(Bloomberg Opinion) -- If you meant to discredit the U.S. government’s whole approach to budget planning, you’d struggle to improve on the proposal announced this week by President Joe Biden’s administration. Admittedly, these plans rarely tell the public much about what’s likely to happen. But the 2023 budget goes one better: It says next to nothing about what the administration would even like to happen.
The 149-page document, plus expansive appendices and supplementary materials, tucks the administration’s core fiscal-policy ambitions into an empty line and a footnote. This says the budget includes a “reserve” for “legislation that reduces costs, expands productive capacity, and reforms the tax system” — without specifying the associated outlays or revenue, or any actual policy.
This ghostly presence is a placeholder for the administration’s enormous, shape-shifting “Build Back Better” plan, which has stalled in Congress. It renders the budget and its supporting volumes not just largely pointless, as usual, but absurd.
Even so, the material can be mined for specks of information. For instance, since the budget assumes that Build Back Better, if it ever happens, will be revenue-neutral, its projections for public borrowing and debt reveal what the administration thinks about fiscal control. The good news is that the plan’s projected deficits are lower than in the Office of Management and Budget’s baseline. In that limited sense, Biden was right to say the plan reduces deficits.
Yet it doesn’t reduce them by much — the average deficit over the next 10 years is still projected to be 4.7% of gross domestic product. Public debt would continue to rise, from 102% of GDP this year to 107% in 2032. In effect, the administration wants to make the massive increase in public debt due to the pandemic permanent. That would be imprudent even if the recent fiscal emergency were sure to be the last — and, needless to say, it won’t be. A responsible budget would instead focus on getting borrowing firmly under control over the next decade.
Some of the plan’s specifics — policies not subsumed in the invisible “reserve” — are also revealing. Most notably, the budget calls for a 9.8% increase in defense spending. In light of Russia’s invasion of Ukraine, a higher priority for national security certainly makes sense. The proposal also envisions higher spending on policing, gun-control measures and other anti-crime initiatives. Most voters would welcome such outlays.
To cover the cost of this extra spending, however, the administration again calls for higher taxes on corporations and on households with very high incomes. In particular, it proposes a new minimum tax of 20% on the “full income” — including unrealized capital gains — of taxpayers with wealth of more than $100 million. This is both radical and demanding. Complex rules (yet to be devised) would be needed to allow for the valuation of assets that can’t easily be marked to market, and to let taxpayers settle their liabilities over time. The plan would almost certainly face legal challenges. More to the point, moderate Democrats — including Senator Joe Manchin — are unimpressed. You can’t be taxed “on things you don’t have,” Manchin said as soon as the idea was announced.
In short, this proposal — like the budget as a whole — just isn’t happening. That was to be expected. What’s more disappointing is the administration’s continuing failure to wrestle with the implications of its spending ambitions. It’s still working on the assumption that an enormous expansion of government spending can be financed entirely with tax increases on corporations and the very rich. The arithmetic, and the realities of tax enforcement, say otherwise.
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Why Your Tax Refund May Be Bigger This Year: Alexis Leondis
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Biden Should Tax the Rich to Shrink the Deficit: Matt Yglesias
The Editors are members of the Bloomberg Opinion editorial board.
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