Every year, the president presents a budget proposal for the federal government that represents (at best) a starting point for negotiations with Congress. At worst, it’s a load of hot air and partisan fan service. President Joe Biden just published its latest budget – and it is especially the last.
And yet, of course, it sounds good on the surface level. The White House he says his budget will “help families breathe a little easier” by “investing in America, reducing costs for families, protecting and strengthening them.” Social security and Medicarereducing the deficit, and more.” Oh, and he’ll presumably do it all by raising taxes only on the “rich” and big corporations. What’s not to love?
Well, a lot, actually, once you look beneath the surface.
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For example, President Biden says his budget will reduce the federal budget deficit by $3 trillion. While perhaps true, at least under a series of rosy assumptions, this is a pretty good spin on what he would actually do.
According to the non-partisan Committee for a Responsible Federal Budget (CRFB), the national debt would be break a new record for 2027 under the Biden plan. The total federal debt would increase by a staggering $19 trillion over the next decade. The national debt will reach 110 percent of GDP by 2033, meaning we will owe significantly more in debt than our economy produces in a full year.
This means slower economic growth, less private sector investment in the economy, and trillions in taxes just to cover interest payments.
Biden’s $3 trillion in deficit “savings” is only compared to a hypothetical baseline projection, which means it’s probably a little less fiscally reckless than the status quo. But the president’s budget clearly doesn’t come close to restoring fiscal sanity as he promised — on the contrary, take the United States to record levels of debt.
Oh, and while Biden brags about how unlike those mean Republicans, his plan doesn’t cut Social Security, that also means it does nothing repair Social security.
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As a result, effectively, through inaction, approves the strong automatic cuts of benefits that will occur when Social Security. becomes insolvent in 2033. Without real reforms, benefits will be cut at least 23 percent at that point, according to the Congressional Budget Office.
And while Biden claims that its budget supports Medicare, it does in part with budget tricks that doesn’t really equal real savings, according to Manhattan Institute economist Brian Riedl.
Meanwhile, on the fiscal front, Biden’s proposal is surprisingly aggressive. His plan includes almost $5 trillion in tax increasesincluding a large increase in the income tax rate, an increase in the income tax rate, a new “billionaire tax” on unrealized capital gains, a quadrupling of tax on the purchase of shares, and more.
All of this would amount to the largest tax increase since the 1960s and “the highest sustained tax burden in American history.” by Riedl. Doesn’t that sound like just what the economy needs to avoid a recession?
Now, the tax increases are nominally aimed at the wealthiest Americans and Big Business, and I certainly don’t expect people to pull out the little fiddles and feel bad for the Jeff Bezoses of the world. But the harsh economic reality is that nominal taxes applied to “the rich” and “Big Business” often have economic ramifications that hurt everyday Americans — and Biden’s tax proposals are no exception.
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For example, raising the corporate tax rate sounds like it will only hurt the corporate bigwigs. But economists across the ideological spectrum largely agree that a significant portion of the corporate tax burden is ultimately borne by workers via lower wages. I don’t agree on the exact percentage, but roughly 70 percent is the most likely percentage, according to the non-partisan Tax Foundation.
So, Biden’s massive tax increase on “corporations” would end up hitting American workers right in the paycheck. It could also hurt the investment and, as a result, could eliminate an estimate 159,000 jobs.
Does “helping families breathe easier” sound like that to you?
In addition, the proposed increase in corporate taxes would put the United States far behind other developed countries. At 32.2 percent, our combined federal and state tax rate would be 10 points higher than others. OECD countries, according to the Tax Foundation. That puts us at a strong competitive disadvantage when it comes to attracting jobs and investment.
All in all, Biden’s budget proposal is a mix of rosy rhetoric, optimistic assumptions, lofty goals and bad ideas. Fortunately, it will have to get its current budget through a Republican-controlled House of Representatives. The final result should be little similar to this first partisan project. And America will be much better off than if the first draft of a Biden budget became a reality.
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