President Biden’s Budget Proposal is Unserious about Deficit Reduction

Michael Hanratty, Staff Writer

On March 28, President Joe Biden released his proposed federal budget for the 2023 fiscal year, kicking off months of negotiations with Congress before a finalized budget is passed in the fall. According to the White House, Biden claims that his top priority is deficit reduction. But instead of making hard decisions about spending cuts, the Biden budget uses accounting gimmicks and no small dose of dishonesty to make the proposal look fiscally responsible. Biden’s budget proposal is a brazen attempt to reframe the political debate as he stares down the barrel of a midterm shellacking for the Democrats.

It is not the first time the Biden administration has told half-truths about its economic agenda to make themselves look better; as they worked (unsuccessfully) to pass the Build Back Better Act last year, the president kept finding new and politically convenient rationales for it. In March 2021, as Biden fashioned himself a new FDR, he called it a “once-in-a-generation” investment. By September, inflation was the driving political issue. The White House then claimed that the Build Back Better plan suddenly cost zero dollars”! Come October, amid discontent from progressives over the size of the plan, Build Back Better was a generational spending bill once again; Biden’s chief of staff emphasized in a tweet that it was “twice as big … as the New Deal.” The Biden Administration is no stranger to using dishonest — and sometimes outright bizarre — rhetoric about its economic agenda to match the prevailing political winds.

President Biden continues to distort his proposals for political advantage in the budget debate, particularly in the context of deficit reduction. He has repeatedly taken credit for a projected $1.3 trillion decrease in the deficit for the 2022 fiscal year. But the deficit is on track to decrease only because Biden failed to pass his signature legislation, the Build Back Better Act, which would have supercharged federal spending over the next decade. President Biden can’t claim to be serious about deficit reduction when his only achievement in the arena is failing his way into some savings. And even with these savings, economist Brian Riedl points out that projected budget deficits for 2022 are over $1 trillion for only the third time in U.S. history, far outpacing pre-pandemic levels. Biden’s claims about his proposed 2023 budget are equally dubious. The White House’s proposal calculates that its spending plans still leave deficits of $14.4 trillion over the next decade — hardly a feat of fiscal restraint. Even worse, Biden’s budget proposal simply leaves out many of the spending initiatives his administration continues to push in Congress. The president has been clear that he still hopes to push through major pieces of his Build Back Better legislation before the midterms, however politically improbable that might be. Yet these major spending plans are nowhere to be found in the budget document: the administration excludes them, saying that they are subject to Congressional negotiation. Either President Biden simply forgot to include most of his economic agenda in the budget, or he is being deliberately dishonest so he can make bogus claims about deficit reduction.

The Biden budget’s revenue offsets are also laughable. To pay for his desired discretionary spending increases, President Biden proposes tax hikes which have no chance of passing Congress. The first is an increase in the corporate tax rate from 21% to 28%. It’s a bad idea: The nonpartisan Tax Foundation found that the change would lead to a long term GDP decrease by 0.7%, adding up to a $720 billion economic loss over 10 years. And it has no chance of passing the Senate; as early as April 2021, Axios reported that Senator Joe Manchin would not support a 28% corporate rate. Biden’s budget also includes a new proposal: A 20% minimum tax on income and unrealized capital gains for the top 0.1% of Americans. It is the proposal to tax unrealized capital gains, which would require certain investors to pay taxes on increases in the value of their stock portfolio before the stocks are sold, which is most problematic. It is likely to discourage investment by requiring investors to cough up cash simply to hold onto stocks. The unrealized capital gains tax proposal is also dead on arrival in the Senate thanks to Manchin; Bloomberg reported his opposition to it soon after Biden’s proposal was released.

President Biden’s claims that his budget is focused on deficit-reduction rely on a two-part sleight of hand. First, Biden’s budget simply omits his administration’s major spending initiatives. Second, Biden counts on proposed tax hikes which have no chance of becoming law to pay for the spending he does actually include in the budget plan. Biden’s desire to seem fiscally moderate is understandable — the ultra-liberal economic ambitions of his first year earned him approval ratings which barely crack 40% in the FiveThirtyEight average of all polls. But declarations about the importance of deficit reduction aren’t enough. If President Biden were serious about our national debt, he wouldn’t have put forward such an obviously unworkable budget plan.