Fact-checking 6 claims in Joe Biden’s budget speech on the economy, taxes and Medicare

President Joe Biden proposed a $6.8 trillion budget this week that would impose tax hikes on the wealthy to bolster Medicare’s finances and provide additional money to expand social programs. 

All presidents’ budgets are merely suggested starting points for congressional deliberation — especially now, with the opposite party controlling the House. But they offer a general idea of what policy accomplishments the White House aspires to in the year ahead. This budget could also provide hints of what Biden will campaign on if he runs for a second term.

Biden said his proposal would reduce budget deficits, produce savings on prescription drug prices and help the country remain economically competitive with China. However, his plan didn’t address in detail how to ensure the future financial health of Social Security, although he campaigned on a promise to protect the program and has criticized Republican plans to reform it..

House Speaker Kevin McCarthy, R-Calif., called Biden’s budget proposal "unserious." Republicans will likely unveil their own budget proposal later this spring.

The two parties’ conflicting visions for the federal budget will then set off months of debate.

Economists estimate that Congress must act by mid-August to lift the debt ceiling or the Treasury Department will run out of money.

We fact-checked several remarks Biden made Feb. 9 as he unveiled his budget, including statements about inflation, jobs, the deficit, taxes and Medicare. We found that most of his statements required at least some additional context than he’d provided.

"We brought down inflation seven months in a row."

This is largely accurate but needs context.

Year-over-year inflation is a common way of measuring the increase in prices; it takes the economy’s current overall price level and compares it with the price level a year earlier, to see how much higher or lower it is on a percentage basis.

Year-over-year inflation peaked in June 2022 and has fallen for the next seven months for which data exists.

The most recent year-over-year figure, 6.3%, is still far higher than the 1.4% Biden inherited when he was inaugurated, and higher than it was as recently as October 2021.

The current rate is also much higher than the Federal Reserve Board’s target rate of around 2%, meaning the board will continue to raise interest rates, which risks driving the economy into recession. 

"I was able to create 12 million new jobs in two years, more than any president in American history has created in four years."

He has a point, but this claim needs a bunch of asterisks.

In raw numbers, Biden did oversee greater job growth in two years than any post-World War II president’s first term in office. 

However, if you measure the change in jobs by the percentage increase from the time a president took office, Biden rates in the middle of the pack among recent presidents. 

And although Biden has easily outpaced every postwar president in job gains per year served in office, he has benefited from fortuitous timing: He took office on the upswing of a deep recession and has not faced a new recession yet, something that many of his predecessors experienced during their first term and that hobbled their job creation figures.

Biden’s policies, such as those on the coronavirus pandemic, may have helped boost  national employment. However, no president is all-powerful in shaping the economy; international economic trends and other factors also play a role.

"In my first two years in office, I brought down the deficit a record $1.7 trillion, more than any president has in American history."

This needs context.

Biden’s administration presided over smaller deficits than were seen under the Trump administration. Between 2020 and 2022, the federal budget deficit — that is, revenues minus spending for the year — fell by $1.7 trillion.

But there’s an important caveat: The deficit had risen because of a temporary phase of unusual federal spending during the coronavirus pandemic.

During 2020 and 2021, the federal government’s spending skyrocketed as both the Trump and Biden administrations tried to ease the pandemic’s economic blow. The response from Congress and the White House included enacting stimulus payments, extending unemployment insurance, instituting business operation grants and increasing public health spending. 

Because tax revenue didn’t keep pace with spending, the deficit surged in 2020 and 2021. The deficit declined in 2022, as time-limited programs expired and as the worst of the pandemic passed, boosting tax revenue from increased employment and corporate revenue.

Also, a smaller deficit does not equal a shrinking federal debt. The federal debt is the sum of all past deficits (minus any surpluses, which there haven’t been for decades). So, any deficit, even a smaller one than previously, adds to the debt.

"Medicare finally has power now to negotiate lower drug prices." 

This is accurate, but it applies only to a small number of prescriptions.

Medicare is the federal health insurance program for Americans older than 65. For decades, the program has lacked the authority to negotiate drug prices, which has translated into costs that are higher than those paid by other industrialized nations. 

The Inflation Reduction Act which passed in 2022 will allow the federal government to negotiate the price of 10 drugs in Medicare Part D, the outpatient prescription drug use benefit, in 2026. In subsequent years, the number of drugs that the government could negotiate prices would rise, covering both Medicare Part D and Medicare Part B. 

Biden’s budget proposal would allow Medicare to negotiate prices for more drugs.

"You know what the average tax (billionaires) pay, federal tax? Three percent. T-H-R-E-E. Three percent. No billionaire should be paying a lower tax than somebody working as a schoolteacher or a firefighter or any of you in this room."

We rated a previous version of this claim False.

Biden has previously cited an 8% tax figure for billionaires, based on calculations by his own White House Council of Economic Advisers. But neither the 8% figure nor the 3% figure aligns with current tax policy.

To arrive at either 3% or 8%, Biden used calculations for what he thinks billionaires should pay if they were subject to a wealth tax he’s proposing. Even though Biden said in his remarks that billionaires "pay" that rate of federal tax, they don’t; his wealth tax proposal is theoretical and doesn’t govern what billionaires actually pay today.

Under current laws, the 25 highest-earning billionaires paid a 16% tax rate on average, estimates show. That’s far higher than 3%.

Biden’s comparison with households of more modest means is also inaccurate. Among households earning $50,000 to $100,000 a year — the category that would include many teachers and firefighters — the vast majority paid effective tax rates of between 0% and 15%. Even the very richest billionaires currently pay rates higher than that under today’s tax code.

Studies show that children who go to preschool "increase by nearly 50 percent the likelihood that they’ll finish high school and go on to earn a two- or four-year degree, no matter what their background is."

This is Mostly True.

A 2018 study of the Chicago Child-Parent Centers program by three researchers affiliated with the University of Minnesota supports Biden’s assertion, and experts in the field told PolitiFact that their study is credible.

However, other studies of preschool programs have shown gains in college attendance, but with lower rates — 12% to 18%. 

As a general pattern, experts said, the more socioeconomically disadvantaged the group of students is, the bigger the boost preschool provides for future college attendance.

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