Editorial: Biden spending spree bad for economy
President Joe Biden marked his first 100 days in office this week by laying out a massive spending plan, as well as massive tax increases that would only partially cover the costs while inflicting significant damage to the economy. His plan would also harm those the president purports to help: families.
In his first address to Congress Wednesday, Biden further distanced himself from his campaign promises of bringing the country together. By adding on trillions of new spending and slapping businesses and successful Americans with hefty taxes, the president is signaling he is more concerned about appeasing progressives in his party than in finding consensus on moving the country past the pandemic. Even moderate Democrats have expressed hesitancy.
The amount of spending the federal government has incurred the past year to combat COVID is already astronomical. Roughly $5.3 trillion has gone to direct payments, small businesses and the states. Biden just recently signed the latest $1.9 trillion relief package, but failed to get any GOP support. America’s debt stands at $28 trillion.
The president is just getting warmed up, however. Two new spending proposals — the “American Families Plan” and the “American Jobs Plan” — would pile on more than $4 trillion. Some of the spending that's actually directed to infrastructure projects could get bipartisan buy-in. Yet the plans read more like liberal wish lists and aren’t likely to get Republican support.
Biden has dubbed these joint plans a once-in-a-generation investment to restructure the economy. But if Democrats ram this through, it could have the unpleasant effect of hampering the economy, job creators and families at a time they are already fragile. As usual, the wealthy and businesses are the target of new tax increases.
The Families Plan would invest billions in child care, universal preschool, paid family leave and “free” community college, and Biden calls for paying for all this in part by doubling the capital gains tax to 39.6% from the current rate of 20% for those making more than $1 million a year.
Biden has promised that no one earning less than $400,000 would see a tax hike, but if all these spending priorities are passed, there’s no way that the middle class won’t get hit.
The president has also called for the federal corporate tax rate to rise to 28% from the current 21%, which would impact small businesses, too.
“This tax hike would reduce wages, cost jobs, harm economic growth, cut investment, and make America less competitive,” according to a Heritage Foundation analysis. “Make no mistake, increasing taxes on businesses hurts real people.”
In addition, Biden is advocating a stiff inheritance tax by doing away with the “step up in basis” provision that allows heirs to avoid a capital gains tax when they inherit assets, such as stocks and property that appreciated in value under the previous owner.
“If this goes into effect, you will see many Michigan farms, cottages, and small businesses broken up and sold,” said Patrick Anderson, principal of Anderson Economic Group, in an email. “Only on paper is this not heartless.”
These harmful consequences of the proposed big giveaways must be considered. We hope Biden returns to his promises of bipartisan governing.