Having resolved the latest federal debt ceiling “crisis,” Congress now turns its attention to the federal budget for fiscal year 2024. True to form, President Biden proposes to increase federal taxes and spending by $4.7 trillion and $1.8 trillion, respectively, over the coming decade. He attempts to sell this policy by saying his plan would reduce the 10-year deficit by $2.9 trillion. We believe flipping the president’s numbers on their head would lead to far better outcomes for the country.
Please allow us to explain.
In the 40 years before the pandemic, federal spending averaged 21.1% of our economy, as measured by gross domestic product (GDP). The pandemic necessitated a temporary increase in federal spending, but sadly, even though the pandemic is but a fading memory, federal outlays remain substantially higher as a share of GDP than they were prior to the crisis.
According to the Congressional Budget Office, federal spending will, under current law, average 24.1% of GDP over the next ten years. Not satisfied with the projected largesse, President Biden calls for boosting the 10-year average to 24.8%.
Don’t be fooled. Given that cumulative GDP is projected to total $332 TRILLION over the coming decade, even a 0.7 percentage point increase in federal spending is, to say the least … meaningful.
Federal spending should not grow faster than the economy or people’s paychecks, but that is precisely what it will do under President Biden’s plans.
The Biden Administration’s approach to policy reminds one of President Ronald Reagan’s description of the government’s view of the economy: “If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it.”
We offer a different approach — one that puts the country on a sounder financial footing, reduces government’s toll on our household budgets, and leads to an absolute increase in the standard of living. Liberal budget policies have led to higher living costs and a lower quality of life, and Americans are ready for a change.
We propose a pro-prosperity strategy that flips President Biden’s numbers. Instead of increasing taxes by $4.7 trillion, we would cut federal spending by $4.7 trillion. Instead of increasing federal spending by $1.8 trillion, we would cut federal taxes by $1.8 trillion.
President Biden’s budget would — at least on paper — cut the 10-year federal deficit by $2.9 trillion. Our proposal would cut the deficit by $2.9 trillion as well. No difference.
But while President Biden’s budget would grow the size of the government and the federal tax burden, ours would shrink the government and lighten the tax burden on American taxpayers.
Most importantly, President Biden’s proposal would undermine long-run U.S. economic growth while ours would boost it. That’s key.
That’s also why 435 economists, including two Nobel Laureates, signed an open letter earlier this year urging “Congress to reject President Biden’s irresponsible budget proposal ….” Citing the Biden Administration’s “anti-growth” tax and spending policies, the economists conclude “We do not have a revenue problem; we have an enormous spending problem.”
It goes without saying that the Biden administration and its allies on Capitol Hill would, without a moment’s hesitation, likely claim that a $4.7 trillion reduction in federal spending (alongside our $1.8 trillion tax cut) would “gut” federal programs and impose all manners of harm.
In fact, our proposed cuts would reduce federal spending and taxes relative to current law by a modest 5.9% and 3%, respectively.
Why do we reject the Biden Administration’s mantra of big government socialism? We do so because we aim to grow the U.S. economy, not the federal government.
President Biden proposes to increase federal taxes and spending. We humbly offer an alternative vision.
James Carter is the director of the America First Policy Institute’s Center for American Prosperity. Previously, he served as deputy undersecretary of labor under President George W. Bush and as a deputy assistant secretary for economic policy at the U.S. Treasury. James S. Gilmore III served as the 68th Governor of Virginia and is currently the CEO of the American Opportunity Foundation.
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