In Brief: It’s the Entitlements, Stupid
The guaranteed nature of Biden’s spending is the real threat to America’s economic future.
With Democrats in control of the White House and both chambers of Congress, federal spending is going to balloon without much Republicans can (or will) do about it. In fact, the Wall Street Journal editorial board warns that this increased spending in the near term is only a sliver of the real problem:
A giant tax-and-spend bill this year is likely, and the biggest expansion of the entitlement state since the 1960s is now possible.
The entitlements are by far the biggest long-term economic threat from the Biden agenda. Tax increases can be repealed by a future Congress. Spending on infrastructure will slow as funding falls. The courts may block his racial preferences. But entitlements that spend automatically based on eligibility are nearly impossible to repeal, or even reform, and they represent a huge tax-and-spend wedge far into the future.
The media won’t talk about this, and Republicans are so far missing in action. But Americans need to understand the stakes.
Entitlements never go away, either, as the Supreme Court reminded everyone in its third ObamaCare ruling last month. And Democrats want to expand into all areas of American life:
Federal child care, government paid family leave, free community college, a $3,600 tax credit per child, a permanent expansion of ObamaCare premium subsidies, universal pre-K, permanent expansion of the earned-income tax credit to workers without children, and more.
We’d highlight two points. First is the dishonesty about costs. Entitlements always start small but then soar. The Biden Families Plan is even more dishonest than usual.
For example, it pretends the child tax credit ends in 2025, so its cost is $449 billion over the 10-year budget window that is used for reconciliation bills that require only 51 votes to pass the Senate. But a future Congress will never repeal the credit. An honest accounting would show how the credit will cause the deficit to explode in year 11 and beyond and thus require 60 Senate votes to pass.
Second, these programs aren’t intended as a “safety net” for the poor or those temporarily down on their luck. They are explicitly designed to make the middle class dependent on government handouts.
Not only do entitlements stay, says the Journal. “Entitlements always grow over time, as politicians add benefits and increase eligibility.”
Social Security benefits have increased often since the program began, and its formula based on the increase in average wages means benefits rise faster than inflation. Medicaid was once a safety-net program but now covers 37% of Californians. Food stamps and nutrition programs started as help for the poor but now cover tens of millions of Americans. Medicare started as coverage for seniors but now Democrats want it to cover anyone over age 55.
For a while, in the 1990s and 2000s, entitlement reform was in the political air. But it always failed, even when Republicans controlled the government. George W. Bush tried to reform Medicare and Social Security, but his party made him expand the first and fled from the second. A GOP majority failed by a single vote to reform ObamaCare in 2017, as three Senators defected.
The result is that on present trend the U.S. is falling into the same entitlement trap as Western Europe. Entitlement spending requires higher taxes, which grab 40% or more of GDP. Economic growth declines as more money flows to transfer payments instead of investment. The entitlement state becomes too large to afford but also too politically entrenched to reform. Incentives for upward mobility erode as dependency on the state grows.
The Biden Families Plan will greatly accelerate the pace of all this.
And taxpayers both now and in the future will foot the enormous bill.
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