President Joe Biden recently released a budget proposal for fiscal year 2025 that, if approved, could further fuel sky-high inflation, according to federal budget experts who spoke to the Daily Caller News Foundation. There is a possibility that this may occur.
president’s suggestion The report calls for a raft of new targeted spending measures and tax increases that will add at least $14.8 trillion to the already large national debt by the end of Biden’s estimated second term. is presenting. Experts told DCNF that much of the budget proposal contributes to deficit spending that could lead to runaway inflation, while failing to address the real problems that drive unaffordable price increases. (Related: Iconic discount brand to close nearly 1,000 stores as tough economic factors weigh on sales)
“Between new anti-growth taxes and huge budget deficits, the real supply of goods and services will decline, more financial assets will be left floating, and more dollars will chase fewer goods and services. We’re going to have inflation, and the Fed is probably going to either print money like crazy to cover some of the deficit and push up inflation even more, or tighten the money supply and send interest rates to the moon and push inflation. We’re responding by going back and forth between lowering it just a little bit,” said Richard Stern, a director at Grover M. Kennedy. The Heritage Foundation’s Herman Center on the Federal Budget told DCNF.
Inflation is currently 3.2% year-on-year as of February; woke up It was 18.5% since Biden first took office in January 2021. Biden has made a huge stimulus package part of his own economic package, passing the American Rescue Plan in March 2021, which authorized $1.9 trillion in new spending, and in August 2022. passed the Inflation Control Act. Another $750 billion was approved.
“Biden’s budget is expected to increase debt from $260,000 to $370,000 per household,” Stern told DCNF. “As a result, interest rates will continue to rise further… not only will housing be pushed out of reach for most people, but business growth will also dry up.”
In response to high inflation, the Federal Reserve has set the federal funds rate in the 5.25% to 5.50% range, putting pressure on interest rates across the economy as credit costs rise. House prices are particularly vulnerable to increases in credit costs, as mortgage interest rates are closely linked to the price of Treasury bills, which are valued based on future inflation and interest rate expectations.
“Deficits will raise inflation because it means the government will produce more financial assets (bonds) without corresponding increases in real productive capacity,” Stern told DCNF. There is,” he said.
The budget seeks to authorize $258 billion to be used to build or preserve 2 million housing units, particularly for low- and moderate-income households. The real factor limiting the availability of housing in terms of units is local regulations like those in California that stall construction, which additional federal funding will not solve. Rather, it means spurring inflation.
“It’s very difficult to build apartments because of government zoning and regulatory rules,” Chris Edwards, the Kilts Family Chair in Fiscal Studies at the Cato Institute, told DCNF. “It’s not the federal government’s job to try to solve problems with subsidies…It’s a problem that states and local governments should solve themselves through deregulation, so it’s really a waste of federal taxpayer dollars.”
Have you ever wondered why Bidenmics isn’t working?
Biden’s 10-year budget:
Federal taxes per household in 2025 – $41,600
Federal taxes per household in 2034 – $60,6002034 Monthly Net Interest Expense – $600
2034 monthly net interest expense – $900 pic.twitter.com/IUjLdOQ55y— Richard A. Stern (@RichAStern) March 15, 2024
Biden administration officials told DCNF that they would reduce the national deficit by $3 trillion over the next 10 years by raising taxes and cutting wasteful spending, parroting language from the budget proposal.edwards point The calculations used in the budget show that even though GDP and inflation rise over time, budget deficits do not occur during regular spending, including forecasting non-defense discretionary spending at the same level each year. You can see that a trick is used to make it appear as if it is decreasing over time. These increased benefits would result in an additional $2.5 trillion in deficit spending by 2034.
“He uses false accounting and budgets in a variety of ways to make it appear that he is reducing the deficit relative to a baseline,” Edwards told DCNF. “It’s extraordinary that the government is $3 trillion in debt and the president is proposing a budget that would add another $17 trillion in debt over the next 10 years. It’s extremely irresponsible.”
The U.S. national debt has already ballooned to nearly $34.5 trillion under the Biden administration, up from about $27.8 trillion when he first took office in January 2021. according to to the Ministry of Finance. In February alone, the national debt increased by $296 billion, more than the $271 billion total the government took in that month.
“Furthermore, his tax plan will make our tax system one of the least competitive in attracting investment here, passing the buck among the wealthy and large corporations, and ultimately leading to lower wages. , higher consumer prices, fewer start-ups. There’s less growth and less opportunity in the market,” Stern told DCNF.
The plan also calls for higher taxes on “high-income Americans” to pay for Social Security, while raising taxes on people with annual incomes of more than $400,000 and certain business owners to fund Medicare. ing. Biden also wants to raise taxes on large corporations, eliminate some of the tax cuts given during the Trump administration, and eliminate “tax cuts” in a variety of areas, including capital gains and executive compensation. .
Gross domestic product (GDP) has been above trend for the past two quarters, increasing by 4.9% in the third quarter of 2023 and 3.2% in the fourth quarter. according to to the Bureau of Economic Analysis. Despite the economic gains, federal debt increased by more than $800 billion in the fourth quarter of 2023, more than double the GDP growth rate.
“His budget, in my opinion, is a completely unconscionable budget that will lead to long-term economic disaster,” Stern told DCNF.
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