Last Friday President Joe Biden released his long awaited, “go big or go home” $6 trillion federal budget proposal.
Obviously there is much to say about this budget proposal, and we’ll have much too say about it in coming weeks. But there are a couple of major assumptions in the budget that are just so jaw-dropping, so untethered to reality that we’re going to lead off our budget discussions by pointing them out.
And we’re not talking about the sheer, unimaginable size of the budget proposal or the harmful tax increases. We’ll get to them.
The first absurdity is the Biden budget’s projection of inflation remaining at 2.1 percent for the next several years. Yes, that’s defensible considering the last few decades, but inflation this past April alone was 3.6 percent—the highest level in 29 years.
And, unfortunately, it was NOT a one-month, post-Covid aberration. Inflation in February doubled over that of January, and inflation in March doubled over that of February. That’s a trend, not an aberration. And while it’s possible that this is a unique, temporary inflation driven by the economic disruptions from the Covid pandemic, it’s economic malpractice to assume that rate years in the future—especially when it’s done just to make the budget more politically palatable.
But the second absurdity is much worse.
Remember the Biden campaign slogan “Build Back Better”? The Biden agenda, which seems to be pretty much the standard radical progressive agenda fronted by a genial spokesman, is based on the idea that enormous “investment” (i.e., spending) on education, green energy transformation, infrastructure, child care, and other Big Government goodies will result in a stronger economy.
So it’s beyond amazing that the Biden budget proposal projects an economic growth rate as a result of his policies of—brace yourself—1.8 percent.
In every one of Donald Trump’s first three years in office, the rate of economic growth was higher than that. It’s unreasonable to consider Trump’s fourth year, since that was the year of the Covid pandemic.
So what the Biden administration is proposing is a gargantuan expansion of federal spending and borrowing, which will explode the deficit, further bloat the national debt, and run the risk of monetary inflation, all in order to achieve a rate of economic growth that is lower than that of the previous administration.
All this for 1.8 percent economic growth?
If inflation is 2.1 percent, as Biden predicts, but economic growth is 1.8 percent, we’re actually losing ground economically. While GDP is an inflation-adjusted statistic, Americans will still be worse off if inflation exceeds economic growth.
And since there is every reason to think inflation will be higher than the Biden budget assumptions, it seems the Biden budget is going to result in stagnant economic growth, higher inflation, bigger deficits and more national debt. Stagflation, anyone? Misery Index, anyone?
Is that what Americans voted for last November?
June 1, 2021