No matter the result of next month’s election, President Joe Biden will soon leave the White House. That makes it a good time for a nearly final assessment of his and Vice President Kamala Harris’ first-term legacy on federal spending and debt — a tragedy of epic proportion. Unfortunately, neither Harris nor her rival on the campaign trail has made a priority of fixing this problem.
According to brand-new Congressional Budget Office numbers, the 2024 budget deficit is around $1.8 trillion. It’s heading to $2.8 trillion in 10 years, assuming a very rosy scenario. Worrisome too is that interest payments on government debt will eat up over 20% of revenue in 2025. As the Hoover Institution’s Joshua Rauh noted, if you remove the revenue earmarked for the Social Security Old Age and Disability Insurance program, that number jumps to 27.9% and rising.
The federal government’s debt is now over $28 trillion by one measurement. That’s $2 trillion more than last year and $6 trillion more than when the Biden-Harris team entered the White House. This debt stands at 100% of America’s GDP, which, other than a one-year exception at the end of World War II, is the highest ratio we’ve ever had. Unlike in 1946, today’s debt is only going to grow. Indeed, debt-to-GDP took a nearly 30-year dive to reach 23% in 1974. Today, federal debt is projected — again, under the rosiest scenarios — to rise to 166% in 30 years.
Now, the Biden-Harris administration isn’t the only one responsible for this debt spiral. Former President Donald Trump was also bad. As Brian Riedl wrote recently, “Trump had already signed legislation and executive orders adding $4 trillion to 10-year deficits before the bipartisan pandemic response added $4 trillion more.” That’s serious red ink.
But when Biden and Harris took office, most of the pandemic was behind us. The economy was reopening, vaccination was underway and the economy resumed growing. However, the end of this emergency didn’t mean a return to less spending and lower levels of debt. Biden had other plans. Instead of suggesting, like then-President Barack Obama did after the Great Recession, that he would halve the deficit in five years, Biden decided it was time to extend pandemic emergency programs.
Three months into the term and four months after the last $900 billion COVID-19 relief bill, the Biden-Harris administration pushed through another $1.9 trillion bill. This spending was so out of proportion with the state of the economy, which faced an output gap of only $420 billion, that we suffered the worst inflation in 40 years. This wasn’t just a serious hit to the deficit — it also cost the typical family more than $10,000.
The administration then decided to push several large, unpaid-for bills. Riedl lists some: “$1.4 trillion in new spending in omnibus appropriations bills, $620 billion in student loan bailouts, $520 billion for new veterans’ benefits, a $440 billion infrastructure law, a semiconductor bill, and $360 billion in new SNAP and health spending forced through by executive order.”
Some economists wrongly insisted that adding debt is no big deal as long as interest rates are low. This condition certainly doesn’t apply to the Biden-Harris spending spree. Add it all up, including interest payments on the debt, and you get $5 trillion on top of what was already there.
The impact of this irresponsible spending spree is plain to see in other CBO numbers. When Biden and Harris entered the White House, the budget deficit was a pandemic-influenced $2.3 trillion, and it was set to fall to $905 billion by 2024. As mentioned above, it’s now twice what it was supposed to be.
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Even this is nothing compared to what Biden and Harris hoped to spend. They tried to push out the $2.3 trillion Build Back Better bill. The Supreme Court blocked a much larger version of the student loan forgiveness program.
This White House has been terrible for our finances. Now that Harris is running for the top job, she shows no signs of slowing the spending down. She wants trillions in tax credits for many different special interest groups, from first-time homeowners to parents to favored industries, and she continues to push through student loan forgiveness. Mr. Trump, with his expensive brand of populism, is only slightly better.
No matter who wins the election, that person will inherit a gigantic deficit and major interest payments that will only go up, thanks to an entitlement-spending explosion no politician wants to acknowledge. Good luck to the next president, and heaven help the rest of us.
Veronique de Rugy is the George Gibbs Chair in Political Economy and a senior research fellow at the Mercatus Center at George Mason University.