When this observer first got interested in politics in the late 1980’s, the budget deficit was an important issue. Prognosticators worried about ever expanding deficits hampering economic growth and creating an impossible debt burden for future generations. In 1991, the Federal budget deficit was $269 billion and the national debt totaled, $3.6 trillion, 60% of GDP. There followed three decades of ham-fisted attempts by Republican and Democrat budget hawks to get a handle on the debt. They failed.
In 1995 the Republican Congress led by Speaker Newt Gingrich shut down the government to force President Bill Clinton to agree to spending cuts. These cuts fell on entitlements like Medicare and Social Security. Clinton refused to budge, the GOP got blamed for the shutdown, and Gingrich’s entitlement reform plans came to nothing. In 1997 Gingrich and Clinton struck a deal that held spending down and actually created a budget surplus. The deficit and debt grew again after the dotcom bubble burst in 2001. The debt grew even more under President George W. Bush, who put the Iraq War on the national credit card. In 2011 Republican House Speaker John Boehner tried to extract spending concessions from President Obama by refusing to raise the nation’s debt ceiling. Obama eventually gave in, but the ensuing cuts fell mostly on the military and the debt grew all the same. The national debt doubled under President Obama and Boehner is now a lobbyist for the marijuana industry. President Trump, who sometimes operated his real estate empire under bankruptcy protection, was indifferent to the deficit and the debt and added trillions to both. Do note that the House of Representatives was led by supposed budget hawk Speaker Paul Ryan during Trump’s first two years. The scandal of American indebtedness is truly bipartisan.
In 1989 New York City real-estate developer Douglas Durst installed the famous or infamous National Debt Clock in Manhattan. The debt clock shows the depressing state of American finances today. The Federal government will spend $4.8 trillion this year. Readers are no doubt wondering where the money goes. Social Security (America’s old age and disability pension system) costs $1.1 trillion. Medicare (old age healthcare) costs $722 billion, Medicaid (healthcare for the poor) $448 billion. Finally, the defense budget totals $705 billion. The remaining trillions fall under ‘discretionary spending’. Today the budget deficit is $966 billion and the Federal debt $27 trillion. This amounts to 129% of GDP.
As staggering as these numbers are, they’re about to get worse.
President Joe Biden has released his 2022 budget plan. Biden’s budget adds more than a trillion in new spending. This includes a decade’s worth of spending on Biden’s infrastructure and education proposals. It is estimated that Federal revenues will total $3.6 trillion, about $1.9 trillion from Federal income taxes and $1.3 trillion from payroll taxes (these taxes fund Social Security, Medicare and Medicaid). Biden plans to pay for spending increases by raising taxes on those making more $400,000 and raising the corporate tax rate from 21% to 28%.
Of course, Biden’s budget is a ‘wish list’, a statement of principles, ideas, and hopes on the Administration’s part. Congress controls the purse strings. Usually, budgetary measures can be voted through without a 60 vote filibuster busting majority via reconciliation. But the senate parliamentarian has ruled the senate can’t use reconciliation again. It’s unlikely the senate will go along with everything in this budget. One third of the senate is up for reelection next year and moderate, red state Democrats won’t want to face voters having supported massive tax increases. Still, the Biden Administration’s sentiment is clear: more spending, more government.
More than $2.3 trillion of Biden’s budget would be spent over the proceeding decade on infrastructure education and other items the administration claims are relevant to both. Contained within Biden’s infrastructure proposal is spending on universal daycare, free college tuition and a host of other left spending wishes. In response Republican Senate Minority Leader Mitch McConnell has put forward a $900 billion plus proposal for roads, bridges etc. The two sides are negotiating but remain far from an agreement.
In truth America needs an infrastructure plan. Here in New Jersey the three principal Hudson River crossings into Manhattan are approaching their hundred-year birthdays. The George Washington Bridge was completed in 1931, the first tube of the Lincoln Tunnel in 1937 and the Holland Tunnel was opened in 1927. On a busy day it can take motorists an hour or more to traverse these Hudson River spans. Separate from the proposed infrastructure plan, the Biden Administration has approved the construction of the Gateway project, a new rail tunnel from New Jersey to New York’s famous Penn station. Besides, no one’s really interested in bringing the debt and deficit under control. What’s another trillion?