Sure, the federal deficit is falling, but what’s the real story?
Legendary economist Thomas Sowell wrote in a National Review op-ed in 2012, “All of us should be on guard against beliefs that flatter ourselves. At the very least, we should check such beliefs against facts.” In other words, politicians enjoy gaslighting the public, and this is what President Joe Biden is doing when he touts his achievements on the budget deficit. On the surface, it is correct that the federal shortfall has been reduced considerably. But scratching underneath that fact provides more information than the administration is willing to share.
A Tale of the Budget Deficit
The 2022 budget deficit has plummeted by half from a year ago to $1.375 trillion. This was fueled by a 21% increase in revenues totaling $4.896 trillion. But the final month of the fiscal year – September – saw a considerable $430 billion increase because of the Democrats’ student loan forgiveness plan. Despite the facts and figures, Biden championed the numbers in a recent speech.
Speaking at the White House on Oct. 21, Biden once again declared that “the deficit fell by $1.4 trillion – the largest one-year drop in American history.” This is in addition to the previous year’s $350 billion decline in the budget deficit. But while this is technically true, his 1,958-word speech did not mention anything about COVID-related payments expiring, which accounted for much of the deficit-financed spending of the last two years. From sweetened pandemic-related unemployment assistance to the paycheck protection program (PPP) to stimulus checks, all of these emergency benefits are done.
The president also remarked on deficits and inflation, telling reporters that the Republicans’ blueprint would add about $3 trillion to the deficit: “Adding another $3 trillion to the deficit is reckless, it’s irresponsible, and it would make inflation worse.” What makes this a fascinating narrative is that if he believed that deficits contribute to inflationary pressures across the economy – which they do – how come White House officials, including Biden and Treasury Secretary Janet Yellen, rejected concerns that the consumer price index (CPI) would surge with all these new outlays? Where were the alarm bells?
As Liberty Nation reported in September, the Committee for a Responsible Federal Budget (CRFB) calculated that Biden’s policies, from executive actions to legislative initiatives, will add nearly $5 trillion to the deficit between 2021 and 2031. Even when the American Rescue Plan (ARP) is removed from the equation, the Democrats poured $2.5 trillion into the punch bowl. In a separate report, Maya MacGuineas, the president of CRFB, was not thrilled that the US government still borrowed $1.4 trillion in fiscal year 2022: “That is not an accomplishment — it’s a reminder of how precarious our fiscal situation remains.”
And this is dangerous in a rising-rate environment because a $31 trillion national debt – and counting – will come with substantial servicing payments. Current estimates suggest that total interest could clock in at nearly $580 billion this fiscal year due to the Federal Reserve’s inflation-busting campaign. The White House’s own projections show that taxpayers will be on the hook for $914 billion in annual payments by 2030, representing close to 5% of the gross domestic product (GDP). Remember, this FY 2022 outlook was released before the Eccles Building went scorched-earth on the fed funds rate, so it could easily be more than $1 trillion by the next decade.
US officials claim that the president’s “record on fiscal responsibility is second to none.” To quote Brick Top from the 2000 picture Snatch, “In the quiet words of the Virgin Mary, come again?” According to the latest Pew Research Center polling data, Biden can get away with gaslighting the public because fiscal responsibility is not a key issue for voters. Among Republicans, the top subjects are the economy, crime, and immigration. For Democrats, it is the future of democracy, health care, and abortion. There is nothing about balancing the books or spending cuts. The statistics and reality may give the right some easy victories in the Great Meme War, but will it amount to anything when Election Day arrives?