President Joe Biden’s budget submission to Congress is quite staggering. Not in a good way.
It calls for record-breaking amounts of spending, taxes, deficits, and debt. It is a budget that generations will pay for in slower economic growth, higher taxes, and overwhelming debt for years to come. The budget proposes spending $6 trillion in fiscal 2022, rising to $8.2 trillion in 2031, and totaling nearly $70 trillion over the next 10 years. Total government spending would average 24.5% of GDP, far above the 21% it has averaged for the last 50 years. There has never been a 10-year period in our history with government spending at this high a level.
How to pay the bill?
Biden calls for $3.6 trillion in tax increases over the next 10 years, the largest tax increase in history. Under the budget, taxes as a percentage of GDP would increase from 16.3% in 2020 to 19.9% in 2031. The tax burden on the economy would average 19.3% over the next 10 years, well above the 17.4% average over the last 50 years.
Individual taxes would more than double, from $1.6 trillion in 2020 to $3.5 trillion in 2031. Corporate taxes would more than triple, from $212 billion in 2020 to $693 billion in 2031. The maximum tax rate on savings and investment would nearly double, increasing to the highest rate in 100 years.
Despite record tax increases, federal deficits would soar, running at more than $1 trillion a year for the next 10 years and totaling nearly $15 trillion, a 10-year level never seen before. Debt held by the public would nearly double, increasing from $21 trillion in 2020 to $39 trillion in 2031. That debt level would be 117% of GDP, a level never before reached in our history, not even during World War II.
Biden says that only the rich and big corporations will have to pay more. But that is not the case. Everyone will have to pay. You and I will have to pay for this budget through lower post-tax wages, higher consumer prices, and lower retirement savings as saving and investment in our economy fall. We will pay for this budget through slower economic growth, higher inflation, lost jobs, and a drop in U.S. competitiveness.
Put simply, Biden’s fiscal offering is a road map to a lower standard of living for all of us. Congress should reject it out of hand.
Bruce Thompson was a U.S. Senate aide, assistant secretary of the treasury for legislative affairs during the Reagan administration, and director of government relations for Merrill Lynch for 22 years.
