President Joe Biden’s unprecedented $6 trillion budget proposal would actually lead to a reduction overall in the U.S. economy by 1 percent in the next decade, according to a newly released analysis.
The loss in gross domestic product would come as a result of policies that would cut economic growth while also eliminating tens of thousands of jobs, the study by the non-partisan Tax Foundation, published Wednesday, concluded.
The analysis combines all aspects of Biden’s Fiscal Year 2022 budget request, his first, including his eight-year American Jobs Plan ($2.3 trillion) and his American Families Plan ($1.8 trillion), and his $1.5 trillion request for annual governmental expenses including the Defense Department and hundreds of federal agencies.
The Tax Foundation forecast that over a 10-year period, Biden’s budget plans would shrink U.S. GDP by o.9 percent. Meanwhile, the budget plan would also cost the nation about 165,000 jobs over the same period, while wages would decline by 0.8 percent.
By comparison, Americans did much better under just four years of former President Donald Trump’s economic policies, with earners in all wage brackets taking home more money and GDP.
And while Trump’s economic gains came after he and the Republican congressional majority cut taxes, Biden is calling for raising taxes — on corporations (from 21 percent to 28 percent); restoring the top individual income tax to 39.6 percent; and nearly doubling the capital gains tax wealthy Americans pay from 20 percent now to 39.6 percent. Biden also favored the 15-percent global minimum tax on U.S. corporations’ foreign profits.
Biden is also seeking about $4 trillion in new government spending, which the Tax Foundation estimates will raise GDP by an infinitesimal 0.3 percent, and that’s only if Biden and Congress don’t raise taxes. Finally, there is the ‘hidden tax’ of inflation, which Republicans and some economists have blamed on Democrats’ extravagant unemployment benefits that have created an artificial labor shortage, causing more dollars to chase fewer goods, and leading to higher prices.
“This positive economic effect is entirely offset by the increase in corporate and individual taxation, resulting in less work and investment,” the analysis notes.
Deficit spending and increased taxation would cause a reduction in savings rates for American earners and boost payments to foreign owners of U.S. debt, all of which would contribute to the overall reduction in GDP, the Tax Foundation analysis adds.
“Still, the spending plans would make the tax code more progressive by raising the rates paid by higher earners and corporations, while expanding a number of tax credits for low- and middle-income families,” Fox Business Network reported, citing the analysis. “In fact, while the top 1% of earners would see their after-tax income drop by 4.5% in 2022, the bottom quintile would see after-tax income rise by roughly 16% in 2022 on a conventional basis.”
The budget is just a proposal, however, and thus far Republicans have largely rejected the plan for its sheer size. There is also renewed concern about the national debt, which currently sits north of $28 trillion, or nearly $10 trillion more than when Trump took office. The latest forecast estimates that by 2030, the debt will rise to 117 percent of annual GDP.
“It’s amazing how little all this taxing, printing, and borrowing would actually net American families,” Senate Minority Leader Mitch McConnell (R-Ky.) said in a statement of Biden’s proposal. “The money would just disappear into a million mediocre socialist daydreams, from electric car subsidies to work-discouraging welfare programs to Washington-directed childcare plans that would put politicians’ thumbs on the scales of family decisions.”
“President Biden’s proposal would drown American families in debt, deficits, and inflation,” he added.
Other GOP senators declared the proposal moot before it even arrives in the chamber.
“President Biden’s budget is dead on arrival,” Sen Lindsey Graham of South Carolina said in a statement last month. “There will be serious discussions about government funding. But the Biden budget isn’t serious and it won’t be a part of those discussions.”
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