A president’s budget is basically his wish list. The chief executive has no power to change tax rates or spending on his own; anything he wants to do must first be approved by Congress.
But with Biden’s party controlling both houses of Congress for another year and a half, Biden’s pricey wish list should prompt massive pushback from Republicans and provide a wake-up call to the moderate Democrats who still care about deficits and wasteful spending.
In this document, the Biden administration compiles its various tax-and-spend proposals — the major ones being the multi-year infrastructure and family plans, which cost about $2 trillion apiece — and outlines what they mean for the federal budget. Even assuming that things would play out the way the White House envisions, the result isn’t pretty: massive spending, massive deficits, and massive tax hikes.
This is really not the time to push forward with that combination of goals.
In fiscal year 2019, the federal budget was already on an unsustainable trajectory. That year, the government spent $4.4 trillion while bringing in just $3.5 trillion, and the old-age entitlements were projected to spiral out of control in the near future. In 2020, COVID-19 struck, and the government spent $6.6 trillion while bringing in $3.4 trillion. And this year, thanks in large part to Biden’s wasteful COVID bill, the Congressional Budget Office predicts we’ll run a $3 trillion deficit again.
For context, in a nation of 331 million, every trillion dollars represents $3,017 for each person in the country, including kids, or $7,785 per household.
As the pandemic recedes and the entitlement trust funds keep dwindling, one would think a return to pre-COVID levels of spending would be in the cards. But no, Biden would like the government to spend about $6 trillion in the 2022 fiscal year while bringing in only $4.2 trillion, with spending levels only growing from there. The budget will drive debt as a share of the economy to the highest in U.S. history, exceeding the World War II record. (Incidentally, the budget would reduce defense spending to 2.5 percent of gross domestic product by the end of the decade, which would be the lowest since 1940, or before the big buildup).
In February, before the most recent COVID bill became law, the CBO estimated the federal government would spend about $61 trillion between 2022 and 2031. Biden’s budget puts that number at $69 trillion. That $8 trillion increase is $62,280 in additional spending for every household in the country.
Over time, much of the new spending would (allegedly) wind down, while the new taxes would stay in place. By the administration’s math, Biden’s agenda would be paid for in about 15 years, despite the initial elevated deficits — and even that assumes no additional spending is proposed by any subsequent administration in that period. In the long term, in other words, the huge hit to the deficit delivered by Biden’s plan would be replaced by huge taxes — so long as the taxes brought in as much revenue as the administration expects. Meanwhile, the entitlement crisis would continue to grow, forcing the country to choose between benefit cuts and more taxes still. Even this analysis does not take into account inflation, which is showing signs of being on the rise, and which an expansive fiscal policy threatens to exacerbate. The massive amount of debt would also make it more difficult for the Federal Reserve to hike interest rates to control inflation, because doing so would increase the government’s borrowing costs.
We have already spelled out our objections to many of the particulars of Biden’s agenda, and we won’t belabor them here. Briefly: Biden’s infrastructure plan strays far from actual infrastructure investments — and our infrastructure is not in as bad of shape as many insist. His family plan warps the incentives that parents face when deciding how to care for their children by massively subsidizing professional child care. And his tax hikes could stymie economic growth, punish investment, and fall on everyday workers in addition to the dreaded rich people Biden is trying to target.
Biden’s budget is not yet the law. There is still time to stop it. It will become reality only to the extent that Congress chooses to enact it. But with both houses of Congress in Democratic hands, the president has far better odds than would usually be the case. Republicans should oppose this agenda every step of the way — and moderate Democrats should join them.