Serving the High Plains
Serving the High Plains
As they prepare to spend $1.2 trillion on a bipartisan infrastructure deal, along with a vastly larger sum on a party-line social-policy bill, Democrats might be expected to defend their ambitions on the merits. Instead, progressive leaders seem to be focused on fiscal gimmickry.
Their goal is to advance a $3.5 trillion initiative known as Build Back Better. With moderates balking at the bill’s scope and cost, efforts are underway to deliver a slimmer version that might command broader support. Unfortunately, these seem to be concentrating not on setting priorities, getting value for money, and presenting intelligible choices to the country, but on creative accounting.
Some of the devices under discussion are familiar. One idea would be to set revenue gathered over the full 10-year budget-planning period against spending programs that stop partway through, even though they’re intended to be permanent. More fancifully, President Joe Biden has claimed that the $3.5 trillion plan is “paid for” and hence “costs zero dollars.”
Even if it were true that higher taxes would entirely cover the outlays, the cost does not evaporate. (Does this really need to be said?)
As it happens, though, the plan’s tax increases don’t cover the proposed new spending. The true 10-year cost of the proposals would most likely be $5 trillion or more, and the tax increases under consideration would raise slightly over $2 trillion. In other words, apart from costing $5 trillion more than nothing, the plan as it stands would add substantially to public borrowing and future public debt.
Remember that these enormous new commitments were proposed on top of an unprecedented expansion of spending and borrowing due to the pandemic.
Government outlays in 2020 were $6.6 trillion, of which just $3.4 trillion was covered by taxes. This year’s budget deficit is again projected to be roughly $3 trillion (13.4% of gross domestic product), pushing public debt to $23 trillion (103% of GDP).
With inflation running at a multi-decade high by some measures, these gigantic numbers surely warrant more caution than Biden and progressive Democrats have allowed.
No doubt, elements of the Build Back Better proposal are worthwhile. The plan is nothing if not comprehensive, and some of its ideas, especially if narrowly tailored, deserve support, if money were no object. In the real world, unfortunately, governments must make judgment calls and trade-offs based on value per dollar spent. That, in turn, requires the kind of attention to detail that has been mostly absent in this debate.
It all bears witness to a deeper problem. Progressive Democrats proudly see their spending ambitions as radical and transformative. But far-reaching plans to reduce poverty, strengthen the safety net, broaden economic opportunity, and expand public services require comparably far-reaching plans to tax and spend prudently — especially if the goal is to create permanent new benefits with recurring outlays. It’s wrong to seek credit for transforming the country if you’re unwilling to be honest about what that demands.
— Bloomberg Opinion