Statement in Response to Senate Budget Hearing on “The Rich Get Richer, Deficits Get Bigger: How Tax Cuts for the Wealthy and Corporations Drive the National Debt”

May 17, 2023

The Honorable Sheldon Whitehouse
Chairman
Senate Committee on the Budget
624 Dirksen Senate Office Building
Washington, D.C. 20510

The Honorable Chuck Grassley
Ranking Member
Senate Committee on the Budget
624 Dirksen Senate Office Building
Washington, D.C. 20510

RE: Hearing on “The Rich Get Richer, Deficits Get Bigger: How Tax Cuts for the Wealthy and Corporations Drive the National Debt”

Dear Chairman Whitehouse, Ranking Member Grassley and honorable members of the committee,

Thank you for the opportunity to submit this statement regarding today’s hearing on “The Rich Get Richer, Deficits Get Bigger: How Tax Cuts for the Wealthy and Corporations Drive the National Debt.” The persistence of historically high deficits is an issue of vital national importance, especially as inflation continues to eat away at the earnings and wealth of millions of Americans. I applaud the committee’s willingness to address it at such a crucial time.

As you know, the latest budget projections from the Congressional Budget Office now estimate a deficit of $1.5 trillion in 2023 and, more distressingly, debt reaching 119 percent of gross domestic product by the end of the next decade.[1] While lost revenue no doubt has contributed to the accumulation of the national debt, federal spending over the last two decades has consistently outpaced revenue and contributed more substantially to our worsening fiscal picture.[2]

Many commentators, particularly on the right side of the aisle, have emphasized the impact of mandatory spending programs, as well as associated demographic changes and health care costs, on the United States’ balance sheet.[3] However, this explanation does not tell the whole story.

Policymakers should also closely examine measures taken during the last three years—by two different presidents—in response to the COVID-19 pandemic. Presidents Donald J. Trump and Joe Biden spent more than $5 trillion that was neither budgeted for, nor expected.[4]

These actions bear a striking resemblance to how lawmakers have responded to many other unforeseen events, including natural disasters, national defense emergencies and financial crises. In aggregate, the federal government has spent trillions of unplanned dollars following such events.

In addition to recent pandemic spending, one analysis catalogued more than $3 trillion in supplemental appropriations since 2000.[5] And a comprehensive accounting of spending overseas in the years following the 9/11 attacks estimated those costs at more than $8 trillion.[6]

Since the start of the 21st century, the national debt has grown to approximately $31.7 trillion, or $26 trillion more than in 2000.[7] Doing a quick back-of-the-envelope calculation, the pandemic, foreign wars and other emergency supplementals alone account for roughly $16 trillion in unforecast outlays, or more than 60 percent of the rise in the national debt during this time.

Truly, off-budget and other unplanned spending is an epidemic that is plaguing the United States’ budgetary outlook, as well as the economic growth and the well-being of all Americans. A recent study I authored discusses this topic in greater detail and includes many potential solutions for your consideration.[8] I include it below as a resource in your efforts.

Thank you again for your leadership on this matter. The R Street Institute is happy to advise the committee in its work or in any other manner that would be helpful.

Respectfully,

Jonathan Bydlak
Director of Governance, R Street Institute
Director of the Fiscal and Budget Policy Project, R Street Institute

[1] Amber Marcellino et al., “An Update to the Budget Outlook: 2023 to 2033,” Congressional Budget Office, May 2023, p. 7. https://www.cbo.gov/system/files/2023-05/59096-Budget-Outlook.pdf.

[2] Ibid., p. 15. https://www.cbo.gov/system/files/2023-05/59096-Budget-Outlook.pdf.

[3] Brian Riedl, “The Entitlement Crisis Ignored,” National Review, March 1, 2018.  https://www.nationalreview.com/magazine/2018/03/19/entitlement-spending-crisis-ignored-debt-looms.

[4] Alicia Parlapiano et al., “Where $5 Trillion in Pandemic Stimulus Money Went,” The New York Times, March 11, 2022. https://www.nytimes.com/interactive/2022/03/11/us/how-covid-stimulus-money-was-spent.html.

[5] Romina Boccia and Dominik Lett, “Emergency Spending Is on the Rise: Here’s How Congress Can Stop It,” Cato Institute, Dec. 20, 2022. https://www.cato.org/blog/emergency-spending-rise-heres-how-congress-can-stop-it.

[6] Neta C. Crawford, “The U.S. Budgetary Costs of the Post-9/11 Wars,” Watson Institute for International and Public Affairs at Brown University, Sept. 1, 2021. https://watson.brown.edu/costsofwar/files/cow/imce/papers/2021/Costs%20of%20War_U.S.%20Budgetary%20Costs%20of%20Post-9%2011%20Wars_9.1.21.pdf.

[7] “Table 1.1—Summary of Receipts, Outlays, and Surpluses or Deficits (-): 1789–2028,” Office of Management and Budget, last accessed May 15, 2023. https://www.whitehouse.gov/wp-content/uploads/2023/03/hist01z1_fy2024.xlsx.

[8] Jonathan Bydlak, “The Known Unknowns: Planning for the Next Emergencies,” R Street Policy Study No. 286, May 11, 2023. https://www.rstreet.org/research/the-known-unknowns-planning-for-the-next-emergencies.