On Monday, March 11, President Biden released his proposed federal budget for fiscal 2025. The President proposed tax hikes on millionaires, billionaires and corporations that would raise tax receipts by whopping $4.9 trillion over the next 10 years. In particular, it raises the corporate tax rate from 21% to 28%, and the individual top rate from 37% to 39.6%, and there is a significant Medicare tax increase. There also are a slew of other tax increases on the wealthy and large corporations. When many people criticized these large tax increases, the President replied: "I'm a capitalist, man. Make all the money you want. Just begin to pay your fair share of taxes,” Everybody but his own son, evidently.
The President’s budget also requested a significant increase in spending. There are wonderfully sounding new programs for the poor and the middle class, and a big increase (6.2% in 2025) in spending for Social Security, and further steady increases over the next decade. “I won’t cut Social Security. I won’t cut Medicare,” says he. All in all, the President boasts his plan will cut the budget deficit by $3 trillion over the next ten years.
That’s ridiculous, of course, for the President’s budget actually projects another $16.3 trillion in deficits over the next ten years, and that number assumes Congress will pass his proposed tax increases. If Congress balks, Biden’s budget projection for the deficit is actually $19.3 trillion. Then ask yourself: what if there is a recession sometime in the next ten years? Well, tax receipts always fall during a recession while social spending always increases. So, if there is a recession, there will be an even bigger tsunami of red ink as far as the eye can see.
President Biden doesn’t seem to be concerned, or he would not have made this proposal; but what does the non-partisan Congressional Budget Office think about all of this? In an interview with the Financial Times (3/26/24), Phillip Swagel, the Director of the Congressional Budget Office (CBO), said that the growing US government debt was on an “unprecedented” trajectory, risking the kind of crisis which ”could result in a sell-off of government debt, leading to a rise in market interest rates and liquidity problems.”
We note that back in February, the CBO said the US budget deficit was set to rise by almost two thirds over the next decade from $1.6 trillion to $2.6 trillion with much of the increase due to higher interest costs, and that interest payments would account for around three quarters of the rise in the deficits between today and 2034.
We’ve written about this before, and we certainly agree with the fear of the CBO that the growth of US debt is starting to raise questions about the role of the dollar as the global currency. The humongous rise of government debt had spawned a rapid expansion of the US Treasury market where it is bought and sold. This market, the foundation of the US and global financial system, has expanded to around $27 trillion, a 60 percent increase over the past five years. It is now six times larger than it was before the global financial crisis of 2008.
This is the true Existential Threat. We simply cannot afford to let anything happen to our Treasury market. As it exists today, the United States can basically print money by borrowing trillions of US dollars. We are borrowing to fund our military adventure abroad; our social programs at home for our citizens, and now for the millions of migrants flooding our country; and for medical care and social security payments for our aging society. However, the appetite for our debt is fraying at the edges. You can see it in the new record high prices for gold and bitcoins, and you can see it in foreign governments increasingly using their own currencies instead of the dollar in international trade.
You would think that a huge increase in taxes would ordinarily shrink the budget deficits and lower the debt level, but it will never happen if Biden keeps spending every day like it’s Christmas! Instead, President Biden’s budget does just the opposite, resulting in increased taxes and dangerously high budget deficits and mounting debt levels. This high level of federal spending and resulting budget deficits may actually help support the economy for a little while longer, but what the President is really doing is passing our mounting debt problems on to the next generation. To put it simply – our children and grandchildren will be drowning in debt.
Is the President oblivious to the dangers of his economic policies? Is he so certain about the alleged benefits of his policies that he just doesn’t care about the obvious negative effects? Whatever the reason, our country is heading down a perilous path, and it more than enough reason to vote against him in the next Presidential election.
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