The GOP's budget blarney
Sources: St. Louis Federal Reserve, President Biden’s proposed FY2024 budget
Even with President Biden's proposed tax and spending increases, U.S. will rank among the least taxed countries in the advanced industrial world with relatively low social spending
Given Republican control of the House, there’s little reason to review the initiatives contained in President Biden’s proposed budget for fiscal 2024, which begins next October. Rather, allow me to address the Big Lie being offered by the presidents opponents, who are threatening to throw the U.S. into default and the economy into recession by refusing to raise the debt limit.
“His new budget contains the highest sustained levels of taxes, spending and deficits in American history,” Representative Jodey Harrington, Republican of Texas and the new chairman of the House Budget Committee, told the New York Times this morning.
The proposal “is a road map for fiscal ruin,” according to Sen. Charles Grassley, the Iowa Republican who, at age 89, nearly a decade older than the president, ought to know better.
Let’s check out those assertions one by one. First, taxes (see graph above).
Is the this the highest level of taxes in U.S. history? If we look back at the past 30 years (which includes the late 1990s, the last time we had a balanced budget), we see that by plugging in the administration’s new taxes, total taxes as a share of gross domestic product by the end of fiscal 2024 will remain below the levels reached near the end of the Clinton administration. (An interesting fact derived from this chart: Taxes reach their peak as a share of gross domestic product when the economy is booming and more people are working.)
How about spending? When it comes to cutting the budget, the GOP never picks on the Pentagon. They always target social spending. So where does the U.S. stand in terms of social service spending compared to the other 37 countries that belong to the Organization for Economic Cooperation and Development?
As you can see from the above chart, the U.S. remains well below the social democracies of western Europe (with Switzerland and the Netherlands being the only countries than spend less as a share of GDP than us). Take out those outliers, and we’re in the company of economies much poorer than ours.
Finally, let’s take a look at deficits and how the current levels compare historically.
Again, what we see is that the projected deficits for next year are well below the peaks reached during the last two recessions. And while the deficits are rising slightly, that has just as much to do with lagging tax collections (see the first chart) as it does with the increased spending on infrastructure and the new spending on climate change abatement in the Inflation Reduction Act that are now in the pipeline.
So, to sum up. As a share of total economic output, does the president’s proposed budget contain the:
Highest taxes in American history? No.
Highest spending in American history? No.
Highest deficits in American history? No.