President Biden’s deficits threaten economic doom
The latest grim news on the exploding federal-government deficit testifies to the recklessness and incompetence of President Joe Biden. He isn’t responsible for the whole problem, but he has made it much worse.
On July 13, the Treasury Department said the deficit for the first nine months of the fiscal year (from October 2022 through June 2023) was almost $1.4 trillion. This is more than two-and-a-half times the size of the $515 billion deficit for the same period in the previous fiscal year. This is a shocking and financially perilous leap in borrowing. It comes despite near-record-low unemployment, which means more people are paying income taxes and fewer need unemployment assistance (thus reducing the need for a big chunk of federal spending).
The deficit should therefore be falling, not rising. Only dreadful and foolhardy policies create rapidly growing deficits in times of low unemployment.
Alas, Biden has provided just such policies in abundance. They have turned a bad national balance sheet into a full-blown budgetary disaster.
The surging deficit comes because federal revenues have fallen and extravagant spending has gone hog-wild. Both are Biden’s fault, directly and near-directly. Directly, Biden’s American Rescue Plan included $1.9 trillion in spending, his infrastructure law had $1 trillion in spending, his laughably misnamed Inflation Reduction Act spent $750 billion (supposedly offset by tax hikes), and the CHIPS Act (technology) spent another $280 billion.
All told, the respected and centrist Committee for a Responsible Federal Budget wrote last fall, “We estimate the Biden administration has enacted policies through legislation and executive actions that will add more than $4.8 trillion to deficits between 2021 and 2031.”
Near directly, Biden’s spending binge and the Federal Reserve’s recklessly loose monetary policy catalyzed 18 months of the worst inflation in four decades. The fiscal consequences have been severe. When the Fed belatedly rushed to raise interest rates from zero to 5% to counteract inflation, the government had to pay higher rates on the avalanche of money it had borrowed. During the past nine months, federal interest payments exceeded $650 billion, a 25% increase over the same nine-month period in the previous year. Inflation also meant taxpayers had to spend 8.7% more for cost-of-living adjustments on Social Security and other retiree programs.
The rising interest rates that were triggered by Bidenflation also played a large role in producing three of the four largest bank collapses in United States history, for which the federal government has paid $52 billion to cover deposits.
Meanwhile, tax revenues fell despite or because Biden pushed for higher tax rates. A combination of Bidenflation, rising interest rates, Biden’s jihad against domestic energy production, and his regulatory agenda imposing huge costs on businesses, all conspired to tank investment markets. The S&P 500 index fell 20% in 2022, which produced a precipitous drop in investors’ capital gains by investors and far lower tax revenue sluicing into the Treasury. So, tax revenues fell 11% for the first nine months of fiscal 2023, compared to 2022.
Even without the deficits from January through June, the ratio of public debt (including intragovernmental) to gross domestic product reached 129% through last December, an all-time record excluding the anomaly of World War II. For most nations, anything above 100% is a financially dangerous territory (although because the dollar is the world’s reserve currency, the U.S. has a bit more leeway than most). Still, for such a wealthy nation to have a substantially higher debt-to-GDP ratio than developing nations such as Brazil and India, and among the highest in the developed world, is a travesty.
All this doesn’t even take into account looming insolvencies of Medicare and Social Security within 10 years, nor nearly $80 trillion in unfunded federal liabilities during the next 75 years. Yet all we hear from Biden is calls for more spending.