Unlike Obama, Biden Doesn’t Even Pretend to Care about Tackling Our Historic Debt

The new president is gambling that our extraordinary deficits will never matter.

I n the 2020 campaign, Joe Biden proudly ran as an “Obama-Biden Democrat.”

But there is already one important difference between Biden and his old boss: Obama used to at least pretend to be concerned about our long-term debt, while Biden isn’t even going through the motions.

Just like Obama, Biden began his presidency by using a crisis as a justification to smuggle many long-time liberal priorities into a massive spending bill. Yet a few days after the passage of the 2009 stimulus bill, Obama convened a “Fiscal Responsibility Summit” at the White House to discuss ways to tackle the long-term debt.

“We cannot, and will not, sustain deficits like these without end,” Obama said at the time. “Contrary to the prevailing wisdom in Washington these past few years, we cannot simply spend as we please and defer the consequences to the next budget, the next administration, or the next generation.”

He went on to warn that, “if we confront this crisis without also confronting the deficits that helped cause it, we risk sinking into another crisis down the road as our interest payments rise, our obligations come due, confidence in our economy erodes, and our children and our grandchildren are unable to pursue their dreams because they’re saddled with our debts.”

He vowed, “I refuse to leave our children with a debt that they cannot repay — and that means taking responsibility right now, in this administration, for getting our spending under control.”

He followed by titling his first budget “A New Era in Responsibility.”

In reality, Obama’s budgets were filled with accounting gimmicks designed to create the appearance of deficit reduction while avoiding the hard choices that real deficit reduction would entail. The nation’s public debt, which stood at $6.5 trillion when Obama made those remarks at the fiscal summit, shot up to $14.4 trillion by the time he left office. As a share of the economy, debt nearly doubled from 39 percent in 2008, George W. Bush’s final full year in office, to 76 percent in 2016, Obama’s final full year.

During the Trump era, I argued that it was a significant mistake for Republicans to abandon their concern for the debt. Lower taxes are good, but they are only sustainable if the trajectory of spending is under control. Trump-era Republicans not only ignored entitlements and failed to repeal Obamacare, but they ditched the crowning achievement of the Tea Party by nuking the spending caps put in place by the 2011 debt-ceiling deal. And then COVID-19 hit our shores, and Trump and Congress enacted $4.1 trillion in new spending before Biden was even sworn in.

When Biden took office, the nation’s debt had already eclipsed the size of our annual GDP and was approaching the World War II record. This can be seen in a frightening chart from the Congressional Budget Office showing debt as a share of GDP since 1900:

What’s different about the World War II spike is that after the war ended, so did the spending associated with it. In 1945, Social Security was in its infancy. Medicare and Medicaid were 20 years from even being enacted. So in the decades following the war, the debt receded. This time around, even after the pandemic is behind us, we’ll be adding to the debt due to the pre-existing issues we have been ignoring: a growing retirement-age population and rising health-care costs.

Biden has already added $1.9 trillion in new spending that is not even accounted for in the above chart. Though the legislation he signed was pitched as a “COVID relief” bill, in reality, just about 5 percent of the spending it included was actually focused on pandemic-related public-health matters. Additionally, only about $6 billion of the bill’s $129 billion in elementary-education funding was allocated for 2021 — despite its having been sold as an emergency measure to get schools reopened.

Unlike Obama after he secured passage of his economic-stimulus bill in 2009, Biden is not pivoting to talk about how to get the long-term debt under control as the nation recovers from crisis. Instead, he’s acting as if the massive spending bill Congress just passed doesn’t actually count as his “Build Back Better” economic-stimulus program and proposing yet more spending.

Though Biden is talking about raising taxes as a “pay for,” it is only in the context of offsetting a tiny portion of the new spending he is expected to propose. By some estimates, the price tag on his upcoming infrastructure-plus plan could hit $3–4 trillion.

In addition, during the campaign, Biden proposed trillions in spending on expanding Obamacare, subsidizing child care, pumping more money into higher education, and implementing his climate agenda.

So what changed between 2009 and 2021 that has made Biden — a supposed old-school, institutionalist, center-left Democrat — adopt a more fiscally radical posture than Obama, who was supposed to be a transformational liberal leader?

The answer is a combination of political lessons learned by Democrats and a shift in the party’s economic thinking.

It has long been true that Republicans tend to be more concerned about debt and deficits when a Democrat is president than when one of their own is in the White House. This tendency was even more dramatic in the transition from Obama to Donald Trump: With shocking speed, the GOP went from the party of Paul Ryan, entitlement reform, and dire warnings about the debt to a populist party that rejected entitlement reform and didn’t care much about debt.

The drastic shift convinced Democrats that all the Tea Party Republican talk about fiscal responsibility was merely a bad faith way to thwart liberal policy priorities. As Democrats now see it, there is a lot to lose from compromising their agenda to appease deficit hawks, and nothing to gain. After all, if Republicans, who supposedly stand for small government, don’t let debt concerns get in the way of their policy agenda, why should Democrats?

Another factor that has changed is the internal dynamics of the Democratic Party. Put simply, the Left is larger, better organized, and more powerful within the party now than it was in 2009. Back then, many on the left grumbled that the economic-stimulus bill was too small and complained that Obama was wasting time negotiating over debt reduction and doing things like creating the Simpson-Bowles fiscal commission. But the Left was not as strong a force among Democrats then as it is now.

The growing influence of the progressive and socialist wings of the Democratic Party has also helped lead a shift in thinking about the deficit. For a long time, there was broad agreement that the mounting debt was a bad thing, and the fight ended up being over the precise mix of tax increases and spending cuts required to get it under control. In the end, both parties, to varying degrees, chose political convenience — but they at least believed, or pretended to believe, that narrower deficits were desirable.

Now, however, there is much less consensus as to whether deficits matter at all. Modern Monetary Theory, which has gained traction on the left, essentially argues that a country that issues debt in its own currency cannot face a fiscal crisis. While Biden’s advisers may not explicitly embrace MMT, his party has clearly absorbed many elements of its teaching. In practice, Democrats are considering policies based on their own assessment of the merits, without regard to fiscal constraints.

Over the past decade or so, dire consequences stemming from our rising debt have never materialized. We haven’t seen a spike in interest rates, a flight of investors from U.S. Treasuries, hyperinflation, or any of the other scary consequences fiscal hawks warned of. That has helped the case of those who argue that deficits don’t actually matter.

However, economists never claimed that there was a magic debt-to-GDP ratio that would trigger a fiscal crisis. The argument has always been that the larger the debt becomes, the greater the risk a fiscal crisis could ensue. While we may be able to get away with such a large amount of debt for some time, we cannot do so forever. The “deficits don’t matter” mantra is only true until it isn’t. The trouble is that nobody can predict exactly when that will be.

It’s much more difficult to respond to a fiscal crisis once it hits than it is to ward off a crisis by gradually getting the nation’s house in order while our credit is still solid. During a crisis, we’d be forced to choose among options that include severe and sudden spending cuts, hyperinflation, and massive tax increases. By proposing trillions of dollars of spending at a time when the nation’s debt is already approaching record levels, Biden is essentially gambling that extraordinary deficits and massive debt will continue not to matter in perpetuity.

Unfortunately, if he’s wrong, it’s younger Americans who will suffer the most.