Everyone knows that current federal entitlement programs are unsustainable, requiring trillions of dollars in tax hikes just to fulfill today’s benefit promises to current and future recipients. Given that enormous hole, and with federal debt already hitting its limit of $31 trillion, you would think proposals for new or expanded entitlement programs would be on hold.

You would be wrong.

In further proof that he doesn’t understand the first law of holes (when you’re in one, stop digging), President Joe Biden’s budget proposal released last week calls for well over $2 trillion in spending increases, including for new and expanded entitlement programs, such as:

• creating “a national, comprehensive paid family and medical leave program, providing up to 12 weeks of leave;”
• “making permanent…expanded premium tax credits;”
• “$150 billion… to improve and expand Medicaid home and community-based services;”
• providing “Medicaid-like coverage to individuals in States that have not adopted Medicaid expansion under the ACA;”
• putting the community health center program “on a path to double its size and expand its reach;”
• “a Federal-State partnership that provides high-quality, universal, free preschool;”
• “$59 billion in mandatory funding and tax incentives aimed at increasing the affordable housing supply;” and
• expanding “free community college.”

Yet another benefit expansion is the administration’s latest call to revive the expanded child tax credit (CTC) paid in 2021:

The Budget would expand key tax cuts benefitting lower- and middle-income workers and families. The President is calling for the restoration of the full Child Tax Credit enacted in the American Rescue Plan…

That “tax cut” rhetoric revives past administration characterizations of this policy, which in reality is mostly about increasing benefits through direct cash transfers. Summary tables in the budget display how, over the first five years, this policy’s admitted benefit increases ($302 billion) would outweigh its tax relief ($61 billion) by a factor of five to one. In the second five years, the policy is entirely about increasing benefits, with no tax relief at all.

The latest proposal also features the same smoke and mirrors budgeting that accompanied the temporary 2021 expansion and subsequent proposals to extend it. Back then, even though the president and other supporters said they wanted the CTC expansion to be permanent, Democrats’ American Rescue Plan authorized it for only one year. That was done to mask the policy’s enormous costs, and supporters were shocked when the policy wasn’t subsequently extended. As Vox put it last year:

Democrats had been optimistic that if they could just seed the generous program, then they would amass the kind of political support that makes a popular subsidy hard to repeal. “We were shocked,” said Otis Rolley, a senior vice president at the Rockefeller Foundation, who has been leading a coalition of groups to support the policy.

They shouldn’t have been shocked. The 2021 CTC expansion just wasn’t as popular as supporters expected, with 60 percent of registered voters saying the plan was too expensive and not needed after the pandemic.

Nonetheless, the president is once again “calling for the restoration of the full Child Tax Credit enacted in the American Rescue Plan,” while now proposing that most of that “full” restoration lasts only through 2025. (He proposes a permanent revival of only the “full refundability” features of the 2021 policy, which provided payments even to parents who don’t work and don’t owe federal income taxes.) That means the staggering apparent cost of this policy ($429 billion over 10 years) ignores more spending that it includes, given supporters’ stated desire to make the policy permanent. The annual cost of the president’s policy roughly doubles after 2025, so the CTC spending the president intends but doesn’t include in his budget is well over $1 trillion in just the first 10 years.

That’s the smoke and mirrors budgeting for just this one program. But it highlights the grinding contradiction between the president’s big-spending plans and his effort to cast himself as a deficit hawk. As one article aptly put it, “Biden aims to up benefits, slash the deficit.” Considering the impossibly massive tax hikes the president proposes to square that illogical circle, Sen. Tim Kaine (D-VA) summarized the plan’s prospects this way: “If the two houses were 100 Democrats and 435 Democrats, the president still would not get his budget passed.”

The post The Trillion-Dollar Hole in the President’s Budget appeared first on American Enterprise Institute – AEI.