Washington Wednesday - Budget buster

MARY REICHARD, HOST: It’s Wednesday the 30th of March, 2022.

Glad to have you along for today’s edition of The World and Everything in It. Good morning, I’m Mary Reichard.

NICK EICHER, HOST: And I’m Nick Eicher. First up: President Biden’s budget.

The president unveiled his budget blueprint this week. It calls for higher taxes on corporations and the wealthy and more spending on his domestic priorities and on defense.

The budget office admits the plan overspends to the tune of more than a trillion dollars, but also on paper will reduce the deficit.

What would the president’s plan mean for the U.S. economy? And will Congress play along?

REICHARD: Joining us now to help answer those questions is Matt Dickerson.

Matt is an expert on budgetary and tax policy issues with more than a decade of experience as a Congressional staffer.

Matt, good morning to you!

MATT DICKERSON, GUEST: Thanks so much for having me.

REICHARD: We just said the White House budget proposal over spends by a trillion dollars but also on paper reduce the deficit. How does that work?

DICKERSON: Frankly, this is an irresponsible budget from a fiscal policy perspective. Biden's budget increases spending and increases taxes and it's just going to pass the cost on to the American people.

REICHARD: The president talked several times about fiscal responsibility. His proposal would reduce the deficit, but it would still have the country spending a trillion dollars more than it takes in.

Have we become so comfortable with massive deficits that this is the best we can hope for only adding a trillion dollars or so to the national debt in a year?

DICKERSON: I don't think so. And I think the American people are wide awake to the problems of so much excessive government spending. We've seen 7.9% inflation over the last year. And that's really hitting families right where it hurts in their pocketbook. And that's due to excessive government spending, excessive government regulations causing too much inflation. And this president's budget doubles down on those disastrous policies that we saw in Biden's first year.

REICHARD: Deficit spending is not just a Democratic issue. Biden repeatedly criticized his predecessor for running huge deficits. Was that a valid criticism?

DICKERSON: That's absolutely right. Both Republicans and Democrats have contributed to overspending over the last several decades. But it's going to take both parties to turn the tide and reduce the size and scope and role and control of government in people's lives. And the only way you could do that is by not adding new federal programs like Biden is proposing, turn the tide of overspending and the current programs that we have. But Biden wants to press the gas pedal. And we can't be adding new taxes that are just going to harm the economy, reduce growth, and make it harder for the American people to succeed and keep their own money and not be impacted by disastrous inflation.

REICHARD: Now, if you had to state what the other side believes it's doing that’s good, what would that argument be?

DICKERSON: President Biden’s plan, well, he wants to take more money from the private sector from people who have earned it, Americans, give it to the federal bureaucrats and politicians and think that they can allocate that money more effectively. And I think a lot of people would have a lot of problems with that and think that's just not fair. And we're not going to get the right type of outcomes that won’t be good for the American people.

REICHARD: Do you have an example of that?

DICKERSON: The president wants to raise taxes on the rich, on high income people, but the way he wants to do that is he wants to take money away from the businesses that they invest where people work, and they want to give that money to the federal government and create more programs, more welfare programs so that people become dependent on government. You saw this in President Biden's Build Back Better proposal where he wants to exert more government control over more aspects of people's lives, whether that is their childcare, pre-kindergarten, their K-12 education, and even through people's college. More government control means more power for politicians and bureaucrats and less power for individual Americans.

REICHARD: Biden’s plan includes a minimum tax on the ultra rich—a minimum tax of 20 percent. Paying at least 20 percent certainly sounds reasonable. Explain the potential impact of that provision?

DICKERSON: That's how it's being billed by the Biden administration, but that's not actually how it would work in practice. What Biden is proposing is to raise taxes on the business holdings of wealthy Americans. And this is not going to impact those wealthy Americans, most of whom are Democrats. It's going to take money out of places where people work and the businesses where people buy their supplies. So it's going to hurt working Americans, it's going to hurt lower middle class people who need to buy things and need to work places. And it's just going to empower the government, and it's going to empower tax lawyers and accountants. It's not going to hurt the people that Biden is claiming it is.

REICHARD: He has also proposed raising taxes on corporations to 28 percent. What impact would that have on the budget and the economy?

DICKERSON: That will hurt the economy. Right now, the United States has a 21[percent] corporate tax rate. Communist China charges their corporations 25%. So President Biden wants to raise our corporate rate to 28% at the federal level, higher than Communist China charges businesses in their country. Think about the effect that's going to have. It's going to take money away from workers. About 70% of the cost of the corporate tax rate is borne by workers. So this is going to mean lower wages for Americans, it's going to mean higher prices, it's going to make the United States less internationally competitive. And so businesses will have an incentive to leave the United States and offshore. And it's just going to be a terrible result.

REICHARD: Did his proposed increase in defense spending surprise you at all, and what impact might that have?

DICKERSON: The President did actually, to his credit, propose increasing the funding for our Department of Defense, which is needed. Unfortunately, he's not directing those increases to where it will be most effective. He wants to add $3 billion to the Department of Defense to fight climate change, which if you look at the aggression that we're seeing from Russia, from China, that's not actually going to help secure America's national security. We should be investing in our force structure, in our army and our Air Force in purchasing the most up to date technology for our men and women in uniform, rather than misinvesting in some of the ways that President Biden is proposing.

REICHARD: Given your background in budgets and policy, what should the American people understand about the White House’s budget?

DICKERSON: It's just too much taxes, too much spending. And it's not tackling the real problems that the federal government should be addressing—from inflation, to our energy independence, to investing in our national security, and getting the country in a better way. So we should be doing the opposite of what President Biden is proposing and get as much of the government out of the way as possible, reduce spending, get ourselves on a responsible fiscal trajectory, lower taxes, and trust the American people.

REICHARD: Do you know what a child being born today owes to the federal government/ Do you know what that figure is now?

DICKERSON: It's about $60,000 is every American’s share of the national debt currently, and President Biden over the next 10 years his budget proposes doubling the national debt over the next 10 years.

REICHARD: Do you think there’s a point where the American worker is not going to be able to sustain the productivity required to pay this off?

DICKERSON: I think that's a real risk. One of the biggest problems you see in the economy today is many people not in the labor force. People have dropped out of the labor force and they're not working and in large part that's due to bad incentives coming from the government where they're paying people to not work. And they're not able to see the return on investment from putting in the hours and dealing with the regulations when there's all these different government programs that can make it easier for people to stay out of the workforce. And so that that's a real risk

REICHARD: Matt Dickerson the director for the Grover M. Hermann Center for the Federal Budget at The Heritage Foundation. Matt, thanks so much!

DICKERSON: Thank you.

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