I haven’t had time to do a deep dive into the president’s budget yet. But a few things have caught my attention. Dominic Pino is right that this plan is DOA. Still, the budget blueprint is a window into the utter irresponsibility of this administration, even though the budget claims to exhibit a “commitment to fiscal responsibility.”
The president wants to spend $7.3 trillion, or some $400 billion more than during the height of the pandemic. As a point of reference, after the Great Recession, President Obama kept the budget relatively flat for the five years following the recession. By 2015, he had more than cut in half the deficit from the height of the recession. No such luck here. Deficits are staying large.
Also, by 2034, mandatory spending will be $8.3 trillion and consume 80 percent of the budget. That leaves 20 percent for Congress to oversee annually. Do you think the budget fights that everyone claims to hate so much will intensify or moderate? I think you should get used to threats of government shutdowns, budget and debt-ceiling fights, and more, because as mandatory spending grows, passing a budget will be as pleasant as feeding a bunch of hungry dogs from a constantly shrinking plate of food.
Finally, not all taxes are created equal, and the president likes his extra bad (see this useful Tax Foundation chart). He wants to raise the corporate income tax rate from 21 to 28 percent. As it turns out, the corporate income tax is one of the most distortive taxes we have. Here is what the Tax Foundation writes:
Corporate income taxes are taxes on business profits earned by C corporations. The corporate income tax directly increases the cost of making investments in capital, like machinery and equipment, which businesses and workers use to be more productive. When businesses and workers are more productive, the economy grows. So, by increasing the cost of making investments, the corporate income tax discourages investment and productivity growth, creating one of the largest negative impacts on economic growth compared to other taxes.
In addition, if he does get his wish and raises the corporate-income-tax rate, he won’t raise the revenue he hopes to raise, and whatever he gets could eventually be shouldered by workers in the form of lower wages. The same can be said for the rest of his capital-income-taxing agenda.
Another point: After ten years, the president claims he will have increased spending by $4.4 trillion on top of its fiscal year 2024 level and raised revenue by an addition $5.1 trillion annually. Don’t buy it. The document is packed with budget gimmicks and tricks to make things look better than they are. The bottom line is that revenue won’t grow as much as projected, and spending will likely grow more than projected.
The whole thing is a bummer.