Biden's financial policy .. Is the United States drowning in debt?

A few years ago, some experts came up with a strange theory known as "Modern Monetary Theory", which states that as long as interest rates remain low, the US government can spend and borrow trillions of dollars without incurring losses, and can even accumulate wealth.

In a report published by the American newspaper "The Hill", writer Stephen Moore says that despite the absurdity of this idea, which is similar to the theory that the Earth is flat and not spherical, the current President Joe Biden decided to rely on it as a fiscal policy during his presidency, which will make The United States is sinking into more debt in the coming years.

reckless fiscal policy

The new administration has allocated 6 trillion dollars in expenditures within its budget, and it may rise to 8 trillion dollars, and it is expected that a tax increase of two trillion dollars will be approved on the wealthy, and the volume of debts is expected to rise to 7.6 trillion dollars, which is more than the debts accumulated by the previous four presidents.

The trade deficit has increased during the last period by 5 trillion dollars that the government has spent to combat the Covid-19 crisis, and now that the United States has passed the worst period of the epidemic - according to the writer - the American administration is supposed to start looking for the best ways to get rid of the debt burden that will rise to More than $150,000 per American baby, no policy to increase borrowing rates.

According to the proposed budget statement, all of the Biden administration's expenditures fall under "investments," including Department of Education expenditures, childcare grants, paid parental leave, sponsorship grants to wind and solar companies (many of which operate outside the United States), "environmental justice" grants and regulations. Mass transit that few people ride, aid to states and cities that voted Democrats, not to mention unemployment insurance grants, and even the $30 billion President Biden wants to spend to hire 75,000 IRS agents are also investments.

According to the author, what is frustrating about the Biden administration’s budget is that the two most important departments in the country – the Department of Defense and the Department of Homeland Security – did not get any increase in their budgets, as all the increases that were approved went to local social programs designed to redistribute wealth, not to expand it.

Given this budget, the Biden team expects growth rates over the next decade to be 2%, compared to close to 3% over the past 40 years.

Given that a large part of the growth in GDP will come directly from government spending, the GDP growth rate in the private sector is expected to reach 1% or 1.5% annually, and this situation is described as "secular stagnation", a term referring to to a state of little or no economic growth.

The writer stresses that the Biden administration never pretends that it is able to make the budget more balanced in the coming years, but all indications are that it is preparing to deal with tens of billions of dollars of debt indefinitely.

vicious circle

But what are the implications of a budget in which spending levels are raised recklessly each year, with no reasonable sources of income?

The writer believes that the increase in debt, estimated at billions of dollars, will almost certainly lead to higher inflation and interest rates.

Even if Biden does approve a wage increase, the inflation rate is expected to outpace the increase, which means lower standards of living for middle-income earners and older people living on a fixed income.

With soaring inflation and potentially shocking consumers, Congress should combat rising prices and depreciating the dollar by eliminating, not increasing, some unnecessary expenditures from the budget.

The writer points out in this context that Democrats in Congress reject any criticism from Republicans of Biden's unbridled borrowing strategy, recalling the large budget deficits under Republican Presidents Donald Trump and George W. Bush, but they ignore - according to the writer - that debt levels in the current budget are twice higher. to 3 times than it was previously.

The writer believes that the ironic thing is that China will not need to make any efforts to try to devalue the US dollar until the Chinese yuan becomes the dominant global currency, because the United States will do so in the future to reduce the value of its debt.

The writer concluded that Democrats are required to abandon their narrow party loyalties and refuse to vote on the Biden administration's budget, which is based on reckless fiscal policy, in order to help their country out of the vicious cycle of borrowing.