — forecasts for higher Treasury rates that reflects blue-chip market forecasts forward rates. Our forecast tends to look at where — in the case of the long-term rate, we tend to look at where the forward rates are, where the markets are, and where the consensus forecasts are. So, we're just linked up with them.
Over — I think over to you for the other question.
DIRECTOR YOUNG: Yeah. So, Jim, on tax policy. Half of our tax increase would come from rates going up for corporations. The other half are on the top 1 and 2 percent of this country. So that — you know, that is similar or the same in many respects to last year's budget.
And that is consistent with what the President talks about. We can do all of our investments by asking those in the top 1 and 2 percent to pay more into the system.
OPERATOR: All right, we'll go to the next caller in queue. Caller, your line is unmuted.
Q Hi, this is Tami Luhby with CNN. Thank you for holding this call. I had two questions.
One is: Does the budget also contain the President's proposal to extend the number of drugs to 50 for — under Medicare negotiations?
And also, can you explain a little bit more about the Medicare solvency proposals and whether they are the same as last year? Or are there any new proposals?
DIRECTOR YOUNG: Yeah, we are not specific about the — the number of prescription drugs, but we are expanding beyond the 10 in the Inflation Reduction Act.
On our Medicare proposal, it is the same. But the reason we are able to say — and Medicare and Medicaid is able to say — that there is a permanent solvency fix is because we look at over 75 years of effects of our policy in the budget versus 25 years. Also, slightly better economic assumptions underpin that.
So, I know we speak about it in a different way. But the policy is the same. But we were able to look at a longer timeframe of how our policies would impact Medicare, which is why you hear us speak about it in a longer-term fashion.
OPERATOR: All right, we'll go to the next caller in queue. Caller, your line is unmuted.
Q Hi. Hans here — thanks — with Axios. Well, not thanks for being at Axios; although, I am grateful for being at Axios. But that wasn't the intent of my question.
Can we still get a gross number for total tax increases, to kind of follow up on Tankersley, just so we don't make any sort of mistakes there?
And then, am I — just another technical question, and apologies to the — the real budget reporters out there. Is the topline number for 2025 $7.- — $7.266 trillion, and is the topline for deficit in the first year $1.781. And I'm going off of F4. Thank you.
DIRECTOR YOUNG: Can you repeat the second question?
Q I just want to know topline numbers for total outlays, if I'm — if I'm — if I should be looking at F4. So, is the President proposing a $7.- — quotes a $7.3 trillion budget for next year, with deficits that are close to $1- — in the first year, $1.8. I'm just looking at F4.
DIRECTOR YOUNG: Yeah, F4 is the correct table to look at outlays in the budget. Also the Greenbook, which is going to come out later today from Treasury, will have the most details on our tax scores.
OPERATOR: All right, we'll go the next caller in queue. Caller, your line is unmuted.
Q Jonathan Nicholson with HuffPost. A few, hopefully really — real quick questions. The lowest depths of — that I see you guys get down to $1.5 trillion. In the past, $1 trillion has been, sort of, seen as sort of like a tripwire. Like, we should worry about the deficit. So, how do you respond to the fact that that seems to be the lowest you guys get?
B, the Republican budget — the House Budget Committee resolution has about a $3 trillion feedback effect to reduce their 10-year deficit. Can you give us what your equivalent is there that — Jared, you mentioned that there is some feedback effect included in this.
And then, finally, today, former President Trump talked about the need, again, for tariffs against China and that there is, quote, "a lot of room for cutting," unquote, in entitlements. So, I was wondering if you guys had any reactions to that. Thank you.
CHAIR BERNSTEIN: There's a lot there, and I'm not sure I picked up on all of it.
I don't remember saying anything about any "feedback effect." So, I'm not quite sure what you're referring to. I don't think I use that word.
Let me see. In terms of — I think you said something about cutting entitlements. I mean, the President — I mean, Shalanda — Director Young can say more about this than — than me, but the President is unequivocally clear in his opposition to any cuts in Social Security and Medicare.
What else did you want? Oh, one thing I wanted to mention about — about deficits and — and Director Young can follow up — is that especially when you're getting to the out years — I mean, when you're getting a few years out, as you do in the numbers you just cited, it's important to look at the deficit as a share of the economy. Because the GDP, of course, is growing significantly over these years. And so, we have a deficit that goes down considerably as a share of GDP. And you can see that in — in Table S1.
DIRECTOR YOUNG: And as long as we're talking about share of GDP, another indicator we look at closely with regard to our fiscal path is real net interest as a share of GDP. We are well below t- — 2 percent, which most economists look at as a goal — goalpost on where sustainable debt lies. So, Jared is absolutely correct. The deficit as the share to GDP goes down around 5 percent, and our real net interest is well below 2 percent as a share of GDP.
CHAIR BERNSTEIN: Yeah, let me just underscore that point. This also gets back to the — the question that Jim asked.
We do — we think in the — in the spirit of, again, a realistic take of where we think interest rates are headed — where CBO does and other prominent forecasters, we match them pretty closely with our — with our interest rate forecasts. And even with the assumption of higher rates, we still hit real net interest as a percent of the economy that is servicing our debt relative to the size of the economy — is well within historical range. And so, then, we consider that to be a positive indicator of — of fiscal responsibility.
OPERATOR: All right. We'll go to the next caller in queue. Caller, your line is unmuted.
Q Hi. Thank you so much. This is Carmen Paun from Politico. It looks like there will be a — the request has a cut in the amount dedicated to global health from $10.9 billion last year to about $10 billion this year. And I was wondering if you have any more details about what will be cut.
And the second question is relating to the fight on fentanyl. Do you have a sort of, like, topline number across a different department, like, how much you're requesting this year to fight fentanyl? Thank you.
DIRECTOR YOUNG: So, on global health, State Department typically det- — has the details. Each department will put out their individual congressional justifications. And I'm not going to get ahead of those details.
What I will say is the President is able to invest in and keep the progress going over the last three years, even while complying with the F- — the Fiscal Responsibility Act, one major reason we — we pay for our investments. And this budget is both fiscally responsible but also showcases continued investments in places like global health.
And $10 billion, I'm not sure where you're seeing that number, but that is, I'm sure, an increase over previous years.
What was your second question? Oh, on fentanyl.
I talked about this earlier. The major increase in fentanyl is in the border security package the President has put forth and Congress still has not passed. I thank the Senate for doing its work, but we — we continue to look for a path on funding border security that the President has asked for.
One of the major pillars of that is putting in this NII equipment, which everyone knows is a way of finding fentanyl in vehicles that cross land ports of entry.
I've done this for a long time. That used to be bipartisan. So, I continue to remain perplexed as to why we cannot get Congress to take the President up on passing his request to do more of these machines to keep fentanyl out of this country.
OPERATOR: All right. We'll go to the next caller in queue. Caller, your line is unmuted.
Q Hi. This is Richard Rubin at the Wall Street Journal. You talked about the budget being a statement of priorities, but there are several areas where you don't specify. "Shoring up Social Security" is sort of general language, extending the child tax credit only goes through '25, and then the tax cut that expired that you want extended, you don't specify how you would pay for them.
Can you explain sort of why you're not detailing plans in those areas? Thank you.
DIRECTOR YOUNG: On Social Security, the budget is very clear, like the President was on Thursday, what he stands for and what his principles are with regard to Social Security. You heard it from him, but it bears repeating, and you will see those — these words in the budget.
The Pres- — one, no benefit cuts. This President will not entertain proposals to cut any benefits from hardworking Americans who have paid into their system their entire working lives. Two, we must extend the solvency by asking high-income Americans to pay their fair share.
If you make a million dollars in this country, you are done paying your Social Security taxes sometime in February. Is that fair? And we don't think so.
And, three, we must improve the financial security for seniors and people with disabilities. And, finally, we have to ensure that Americans have access to benefits they've earned.
The budget is very clear: We have asked for increases to the Social Security Administration — this will be our fourth time. We're asking for a 9 percent increase this year.
One way to undermine Social Security benefits is not to fund the agency and people needed to provide access to those benefits. And it's unconscionable that the Social Security Administration is being starved of resources. And we call on Congress to take up the President's proposal to increase this agency.
MODERATOR: I think we have time for one more question.
OPERATOR: All right. We'll go the next caller in queue, then. Caller, your line is unmuted.
Q Oh, I think — it's Richard Rubin at the Wall Street Journal again. I'm unmuted. So, can you answer my other questions about the child credit and the extensions at the DJ? Thanks.
DIRECTOR YOUNG: Yeah. Sorry about that.
The child tax credit is extended to 2025. That is an acknowledgment that — we talked about the — the 2017 tax changes earlier today. Those things are connected.
We're going to have a robust tax debate at the end of 2025, in fiscal year '26, because individual tax rates lapsed from the 2017 law. You've heard the President will not raise taxes on those families making under $400,000. But he also will insist that the wealthiest tax cuts not be extended and not be given new. But we have to have that fulsome debate.
Child Tax Credit, we — will be a part of that debate. So, seeing Child Tax Credit does not mean we don't want to see that credit extended in perpetuity. We absolutely do. But we also know, in this country, we're going to have a robust tax debate in 2- — at the end of 2025, and Child Tax Credit will be a part of that.
MODERATOR: And we can still take one more.
OPERATOR: All right. Caller, your line is unmuted.
Q Hey, good morning. It's Ron Brownstein from The Atlantic. Jared, way back when, in the opening statements, you talked about the impact of administration's agenda on long-term growth. I'm wondering if you could give us any sense of what you think the impact of everything you passed and proposed would be on growth and also how it would affect, in your view, near and long-term trends in inflation-adjusted wages.
CHAIR BERNSTEIN: Sure. Ron, the way we quantitatively talk about that, of course, is the economic assumptions that you see in Table S9. So, for example, we have a long-term growth rate for GDP of 2.2 percent. If you look at other forecasters who don't include the growth effects of our policy interventions, they come in lower that — than that. Numbers around the 1.8, 2 percent range.
So, specifically, and I — as I just alluded to briefly in my opening comments, things like affordable childcare. We're very confident that if more caregivers could afford to pay for childcare, implementing proposals in this budget to keep that expenditure down, as a share of income, in the 7 percent range, that would increase labor force.
And higher labor force is a — is very much a — higher labor force is very much a pro-growth development. It's also, to get to the other part of your question, helpful in dampening inflationary pressures. We've seen that even in — in today's disinflation.
Secondly, if you look at our investment agenda, this also — you know, the — the economic way to talk about it is to say it improves the economy's supply side. But I think, more practically, in terms of building up that longer-term potential growth rate, when we stand up domestic semiconductor production; when we stand up domestic electric vehicle, electric batteries; when we improve the nation's infrastructure in ways that, in the previous administration, were a joke, in this administration are happening — all of those are pro-growth, pro-productivity, pro-supply side.
They not only boost the economy's capacity, as our numbers show, but they also help put downward pressure on inflation.
MODERATOR: Great. Thank you all, again, for joining.
Reminder that this call was on the record and embargoed until noon, as are the materials that we provided to you prior to the call.
If you all have any other questions, feel free to follow up with our team.
Thanks.
10:41 A.M. EDT
