Veronique de Rugy pays attention to the man behind the curtain: The President's Budget Reveals the Real Priority: Tax Hikes.
Budgets are about priorities. In the Biden administration's new budget, its apparent priorities are marred by problems. Here's the cheat-sheet version: Rather than containing explosive growth in spending, it would use a bunch of new taxes to wage class warfare.
While this budget is dead on arrival in Congress, it's worth reviewing some reasons why this is so. The president aspires to spend around $6.9 trillion next year, a 55% increase over pre-pandemic levels, and $10 trillion by 2033. While Biden hopes to raise an extra $4.7 trillion over 10 years in taxes, the debt would nevertheless grow over the next decade by $19 trillion as the debt-to-GDP ratio increases from 98% to 110%. All this debt in a high-interest rate environment would have Uncle Sam fork over $10.2 trillion in interest payments alone over that time.
Adding to this fiscal calamity is that Social Security benefits could be automatically cut by some 20% within the next decade or so if the program is not reformed. Biden does propose to reform Medicare, but his means are class-warfare taxes, price controls and transfers from the general fund. There are no improvements to the program's own finances. So, Biden's seemingly aggressive plan fails to solve one of the biggest budgetary challenges we face as a country going forward.
As I think I've probably said before, the Democrat plan on Social Security is to wait until benefit cuts are imminent, then force through a plan to "save" retirees by extracting more money from taxpayers.
Gary M. Galles writes on The Social Security Regressivity Ruse. He offers a sneak preview of the likely rhetoric:
President Biden’s budget proposal included a plethora of “tax the rich” changes with the latest in a long series of misleading and dishonest claims it would make them pay more of their “fair share.” In addition, it also contained a similarly justified and targeted plan to delay the bankruptcy of the Medicare program.
However, despite Biden’s assertion that he would also protect Social Security benefit promises, despite trillions of dollars in unfunded liabilities, his budget proposal essentially ignores the program. But that means it ignores still more burdens that will have to be imposed (no doubt to make sure the rich pay their fair share as well, revealing that that share is always “more”) on top of those already being promised.
But we can anticipate what sort of plan will be coming. On the eve of Biden’s budget rollout, I received an email blast from the left-leaning Center for Economic Policy and Research (CEPR) including their sales pitch about how we should “save” Social Security under the headline, “The Social Security Tax Cap Means Millionaires Don’t Pay Their Fair Share.”
But is the FICA payroll "tax cap" really "regressive" as the left-leaners say? Galles runs the numbers:
The fact that high income earners do not pay more in taxes beyond the tax cap is why “raise the earnings cap” promoters focus on very high income earners. Substantial earnings beyond the tax cap makes high income people’s average Social Security tax rate look very low, providing ammunition for making them pay more arguments (such as in a 2015 Washington Post article that said “the more money you make, the less your effective Social Security tax rate is, making this tax about as regressive as they come”).
However, if anyone has a claim to be unfairly treated by the system, it is high income earners.
That is because Social Security is a retirement program, making it inappropriate to only look at the taxes paid to determine its progressivity or regressivity. One must incorporate the taxes paid and the retirement benefits received. And on that basis, Social Security has long been progressive, not regressive, as the “fair share” crowd claims.
To illustrate, the Social Security Administration calculated that for workers at full retirement age this year would have the following replacement rates on their indexed average taxable earnings: 75.3% for someone with “very low” earnings; 54.8% for someone with “low” earnings; 40.7% for someone with “medium” earnings; 33.6% for someone with “high” earnings; and 26.7% for someone with “maximum” taxable earnings.
Galles also notes that a lot of the "income" going to low-earning households is in the form of transfer payments from the government, and not subject to the payroll tax. Making the funding system even more "progressive".
Kevin D. Williamson writes on The High Cost of Cheap Money, with emphasis on the late, not-that-great, Silicon Valley Bank (SVB).
But here’s a crusty old libertarian thought: We’ve spent most of the 21st century artificially stimulating the economy with artificially low interest rates—with cheap money on easy terms—and there was always going to be a price to pay for doing so. The disruptions associated with COVID-19 may have brought that on earlier and more intensely than we expected, but the worldwide economy is, like politics, a hostage of “events, my dear boy.” Maybe the way going forward isn’t another quarter-century of cheap-money stimulus but a stable policy environment, a reasonable but restrained approach to taxes and regulation, a more effective workforce, fewer barriers to trade and investment, a government focused on the effective provision of public goods rather than pissant culture-war boob-bait, safe streets and decent schools in the cities that are the economic engine of every modern economy, an energy industry not subject to the whimsy of shallow dorm-room radicals, political parties that can go a couple of election cycles without a sore-loser riot or an attempted coup d’état …
You may say he's a dreamer. But he's not the only one.