The fight over President Biden’s budget, the so-called Build Back Better plan, has revolved around very important issues.
- The adverse impact of expanding the welfare state, particularly the per-child handouts.
- The anti-growth effect of higher tax rates on work, entrepreneurship, saving, and investment.
For today’s column, let’s zoom out and look at two charts that highlight the big issue that should be getting more attention.
First, here’s a comparison of projected inflation with baseline spending (the current spending outlook) and Biden’s budget – all based on economic and fiscal estimates from the Congressional Budget Office.
As you can see, spending was growing far too fast even without Biden’s budget. And if Biden’s budget is enacted, the spending burden will rise more than twice the rate of inflation.
Now let’s look at a chart that illustrates why Biden’s spending spree is just a small part of the problem.
To be sure, it’s not good that the President is exacerbating America’s fiscal problems, but you can see that he’s simply adding a few more straws to the camel’s back.
You’ll also notice that I included both the amount of spending that technically is in Biden’s budget plan (the orange part), as well as CBO’s estimate of the additional spending (the gray part) that will happen if the budget gimmicks are removed.
The bottom line is that America’s fiscal problem is too much government spending.
And that spending burden is getting worse over time because spending is growing faster than the private sector, violating the Golden Rule, which is bad news for jobs and growth.
Making the problem worse, as Biden proposes, will further hurt American prosperity.
P.S. Biden’s plan will increase the deficit, which also is not good, but keep in mind that tax-financed spending is no better than debt-financed spending. In either case, you wind up with the same bad result.
P.P.S. This column has two serious visuals to help understand Biden’s fiscal policy. If you prefer satire, here are two other images.
