President Biden’s Fiscal Year 2023 budget proposal forecasts inflation of 4.7 percent this year and inflation of 2.3 percent in 2023. In reality, both projections are considerably lower than realistic forecasts. In addition, inflation currently sits at 7.9 percent, based on the consumer price index reading for February.
This is just the latest example of the Biden administration downplaying, ignoring, or deflecting from the inflation problem that has harmed American workers, families, and businesses.
Since July of 2021, the Biden administration has been insisting this problem would go away. Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen described this inflation as “transitory.” Evidently, those claims have not held up.
Now, the Biden administration is even trying to blame inflation on the Russia-Ukraine war, despite surging inflation pre-existing the conflict by nearly a year.
The average U.S. household spent $3,500 more in 2021 due to inflation, according to a Penn Wharton University of Pennsylvania Budget Model analysis.
Not only is inflation harming consumers by increasing household costs, but it could also have long lasting economic damage. Inflation is eroding purchasing power and wages are decreasing. Real average hourly earnings dropped by 2.4 percent on an annualized basis.
Low-income households were disproportionately harmed, as those households spent about 7 percent more while higher-income households spent about 6 percent more. For example, between November 2020 and November 2021, the bottom 20 percent spent $309 more on food, $761 more on energy, $476 more on shelter, $390 on other commodities, and $224 on other services.
Inflation is now a leading public concern for Americans, with 59 percent saying they worry about it “a great deal.” Similarly, 58 percent of Americans are worried “a great deal” about the economy. Americans have an extremely pessimistic outlook on the economy, now tying with the most negative outlook since April 2020, the beginning of the pandemic.
Surging inflation is, in large part, caused by government’s massive spending problem. The federal government has flooded the economy with so much money that demand is growing too fast for production to keep up.
While Biden claims this is a fiscally responsible budget that will “reduce the deficit,” this is extremely misleading. The budget still shows debt held by the public, as a result of out-of-control federal spending, increasing significantly each year from 2023. In 2023, the budget projects the change in debt held by the public increasing by $1.2 trillion; in 2032, it projects the change in debt held by the public increasing by $1.82 trillion. In 2023, the budget projects the debt held by the public being $26 trillion; in 2032, it projects the debt held by the public being $39.5 trillion.
In 2020, the U.S. government spent over $6 trillion. In 2021, the U.S. spent $6.82 trillion, or 30 percent of the economy. The CBO projects that U.S. interest costs will triple within the next decade — from $331 billion this year to $910 billion in 2031, accounting for 12 percent of the entire federal budget. In 2021, the United States’ interest payments cost roughly $2,600 per household. Biden’s budget does virtually nothing to address this monstrous, growing problem.
In fact, Biden’s budget includes a placeholder for revenue raisers instead of proposing more ways to pay for his agenda. In the summary tables, the placeholder is entitled, “Reserve for legislation that reduces costs, expands productive capacity, and reforms the tax system.”
Outside of the sheer amount of money spent, Biden’s policy proposals themselves will exacerbate inflation and increase the costs of goods and services.
Biden’s budget includes numerous tax hikes on corporations, the biggest being an increase in the federal corporate income tax rate from 21 percent to 28 percent. Corporations will not absorb the cost of the tax increase, but will pass it along to consumers in the form of higher prices. A 2020 study by the National Bureau of Economic Research found that 31% of the corporate tax falls on consumers.
The budget also includes 11 different tax hikes on American energy, which will surely worsen already-high oil and gas prices.
If President Biden’s budget communicates anything, it’s that the Administration is wildly out of touch with the American people.