By: The Editorial Board – wsj.com – March 11, 2024

Most U.S. presidential budgets are exercises in fiscal deception, but even by that standard President Biden’s Monday proposal for fiscal year 2025 sets a record for unreality. It proposes defense spending as if the world is at peace, entitlement spending that isn’t sustainable, and tax increases that would hurt the economy if they passed, which they won’t. Congratulations, Team White House.

The $895 billion was part of the debt-limit deal with former Speaker Kevin McCarthy, and we warned the number for 2025 was inadequate. We’ll elaborate on the defense-budget details later in the week, but suffice to say the budget doesn’t come close to matching Mr. Biden’s rhetoric in last week’s State of the Union about the global threats to democracy. He talks like it’s 1941, but his defense budget suggests it’s 1991 at the end of the Cold War.

Mr. Biden would spend only 3.1% of GDP on defense in 2025, falling through the rest of the 10-year budget window to 2.4% of the economy in 2034. This makes it appear that overall outlays are lower than they would be if defense stayed constant, but at the cost of reduced security in a world that is certain to grow more dangerous. The only people delighted to see these numbers are the Democratic left in Washington and the rulers in Beijing.

Meanwhile, the overall spending numbers fly in the face of fiscal reality. Mr. Biden proposes spending of $7.3 trillion in 2025, which is an increase of $1.1 trillion in two years. For those scoring at home, that’s 18%.

As a share of the economy, Mr. Biden wants spending to reach 24.8%, or a quarter of national wealth. The 1974-2023 average was only 21% and, as Mr. Biden told the country last week, the Covid crisis is over. But instead of letting outlays fall as a share of GDP, as they always have after a recession or crisis, the President wants the government to stay at a new and higher spending plateau.

As for revenue, Mr. Biden is counting on more and more. Tax receipts will hit 18.7% of the economy in 2025, and they’ll keep rising every year for the next decade—to 20.3%. The 1974-2023 average was 17.3%. Mr. Biden is proposing about $4.9 trillion in net tax increases—mostly on business and those making more than $400,000 a year, which is his definition of rich.

But notice the tax sleight of hand with that $400,000 level. That’s the number below which he said no one would pay more in taxes during his first campaign in 2020. He’s using the same number now, despite four years of inflation running as high as 9%. That $400,000 spin zone isn’t indexed for inflation, so it means that each year more of the middle class climbs into his tax-increase maw.

The White House claims the budget would reduce the deficit by some $3.3 trillion over the next decade, but that’s only if his tax increases pass and don’t hurt the economy. Mr. Biden’s spending boom means that the annual deficit barely falls at all in 2025—to $1.78 trillion from an estimated $1.86 trillion in 2024. That would be 6.1% of GDP, despite the growing economy that Mr. Biden keeps boasting about. Mr. Biden keeps racking up unprecedented non-crisis or non-recession deficits, and his budget doesn’t foresee a deficit below 4% of GDP until 2034.

Mr. Biden’s deficits mean that debt as a share of the economy also keeps rising. He foresees debt held by the public rising to 102.2% in 2025, though it was only 79% as recently as 2019. Covid spending by Donald Trump and Mr. Biden caused the debt to explode to levels not seen since the end of World War II.

But unlike after that war, Mr. Biden is making no attempt to control the debt. Public debt in his budget keeps growing and growing—to 106% of GDP in 2030. Interest on that debt will surpass defense spending this year when it hits $890 billion, and it keeps climbing to $1.57 trillion over the next decade.

This is a budget for a world that doesn’t exist, and Americans can hope it will never become law.

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Source: Biden Offers a Budget Fantasy – WSJ