Last night, Biden’s SOTU address was remarkable for its terrible economics. At a time when a growing number of people recognize the role played by the American Rescue Plan Act in the current inflation, President Biden bragged about the overflow of money. He then proceeded to list all the ways he would make the situation worse by spending more: increasing the restrictions on supply with Buy American and minimum-wage requirements, price controls, and blocking foreign trade or supply chains. Better yet, all of this, he claimed, would help fight inflation.
Unfortunately, when the president moved away from left-wing policies, it was to embrace more populist policies such as increased industrial policy, less immigration, business subsidies (to be fair, that’s a bipartisan disease), trade protectionism, and more police funding without any concrete criminal-justice-reform proposals.
If the president’s goal were truly to lower costs and to have “more goods moving faster and cheaper in America,” he could have proposed to repeal the Jones Act, the Trump China and metal tariffs, and reduce regulations on energy production. But that would make too much economic sense.
The most amazing part of the speech, however, was when he actually said with a straight face that all this new spending “to fight inflation will lower your costs and lower the deficit.” That was only topped by this next claim that he is “the only president ever to cut the deficit by more than $1 trillion in a single year.” Considering that this president has done literally nothing to reduce the deficit and he hasn’t even pretended that fiscal prudence would come when we are out of the pandemic, this is an amazing claim. The other reasons why the deficit is falling is that the Covid relief is winding down, and he was stopped from spending even more money when Build Back Better died in the Senate.
Now, to be fair to the president, the interest in cutting deficits, or even paying lip-service to the idea, has been fading away for some time. Just for fun, here is a list of how many times debt and deficit were mentioned by some presidents in their first SOTU addresses:
- In 1993 (debt ratio = 47 percent), Clinton mentioned the national debt nine times and the deficit 21 times in the SOTU. And he actually ended his term with a budget surplus, not a deficit.
- In 2001 (debt ratio = 33 percent), Bush mentioned the debt five times in his SOTU.
- In 2009 (debt ratio = 47 percent), Obama mentioned the debt two times and the deficit eight times. And after the Great Recession, we had a big fight over the need for the implementation of austerity measures.
- In 2017 (debt ratio = 75 percent), Trump mentioned the debt once. This isn’t surprising, since he came into office announcing that he wouldn’t cut the drivers of our future debt: Social Security and Medicare.
- In 2022 (debt ratio = 100 percent), Biden mentioned the debt two times (in the context of making health care free for veterans) and the deficit six times to say that more spending would reduce our indebtedness.
This trend has been a long time coming, but it doesn’t make it any more acceptable.