The White House doesn’t have much good economic news to report these days, so sometimes it pretends the straw it’s selling is actually gold. Such was the case on Friday, when President Biden and his economic advisors claimed a $1.4 trillion fiscal 2022 budget deficit was a major fiscal and economic success.
“Today my administration announced that the deficit fell by $1.4 trillion this year — the largest one-year decline in American history — a $1.4 trillion decrease in the deficit,” President Biden said in a speech at the White House. Dieting readers will appreciate his logic: if you gain 100 pounds but then lose 50, you may qualify to be featured in The Biggest Loser.
The President is technically correct but omits a few salient details. One is that the deficit would have been less than $1 trillion had it not been for his unilateral cancellation of the student loan. The $426 billion present value cost of his debt forgiveness, which he declared without Congressional approval, was added to the deficit in the month of September. Taxpayers will pay for this in the coming years with higher borrowing costs and taxes.
Nor did Mr Biden emphasize that the biggest savings have come not from spending restraint but from the phasing out of pandemic emergency programs – some of which he wants to extend forever. America’s $1.9 trillion bailout in March 2021 expanded child tax credits from $2,000 to $3,000 ($3,600 for a child under six), but the expansions expired in late 2021 how emergency programs should do when the emergency ends.
Democrats tried to make it permanent, and they would have if Sen. Joe Manchin hadn’t opposed it. But the White House and Democrats will try again when they hold Congress, or even in the post-election lame duck session if Republicans are foolish enough to join. The Tax Foundation estimates that it would cost $1.6 trillion over 10 years to make this permanent.
Mr. Biden also failed to give credit to the hard-pressed American taxpayers who brought in $850 billion in additional revenue in fiscal 2022. Individual income tax payments increased 29%, or nearly $600 billion. And it’s all despite the 2017 tax cuts that Mr. Biden claims eroded federal taxes.
Far from it. Under the GOP’s reformed tax code, tax revenues have risen to a near-record 19.6% of GDP. Revenue has only hit 20% twice in history: 20.5% in 1944 during the war and 20% in 2000 amid the dot-com bubble. Yet Mr. Biden continues to claim that millions of Americans are somehow not paying their fair share. Isn’t it enough to hand over one in five dollars of national income to politicians?
Apparently, because on Friday he attacked Republicans for wanting to make Trump tax rates, which expire in 2025, permanent. Despite record tax revenues, he continues to support a tax increase.
Mr Biden also said: “We’re starting to see some of the good news on the economy. Gas prices have plummeted in 46 of the 50 states because of what I did. We’re moving in the right direction and there’s more to come.” He didn’t say over what period of time he’s measuring this drop in gas prices, and that’s understandable. It can’t be from the start of his tenure when the national average was $2.49 a gallon. It’s now $3.82.
We know this is an election campaign and extreme spins are in season. But if Mr. Biden wants to play Rumpelstiltskin spinning straw into gold in the classic fairy tale, he may recall that it had an unfortunate ending for the spinner. That could also be the Democrats’ fate if voters reach a verdict on November 8th.
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Appeared in the print edition on October 22, 2022.