Spending

This week we heard a lot about AUKUS, a trilateral initiative between the United States, the United Kingdom and Australia that will revamp the Australian naval fleet with nuclear-powered submarines over the next two decades. President Biden, UK Prime Minister Rishi Sunak and Australian Prime Minister Anthony Albanese made a show of it in sunny San Diego on March 13, where they officially inaugurated the defense agreement and gave speeches about defending sea lanes and the rules-based international order in the Indo-Pacific. But there was another story here: the Pentagon released a torrent of charts and bureaucratic documents on what it would like to see in the coming year’s defense budget.

Lame-duck sessions of Congress are rarely uneventful. Whether it’s cramming through spending at the last minute or cramming through even more spending at the last minute, our legislature can always be counted on to rubber-stamp bills that lacked political support before Mariah Carey returned to the airwaves. Leading the charge for the opposition this time around is the self-declared speaker of the House, Kevin McCarthy. A Bloomberg headline recently proclaimed that “McCarthy Draws Line on Spending,” and trumpets seemingly blared out from the heavens heralding that Republicans had — finally — rediscovered their fiscally conservative bona fides. But not so fast: this is a script we’ve seen before.

Since the latest growth numbers have come out, much ink has been spilled over the question of whether the economy is in a recession. Perhaps unsurprisingly, the Biden administration tried to get out ahead of Thursday’s release with a press statement noting that back-to-back quarters of negative growth doesn't necessarily mean a recession. Also predictably, Republicans strongly rebuked the idea, saying, “You can’t change reality by arguing over definitions.” Both sides of the debate will continue to play out, and both sides will continue to miss the point. Ultimately, it doesn’t matter very much whether growth goes up or down by 0.2 percent. What matters is the general trajectory of the economy. And on that front, the Biden track record is mixed at best.

Just in time for the holidays, lawmakers will soon approve another increase to the country’s debt limit, perhaps by as much as $2.5 trillion. And like so many of us this time of year, Uncle Sam will continue running up his credit card, spending money on things he can’t afford and often doesn’t really need. That said, there’s little doubt that the coming debt ceiling hike is a necessary (if self-serving) gift from our nation’s capital. After all, legislators from both parties have already authorized trillions in spending, knowing full well the country’s dismal fiscal situation.

Much has been written about the expansiveness of the Biden administration’s signature priority: the Build Back Better Act (BBB). The legislation is projected by the Congressional Budget Office (CBO) to spend more than $1.6 trillion in its attempts to address countless Democratic priorities ranging from climate change to the expansion of Medicaid. One aspect of the bill, however, has attracted far less fanfare than it should have: its impact on the cost of prescription drugs. Provisions in the bill would, among other things, impose rebates on drug manufacturers if prices rise faster than inflation. It’s an idea that sounds great in the current moment of creeping inflation, but is ultimately little more than a market distortion likely to produce an array of adverse consequences.

The fate of the Build Back Better plan is now in the hands of the Senate. The House approved the gargantuan $1.85 trillion bill on Friday despite efforts from Republicans to delay the vote. House Minority Leader Kevin McCarthy played the role of Rand Paul or Ted Cruz, railing against the legislation in an over eight-hour-long speech. The Associated Press suggests that McCarthy viewed his talk-a-thon as an opportunity to show his conservative bona fides should Republicans take control of the House in 2022 and he decide to push for the speakership. “This is a tipping point,” McCarthy said on Friday morning as he wrapped up the speech. “This is a point of not coming back. The American people have spoken, but unfortunately, the Democrats have not listened.” Which Americans?

Top Democrats took a media victory lap last weekend, crowing about the $1 trillion infrastructure bill that finally cleared the House on Friday night after months of false starts and intra-party squabbling. The vote came only after Speaker Nancy Pelosi, in her latest Hail Mary, attempted to satisfy progressive lawmakers by also allowing a procedural vote on the massive social spending bill craved by liberals. Even then, Pelosi was forced to rely on a handful of Republicans to secure a majority. Predictably, the White House was eager to spin the bill’s passage as major win for the Biden agenda, claiming it would energize voters and pave the way for trillions more in government spending just in time for the holidays.

It seems strange, but just two decades ago the United States government had a balanced budget. Bill Clinton had run for president as a new type of Democrat, calling for an end to the deficits that had so bedeviled George H.W. Bush. Thanks in large part to pressure from Newt Gingrich and the Republican Congress, he pulled it off. Clinton trimmed military spending and signed into law a package of tax increases. This cued haunted house noises in the parlors of center-right think tanks, but Biden also approved more conservative-friendly measures like domestic spending cuts and welfare reform. This bipartisan approach, in conjunction with a galloping economy, led to the unthinkable: budget surpluses for four fiscal years in a row.

The Biden administration’s latest $3.5 trillion spending proposal continues to attract attention. With a hodgepodge of Democratic priorities ranging from climate change to Medicare expansion, the bill is the more partisan companion of the administration’s $1 trillion infrastructure plan. Of course, another blockbuster story has been distracting attention from these packages — the difficult withdrawal from Afghanistan. Many in Congress continue to be critical of the administration’s handling of the pullout, and some are determined to use the crisis to their political advantage.

Over the last month, Democratic presidential nominee Joe Biden has proposed roughly $4 trillion in new tax hikes. That is meant to the cover, at least partially, the $7 trillion in spending increases he’ll impose if he wins the White House. As part of his tax hike plan, Biden promises his tax increases won’t hit any American who earns under $400,000. But they will. Even the Washington Post analysis of Biden’s tax plan concedes that his tax plan will impact 82 percent of American earners if enacted as proposed.The reason it will hit so many Americans is because of the change he proposes to corporate taxes. There is broad consensus among tax experts that such an increase will lead to corporations ‘reducing investment returns and cutting working wages’.