President Biden unveiled his fiscal year 2024 budget—a strategic marker that the administration plans to put at the center of the high-stakes policy and political battles looming over Washington. Two American banks collapse, prompting aggressive action by the Department of the Treasury, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) to shore up banking system confidence. Inflation eases but remains uncomfortably high. The office of the United States Trade Representative issued its 2022 annual report and 2023 trade policy agenda. The administration released a new national cybersecurity strategy. The Supreme Court hears arguments in a case that could transform the internet. President Biden made a surprise visit to Kyiv on the eve of the first anniversary of Russia’s invasion of Ukraine. It has been three years since the start of the COVID-19 pandemic, and the United States is set to end the public health emergency. The administration lays out its vision for implementing the CHIPS and Science Act.
President Biden submitted his $6.9 trillion budget proposal to Congress on March 9. The budget request is largely viewed as a messaging document and a political exercise. Budget requests typically do not become law as Congress controls government spending, and it is improbable that Congress will approve the President’s plan, especially with Republicans in control of the House of Representatives. Nevertheless, the budget blueprint is an opening volley in a high-stakes political fight over government funding and the debt ceiling. The budget fight is expected to drag out for months.
Biden’s request includes a set of ambitious proposals, ranging from plans to extend the lifetime of programs like Medicare and Social Security, to tax increases targeting the wealthy to help reduce the deficit, and funding for a number of Democratic priorities. The budget includes new spending on some programs that Biden campaigned on, such as free preschool, increased funding for affordable housing programs, increased funding for Pell grants and other benefits for students going to historically Black colleges or universities and other minority-serving institutions, and it restores the child tax credit. The budget request calls for raising the Department of Defense budget to $842 billion for fiscal 2024, up 3.2 percent from the previous year. The budget also includes continued support for Ukraine amid the war with Russia and investments to outcompete China.
The President’s plan proposes several measures to raise revenue to pay for these programs. The proposal increases the tax rate on wealthier Americans; there is a “billionaire” minimum tax, which would impose a tax of at least 25 % on the total income for Americans whose wealth exceeds $100 million; it increases the rate corporations pay in taxes on their profits to 28%, it cuts tax breaks for oil and gas companies as well as real estate investors, and quadruples the tax on stock buybacks. In fiscal 2024, the proposal would spend $1.8 trillion more than the government would take in, but over the long term, the White House says the plan would reduce the deficit, largely due to tax hikes on corporations and the wealthy.
The latest consumer price index (CPI), released by the Department of Labor on March 14, showed an increase of 0.4 percent in February for an annual increase of 6 percent, in line with what economists had been expecting. While inflation has dropped from last year’s peak, there are still signs that underlying price pressures continue to run strong. This presents a challenging task for the Federal Reserve, further complicated by the collapse of Silicon Valley Bank and Signature Bank, which forced the Fed to step in with emergency measures to backstop the banking system. The Fed has been waging an aggressive fight against inflation, raising rates from near zero to between 4.5 percent and 4.75 percent. Most observers expected the Fed to keep raising rates until they settled between 5.5 percent and 6 percent, but following the bank failures, and in light of recent stress in the banking system, many expect a pause in rate hikes at the central bank’s next meeting on March 22.
On March 12, the federal government took over Silicon Valley Bank (SVB), an institution that caters mostly to venture capitalists and high-tech start-ups. The Treasury Department announced that the Federal Deposit Insurance Corporation (FDIC) would use its deposit insurance fund, which is funded by bank fees and investment earnings, to insure 100 percent of deposits in the bank and pay back account holders. FDIC typically insures up to $250,000 in any account at a bank regulated and supervised by the agency; anything above that threshold is considered uninsured. A joint statement from the Treasury, Federal Reserve, and FDIC said, “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” unlike the 2008 financial crisis when several major banks were saved with spending approved by Congress. The FDIC also stepped in to take over the day-to-day operations of the crypto-focused Signature Bank in New York, which was closed down by state regulators. In brief remarks from the White House following the collapse of SBV, President Biden sought to reassure the public and said, “Americans can have confidence that the banking system is safe.” Biden also stated that he intends to ask Congress and banking regulators to strengthen the rules for banks to stave off future failures. The collapse of SVB is the largest bank failure since the 2008 financial crisis, and the fallout has shaken up financial markets. In addition to taking over SVB and Signature Bank, the Federal Reserve announced it is starting a new emergency lending program, called the Bank Term Funding Program, “to help assure banks have the ability to meet the needs of all their depositors.” Testifying before the Senate Finance Committee on March 16, Treasury Secretary Janet Yellen sought to assure lawmakers that the nation’s banking system “remains sound” and people who banked with the two now failed banks “can feel confident” about their money. The collapse of the banks has also upset expectations regarding future Federal Reserve actions on interest rates (see next section).
The office of the United States Trade Representative (USTR) submitted its 2023 trade policy agenda and annual report to Congress on March 1. Since being sworn into office, President Biden has focused on a “worker-centered trade agenda,” and the report details key accomplishments from the first two years of the Biden Administration and priorities for the year ahead. The greatest geostrategic challenge for the United States is China; USTR notes that China “employs a wide array of unfair, distortive measures,” and that the administration is seeking to realign the U.S.-China trade relationship. The report outlines efforts to develop a trade strategy and a toolkit to combat forced labor, including multilateral and bilateral discussions to use trade policy to address forced labor and child labor in global supply chains. Supply chain resilience was also identified as a critical component of the administration’s trade agenda. It calls out four priority product areas coming out of a comprehensive review of the U.S. supply chain: semiconductors, large capacity batteries, critical minerals and materials, and pharmaceuticals and active pharmaceutical ingredients. The report outlines the administration’s efforts with key trading partners to promote trade based on fair competition and labor practices, supply chain resiliency, environmental sustainability, and trade facilitation. The report also emphasizes digital and inclusive trade and demonstrates the administration’s attention to bilateral and multilateral trade agreements that may advance digital goals, as well as strengthen cybersecurity capacity and create better transparency, predictability, and efficiency in doing business in foreign markets. On the same day that the Biden Administration released the trade policy agenda, it also shared a new National Cybersecurity Strategy (see next section), which recognizes the importance of digital trade and secure digital and physical infrastructure and underscores the importance of these policies working together.
The Biden administration unveiled its National Cybersecurity Strategy (NCS) on March 1, which aims to, “Secure the full benefits of a safe and secure digital ecosystem for all Americans.” Kemba Walden, the acting national cyber director, said the NCS, “Reimagines the American cybersocial contract.” The document highlights the government’s commitment to investing in cybersecurity research and new technologies to protect the nation’s security and improve critical infrastructure defenses. The strategy envisions what it calls “fundamental changes to the underlying dynamics of the digital ecosystem” and outlines five pillars of action: defend critical infrastructure; disrupt and dismantle threat actors; shape market forces to drive security and resilience; invest in a resilient future; and build coalitions to counter threats to our digital ecosystem. The new NCS departs from the previous 2018 strategy in several ways. The new NCS calls to “rebalance the responsibility” of defending cyberspace, moving away from end users and toward the “most capable and best-positioned actors,” including owners and operators of critical technologies and infrastructures. It also seeks to “realign incentives” through various regulatory, grantmaking, and budgetary measures.
The overall message of the new NCS is that the United States can no longer rely on voluntary collaboration and vigilance against cyber threats so they must shift responsibility to industry through regulations. Therefore, there are significant changes in store for the private sector as the administration implements this strategy. Nevertheless, there will be bureaucratic challenges in implementation. The NCS positions the Office of the National Cyber Director (ONCD) as the lead federal actor for harmonizing cyber regulations. Yet, there are significant questions over whether that office can successfully reign in and deconflict between competing departments and agencies that have now been mandated to leverage their unique authorities to promulgate cyber regulations and enhance cybersecurity. Moreover, while some aspects of the new strategy are already in place, several measures will require legislative action. It remains to be seen whether such measures can pass in a divided Congress.
At the end of February, the Supreme Court of the United States heard arguments in the case of Gonzalez v. Google, which gives the high court a chance to review Section 230, the legal provision that protects social media companies from liability for what third parties post to their sites, which has sparked controversy for years. At issue is Google’s alleged responsibility for terrorist propaganda on its subsidiary YouTube. The suit alleges that YouTube “aided and abetted” the Islamic State, in part by allowing its algorithms to recommend video content from the group. This case is the first time the court will directly evaluate Section 230, and the ruling could have long-lasting ramifications for how internet sites treat users’ posts and legal liability on the modern internet. A ruling is expected before the current Supreme Court term ends in October.
February 24 marked the first anniversary of Russia’s invasion of Ukraine, and the country is now at the forefront of a renewed great-power rivalry between the West and Russia. On the eve of the anniversary, President Biden made an unannounced trip to Kyiv, Ukraine, to meet with President Volodymyr Zelenskyy in a defiant display of Western solidarity and resolve. In the past twelve months, the United States has rallied the world in response to Russia’s aggression, working with allies and partners to provide Ukraine with critical security, economic, and humanitarian assistance. Since the war began, the Biden administration and the U.S. Congress have directed more than $75 billion in aid to Ukraine, which includes humanitarian, financial, and military support. The West has also undertaken unprecedented efforts to impose costs on Russia for its aggression, including freezing Russia’s sovereign assets and imposing extensive sanctions on Russia’s economy.
On March 11, 2020, the World Health Organization declared the coronavirus outbreak a pandemic. Three years later, the virus is still spreading, and the death toll is nearing 7 million worldwide. In the United States, an average of more than 500 people are still dying from COVID-19 each day. Yet most Americans have resumed their normal lives. The last briefing by the White House COVID-19 response team was almost seven months ago, and the White House plans to end the coronavirus national and public health emergency on May 11. This termination signals a new chapter in the Biden administration’s response to the COVID-19 pandemic. White House officials say this reflects the nation’s progress against the pandemic with the widespread availability of vaccines and therapeutics. Once the public health emergency ends, so do flexibilities and waivers to Medicare and Medicaid that have been frozen in place for several years. There are also lingering political divides over COVID-19 that have manifested in the newly divided Congress, where House Republicans are using their new majority to increase oversight of the Biden administration’s pandemic response and explore the virus’s origins.
The Biden administration recently laid out its vision for implementing the Creating Helpful Incentives for the Production of Semiconductors (CHIPS) for America Act. The law intends to counter China’s growing economic influence, make the United States less reliant on foreign manufacturing, and mitigate supply chain disruptions. In a speech on February 23, Commerce Secretary Gina Raimondo said the legislation, “Presents us with an opportunity to make investments that are similarly consequential for our country’s future. But only if we as a country unite behind a shared objective, generate a similar public/private mobilization and think boldly.” Secretary Raimondo also announced that the Commerce Department would launch its first application for CHIPS funding, focused on commercial manufacturing facilities. These funds will incentivize companies to manufacture semiconductors here on American soil. The Commerce Department will also release a funding opportunity for semiconductor materials and equipment facilities later this year. Raimondo said the administration’s intention is to have the U.S. design and produce the world’s most advanced chips domestically and aims to establish “at least two new large-scale clusters” of cutting-edge logic fabs by 2030. To achieve this, the administration is creating the National Semiconductor Technology Center (NSTC), an ambitious public-private partnership bringing together government, industry, customers, suppliers, educational institutions, entrepreneurs, and investors. The administration is also calling on companies to partner with high schools and community colleges to train over 100,000 new technicians over the next decade. To do so, the United States will need to triple the number of college graduates in semiconductor-related fields, including engineering. The Department of State also announced a strategic framework, under the International Technology Security and Innovation Fund (ITSI Fund), appropriated under the CHIPS Act, to provide for semiconductor supply chain security and international information and communications technology security.
Department of Labor – Julie A. Su has been nominated as Secretary.
Department of Commerce – The CHIPS Program Office has added staff: Sara Meyers is chief operating officer and chief of staff; Dr. Morgan M. Dwyer is chief strategy officer; Todd A. Fisher is chief investment officer; Andy Kuritzkes is chief risk officer; Fayrouz Saad is the director of public engagement; and Dr. Rebecca Callahan is director of legislative affairs.
Department of State – William M. Russo is Assistant Secretary of State for Global Public Affairs. Eric Garcetti was confirmed as Ambassador to India. Michael Ratney was confirmed as Ambassador to the Kingdom of Saudi Arabia. The following ambassadorial nominations were announced: Bryan David Hunt for Sierra Leone; William W. Popp for Uganda; Vernelle Trim FitzPatrick to the Gabonese Republic; and Michael Sfraga to be Ambassador at Large for Arctic Affairs.
Department of the Treasury – Brent Neiman was confirmed as deputy undersecretary for international finance and development.
White House – Jared Bernstein has been nominated as chairman of the Council of Economic Advisers. Dr. Lael Brainard is now the director of the National Economic Council. Ben LaBolt is the new communications director. Steve Benjamin is the director of the office of public engagement. Katy Ann Searcy is chief of staff for infrastructure implementation. Marcus D. Hendricks, MPH, Ph.D., is now a senior advisor for climate and community resilience at the Council on Environmental Quality. Ryan S. Hathaway is director at the environmental justice interagency council at the Council on Environmental Quality.
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