The national debt has reached levels not seen since the end of World War II, but Democratic presidential nominee Joe Biden is calling for a combination of spending increases and tax hikes that will require trillions of dollars of additional borrowing in the next 10 years.
Biden is calling for more than $3 trillion in new taxes that would be imposed primarily on corporations and the wealthiest Americans. But two recent analyses of Biden's spending plans agree that his proposals would not come close to paying for themselves over 10 years. If enacted, Biden's plans would push federal spending to higher highs while also adding to the national debt—which is already on pace to eclipse the size of the entire American economy next year.
The Penn Wharton Budget Model, a nonpartisan organization within the University of Pennsylvania's business school, crunched the numbers and concluded that Biden's proposed tax increases would cost Americans about $3.4 trillion over 10 years. To get there, Biden would repeal some of President Donald Trump's tax cuts for high earners, raise income taxes on the very highest earners, tax capital gains at the same rate as other income, raise the corporate tax rate, and institute a series of changes to the payroll taxes that fund mandatory spending on entitlements like Social Security.
Cumulatively, Biden's tax plans would not raise taxes on households that earn less than $400,000 per year, the Wharton analysis concludes, though lower-earning households would likely see knock-on effects like "lower investment returns and wages as a result of corporate tax increases."
Those huge tax increases, however, wouldn't be sufficient to cover the cost of the new spending Biden has proposed. The Wharton analysis says Biden plans to hike spending by $5.35 trillion over 10 years, with the largest piles of new federal outlays going toward education ($1.9 trillion) and infrastructure ($1.6 trillion). Biden has also called for $1.6 trillion in new health care spending—mostly by expanding the Affordable Care Act's health insurance subsidies and lowering the eligibility age for Medicare from 65 to 60—but his campaign plans to offset some of that new spending by saving money on the federal government's purchases of prescription drugs.
If enacted—and that, of course, depends on whether Biden wins November's elections and whether he can get Congress to go along with these proposals afterward—Biden's budget, the Wharton analysis says, would push federal spending to 24 percent of gross domestic product, a rough estimate for the overall size of the U.S. economy. Excluding temporary stimulus spending passed in 2009 and again this year to combat economic downturns, the federal budget has not consumed that large of a share of the economy since World War II.
And, actually, the Wharton analysis might be an overly rosy assessment.
"I think they missed a lot," says Brian Riedl, former chief economist to Sen. Rob Portman (R–Ohio) who's now a senior fellow at the fiscally conservative Manhattan Institute. On Twitter, Riedl explained that the Wharton analysis of Biden's spending plans seems to ignore huge amounts of money that the campaign has promised to spend. The spending that's left out of the Wharton report is mostly temporary—like the additional $3 trillion that Biden wants to spend on coronavirus relief efforts—rather than being part of the long-term budget.
That $3 trillion is roughly in line with what House Democrats passed in May, though the spending package has not moved forward in the Republican-controlled Senate. Biden didn't explicitly propose that spending, but he has endorsed it. The Wharton report also gives Biden credit for planned prescription drug cost savings that Riedl says may not materialize. Additionally, the report does not count other one-time spending like Biden's proposed $125 billion to combat the opioid epidemic.
Add it all up, as Riedl did recently for a post at The Dispatch, and Biden's budget would hike government spending by $11 trillion over 10 years. On the tax side, Riedl's view is closer to what Wharton says: He expected Biden's proposals to generate about $3.6 trillion in new taxes over 10 years.
It's true that Biden's plans are less expensive than what some other Democrats proposed during this year's primary campaign, but that fact mostly serves to illuminate just how wildly unserious those other proposals were. Sen. Elizabeth Warren (D–Mass.) called for roughly $40 trillion in new spending, while Sen. Bernie Sanders (I–Vt.) wanted to add almost $100 trillion.
But Biden's tax and spending proposals only look moderate in comparison to those outlandish ones. When stacked up against other recent Democratic nominees' budget plans, Biden's is far more expensive—he's proposing more than twice as much new spending as Hillary Clinton did in 2016, the Wall Street Journal notes. Even if he's not fully supporting Sanders-level budgetary insanity, there is no doubt Biden has been pulled leftward this year.
You don't need a fancy calculator to do the math: Biden is proposing to raise taxes by an exorbitant amount—more than $3 trillion dollars, the largest tax hike in decades—and spending by an even larger amount. The result, of course, is more debt.
Riedl calls that approach "breathtakingly irresponsible" given the country's current fiscal condition. Social Security and other entitlements are steamrolling toward insolvency and the national debt is already on pace to reach $35 trillion by the end of the decade without any new spending. As the debt grows, interest payments on it grow, too—and if interest rates rise, you can add another $500 billion ($3,600 per American household) for each percentage point.
It's also true, of course, that Trump has done a terrible job of managing the country's finances. Even if you ignore the emergency coronavirus spending, Trump has authorized a $937 billion increase in government spending in just four years—a larger increase than the one President Barack Obama presided over during his eight years in office.
Trump is clearly no fiscal conservative, but Biden is promising even more profligacy.
"Essentially, Biden and the Democrats are gambling that building the largest government debt in world history will not endanger the economy, and that interest rates will remain low forever," writes Riedl. "If they are wrong, the costs to taxpayers and in economic growth could be devastating."