When President Biden released his budget proposal this past Friday he listed his priorities in the following statement. (The budget document can be found here.)
Biden’s list of priorities is typical in that it studiously avoids talking about trade-offs. Everything is a priority. Not only that, the priorities are expressed in focus group tested aspirational language meant to please the progressive base while remaining vague enough to avoid measurable results. Biden will for instance, take action, control, provide, tackle, advance, reform and restore. From a policy perspective this is meaningless blather.
Which begs the question: Why did the Administration decide to release this on the Friday afternoon before Memorial day when it would receive minimal coverage? Larry Kudlow provides a plausible explanation. The accompanying numbers in the tables of the OMB budget release give away the game.
In its own budget documents the Biden Administration admits (1) that it is planning for an increase of $14.5 trillion in accumulated debt by the year 2031; (2) it assumes that federal government outlays will increase to 24.5% of GDP through 2031 versus a long term average of about 19.3%, and (3) after a Covid re-opening spurt, real GDP growth will range from 1.8% to 2% from 2023 through 2031.
Let’s think about the implications of all this. The Biden Administration intends to spend gargantuan amounts of money, in the process greatly expand the size and scope of both the federal government and the national debt. For its efforts the Biden Administration projects that it will match the Obama Administration recovery. So how does the Obama record stack up?
1.Measured by real GDP growth, job creation or wage expansion, the Obama record was somewhere between subpar and pretty miserable.
2. From the expansion that began in June 2009, real GDP grew at only 2.1% per annum, the slowest growth rate during an expansion since 1949.
3. Net job creation grew by 8.6% during the Obama years. Total employment grew by more than that, and sometimes substantially more, in 5 of the prior 10 expansions since 1949.
4. Similarly, inflation-adjusted wages increased by more in 5 of 10 prior recoveries since 1949. More detailed data is available here.
So here we have a situation in which the Biden Administration intends to upend much of American society by (1) significantly raising marginal tax rates, (2) substantially re-regulating great swaths of the economy, (3) launching new fronts in the culture wars and (4) using federal power in an attempt to equalize outcomes across groups defined by race and sex rather than by effort and opportunity in complete contravention of the bedrock Constitutional principle of equality before the law.
And for all this, by its own admission, the Biden Administration expects the results to be mediocre at best. Actually, the Administration’s policy agenda virtually guarantees poor results if the Congress is foolish enough to pass it.
The likely result of all this is that economic performance will fall short of even the low expectations of the Administration. Add to that a widening gap between promises and results and the stage is set for rising populist discontent, increased racial tensions, decreasing civility and further erosions of individual freedom.
But think of the bright side. This could be Peak Biden.