The budget recently released by the Biden White House for fiscal year 2022, as well as its fiscal outlook for the 10 years following, says a lot about where this administration intends to take the country.
Two things stand out in particular.
The president clearly wants to enlarge the role of government in the economy. At times in the past, Washington has taken a historically large portion of the economy, but only in recessions and war. But this administration projects a larger role for government on a fundamental and ongoing basis for as far into the future as it can.
It’s also clear from this budget that the Biden administration cares little about promoting economic growth. One would think that all of Biden’s aggressive spending and taxing proposals would find a justification in expectations of higher future growth rates and greater levels of prosperity. But this budget expects only mediocre long-term growth. This picture raises questions about the aims of Biden’s ambitious programs. It would seem that their only aim is to enlarge government for no other reason than to enlarge government.
Though the media has paid little attention to these plans for government expansion, it’s a big part of both the spending and revenues sides of this budget. The White House projects that government receipts will rise from the 16 to 17 percent of the economy in the recent past to 19 percent by 2024. Effectively, one dollar in five of the income of all Americans will go to Washington.
It’s true that such a figure isn’t unprecedented. During the technology boom of the late 1990s, so many people were making money so fast that the nation’s progressive tax schedule raked in more than any expected. Washington’s revenues took a larger share of the economy during the recession year 1981, or than it did in 1969, when President Lyndon Johnson imposed a special tax surcharge to pay for the Vietnam war. And, of course, Washington took more of the economy’s product during the existential emergency of the Second World War, though even then, receipts barely exceeded 20 percent of the economy. If the Biden administration were expecting some sort of unusual economic surge or emergency, this projected rise in Washington’s take would seem less significant. But there’s nothing like that in the budget’s economic projections.
If anything, the plans for government growth are still more evident in the budget’s projected outlays. Federal spending in this budget settles fundamentally after 2023 at a steady 25 percent of the gross domestic product (GDP)—one dollar in four of national output directed by Washington.
To be sure, that figure is lower than last year when federal spending constituted some 31 percent of GDP, but that extreme was clearly in the face of a special emergency that demanded more spending even as it depressed output and income. The only other times outlays have taken up as much of the economy as the Biden budget seeks were also beset by emergencies. One was the great recession of 2008–2009 and its immediate aftermath, and the other was the Second World War. Otherwise, there’s no historical precedent for government spending of this relative size. Since the budget assumes no such emergency, this White House clearly intends to take the country somewhere it has never been.
Still more interesting is the White House expectation of only paltry real economic growth after the post-COVID surge expected over the next two years. The White House projects real growth of less than 2 percent per year, right through the end of this decade and beyond. This growth pace is far below this country’s long-term average growth rate of slightly better than 3 percent per year. A growth slowdown, even a dramatic one, may be a reasonable expectation, but it’s strange nonetheless that the White House would make such a projection given the great claims the president has made for his infrastructure and American Families proposals. Since these projections assume the implementation of Biden’s grand plans, one would think the budget forecasters would have a more optimistic view on future growth than they do.
This is indeed a strange juxtaposition of rhetoric and expectations. Usually, when a president—Democrat or Republican—proposes new programs, especially of the Herculean proportions of Biden’s, he claims that the effort will pay the nation a return in more rapid future growth rates and, hence, levels of national prosperity. Not so here. Either the administration has less faith in the effectiveness of these programs than it has claimed in its public statements, one part of the White House isn’t talking to another, or the programs and the plans to enlarge Washington’s role in the economy have little to do with raising American living standards. It’s a question to which Mr. Biden owes the nation the answer.
Milton Ezrati is a contributing editor at The National Interest, an affiliate of the Center for the Study of Human Capital at the University at Buffalo, and chief economist for Vested, the New York-based communications firm. His latest book is “Thirty Tomorrows: The Next Three Decades of Globalization, Demographics, and How We Will Live.”
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.