President Joe Biden is annoyed. On Saturday, during a speech towards the Congressional Black Caucus, he complained that \”I'm so tired of Republicans saying we are the 'big spenders.' Give me a rest. Give me a break.\” He basically said in a single portion of the speech that he is spending lots of money on special interests and yet \”doing all of this while lowering the deficit-last year, $350 billion, which year by $1 trillion.\” It's magic.
It's amazing to look at a speech in which very few fiscal facts are correct. First, the Committee for a Responsible Federal Budget estimates that \”the Biden administration has enacted policies through legislation and executive actions that will add more than $4.8 trillion to deficits between 2022 and 2031.\” That's exclusively his administration, which sums is going to be added to the trillions in debt accumulated by previous administrations.
And let's remember that the $4.8 trillion figure could be significantly larger if he and the Democratic friends in Congress had passed the roughly $2.5 -$5 trillion Build Back Better (BBB) legislation they pushed so hard for. The figure also rests around the dubious assumption that the Inflation Reduction Act of 2022, that was passed in lieu of BBB, will reduce the deficit. Finally, this figure doesn't include Biden's student-loan forgiveness order, which the Congressional Budget Office (CBO) calculates will alone add over $400 billion in deficit spending over Ten years.
If you need more evidence the president is no budget cutter, look also in the size of recent budget deficits when compared with projections released just three weeks after his inauguration. These forecasted that the combined 2022 and 2022 budget deficits could be $3.31 trillion. They now stand at $3.72 trillion, having a month quit in FY 2022. So, the Biden administration has expanded deficits by $400 billion more than expected, even before we count the current spending mentioned above.
Next, let's look at what's driving the \”deficit reduction\” Biden cites from peak pandemic levels.
The first factor is the expiration of fiscal stimulus spending. After passing the American Rescue Plan and growing spending and creating massive inflation, FY 2022 spending outpaced 2022's by almost $300 billion. Yes, because the stimulus spending expired (BBB was designed to extend many of the programs, so it's fair to state this happened from the Democrats' will), spending is down almost $1.5 trillion within the first 11 months of fiscal 2022.
Those were unusual circumstances, so a much better comparison may be the first 11 months of 2022. With that measure, spending in 2022 has become up by $1.2 trillion. This is not proof of fiscal responsibility.
The second factor driving supposed deficit reduction is the highest surge in inflation in four decades. Inflation pushes millions more Americans into higher tax brackets, thus causing them to pay more taxes and, hence, driving up revenue. These higher tax bills are coming due even as people's real earnings decline. For this reason regressive form of deficit reduction, combined federal revenues in FY 2022 and 2022 are almost $1 trillion greater than CBO forecasted, with receipts in the first 11 months of 2022 almost $1 trillion greater than 2022 levels.
One last thing. None of this takes under consideration the increase in charges around the debt with rates rising substantially the very first time in decades. Based on the Treasury Department, in August, payment on U.S. government debt was $63 billion, up from $34 billion in January. In addition, the CBO's interactive budget tool illustrates how much of an rate of interest increase above the baseline means for interest payments. The answer is \”expensive.\” As Jack Salmon and that i wrote over at Discourse magazine, \”If the eye rate on the 10-year Treasury note is…1 percentage point higher than expected, the cumulative deficit is going to be $2.85 trillion larger over the decade.\”
Depending how the CBO calculates the annual rate of interest, we could find ourselves in territory a whole lot worse than these projections, especially since half of our debt includes a maturity of 3 years or less, which interest rates are even higher. With inflation still not under control and also the Federal Reserve continuing to increase rates, it isn't confusing how our fiscal situation is going to be severely stressed.
The president's claims are bunk bordering on carelessness. His policies, I am afraid, deserve even harsher words.
