The White House released a set of proposals that would address efforts for Ukraine and Israel, invest in humanitarian assistance and support security at the U.S. southern border. 

What You Need To Know

  • President Joe Biden proposed a spending a spending of around $106 billion 

  • This would be a little less than 1% of the U.S. overall GDP

  • An economist said this would raise the U.S. national debt but would make little impact on inflation 

Economists, like Jonathan Ernest, have been working to figure out the impact Americans could see if more federal money is borrowed. The Biden administration recently asked Congress for around $106 billion for humanitarian efforts and to aid international conflict.

While that number seems rather large, it’s only around 1% of our overall GDP, which is around $6.3 trillion. However, the proposal comes at a time when our federal debt is already high.

“The current government is also running a deficit, which means that really it's borrowing those additional funds that will later be anticipated to be paid back in the future,” said Ernest, who is an economist and serves as a professor in the Weatherhead School of Management at Case Western Reserve University. 

According to the Treasury Department, the U.S. government is over $33 trillion in debt. The country accrued a significant amount of debt during the pandemic.

Ernest said asking to borrow funds from the Federal Reserve to address the wars in Ukraine and Israel could mean less government funding for certain departments or programs here in the states.

“We may have to tighten the purse strings and a few other areas a little bit more, draw down on a little bit of other areas moving forward because we'll have to make up eventually the much larger question of of how do we pay down some of that debt increase, things like taxation, which we could see going forward,” said Ernest. “There's all sorts of ways that we could do that.”

The supplemental funding request would give around 5% to humanitarian efforts like food, clothes and supplies. That leaves 35% in financial and monetary aid like loans and another 60% for military support.

While consumers might not feel the impact of this spending through inflation, Americans could see an impact on our tax system.

“It won't necessarily fall on, you know, the particular Ohio consumer or something like that,” said Ernest. “It could be a variety of ways that we have different levels of taxation or adjust different brackets.”

Congress hasn’t made a decision whether to approve President Joe Biden’s request or not.

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