The Decline of America: The Left’s Ill-Fated Quest for a Progressive Utopia
Our country is hurtling toward a future reminiscent of South and Central American countries, with stark socioeconomic divides and a powerful elite controlling the government.
A coalition of Leftists and affluent woke opportunists has effectively seized control of just about every key lever of power and influence in our country. They have in unison, knowingly or not, steered our country towards socialism and authoritarian state rule. Open borders, an inflated welfare state, and excessive debt and deficit spending threaten to destroy the future prosperity of working Americans and retirees on fixed incomes. While it could be argued that illegal immigrants benefit our country because of the cheap labor they provide, this is true only if they do not receive indefinite social services and welfare payments. But this is not the case in a growing number of big blue states and sanctuary cities, all of which rely on unsustainable deficit spending. Illegal immigrants are the new members of the Democratic coalition.
The government is socializing the costs of illegal immigration, and taxes will need to rise to offset these expenses. President Biden’s proposed budget for fiscal year 2025 would increase tax rates on corporate, individual, and capital gains income and expand tax bases to include more types of income. His budget includes a gross tax hike of $5.3 trillion from 2024 to 2034. After taking various credits into account, the increase would be about $3.4 trillion.
President Biden’s pie in the sky $7.3 trillion tax and spend budget would dampen GDP growth, leading to higher unemployment rates and diminished prosperity for tens of millions of Americans. Recent analyses of Biden’s budget reveal its harmful impact: it is anti-capital and anti-growth, adversely affecting all those with incomes above and below $400,000; i.e., most Americans.
Long-Run Economic Effects of President Biden’s FY 2025 Budget
An analysis by the Tax Foundation found that the tax increases would substantially increase marginal tax rates on investment, savings, and work, reducing economic output by 2.2 percent in the long run, wages by 1.6 percent, and employment by 788,000 full-time equivalent jobs:
The tax changes Biden proposes fall under three main categories: additional taxes on high earners, higher taxes on U.S. businesses—including increasing taxes that Biden enacted with the Inflation Reduction Act (IRA)—and more tax credits for a variety of taxpayers and activities. The combination of policies would move the tax code further away from simplicity, transparency, and neutrality while making the U.S. economy less competitive. The increase in the corporate tax rate and the additional taxes on top earners would result in U.S. top marginal tax rates on income that are among the highest in the developed world.
Biden’s new wealth tax, the 25 percent minimum tax on high earners, is expected to lead to a decline in tax revenue over time, as the wealthy adjust their strategies to safeguard their assets, potentially even considering relocating overseas. The 25 percent minimum tax will be imposed on unrealized capital gains even if the underlying asset has not yet been sold, operating as a prepayment for future capital gains tax liability. It would apply to taxpayers with wealth greater than $100 million, requiring a new and complex wealth reporting system. This radical tax design goes well beyond international norms, where capital gains are taxed when realized and at lower rates than the U.S. in many cases.
The president’s tax policy proposals would make the tax code more complicated, unstable, and anti-growth, while also expanding the amount of spending in the tax code for a variety of policy goals not related to revenue collection.
The budget also assumes an unrealistically high rate of growth in the economy, especially considering the large tax increases proposed on businesses and high earners that will slow growth. The budget assumes real GDP will grow at 2.2 percent annually in the last five years of the budget window, while the CBO assumes real GDP will grow about 1.9 percent annually over this period.
President Biden is proposing ruinously large tax hikes on businesses and the top 1 percent of earners that would put the U.S. in a distinctly uncompetitive international position and threaten the health of the U.S. economy. The budget makes unrealistic assumptions about the fiscal cost of major proposals as well as economic growth under higher marginal tax rates on work and investment, concealing what is likely to be a substantial cost borne by American workers and taxpayers.
“You can only confiscate the wealth that exists at a given moment. You cannot confiscate future wealth—and that future wealth is less likely to be produced when people see that it is going to be confiscated.” —Thomas Sowell
The rich already pay more than their fair share.
President Biden and the Democrats constantly smear the rich for not paying their “fair share” and then lie about how much they pay in taxes. The Internal Revenue Service data provides the numbers that prove they are lying.
The following figures are from a Tax Foundation analysis of the 2021 IRS data. They include temporary Covid relief, which skews the results even more progressively. They don’t include the payroll tax, which covers lower-income workers, but the “fair share” point is about income taxes.
The income tax is steeply progressive. Among the top 0.1%, or 154,000 returns with earnings above $3,775,500 a year, the average tax rate was 25.7%. The top 1% of reported 26.3% of the country’s adjusted gross income, while paying 45.8% of total income taxes, up from 33.2% in 2001. Their average tax rate was 25.9%.
The bottom half of earners, the 76.8 million returns that reported adjusted gross income up to about $46,500 earned 10.4% of the country’s total income, while paying 2.3% of all income taxes. Their average tax rate was 3.4%.
In 2020, the CBO reported, the bottom 60% of taxpayers had an average income-tax rate that was effectively negative. The lowest quintile paid minus 27.6%. For the middle quintile it was minus 2.4%.
The wealthy are paying a rising share of the income-tax burden as the share paid by everyone else has correspondingly fallen. In 2001 the top 1% paid only 33.2% of the total taxes paid. Twenty years later, 45.8%. The bottom 90% of taxpayers in 2001 provided 36.3%. Twenty years later, that had dropped to 24.2%.
Biden’s progressive spending has no limits. Washington could confiscate the income of every wealthy person in the country and still not finance what Democrats want to spend.
The grim long-term fiscal outlook
The Congressional Budget Office released its latest Long-Term Budget Outlook (Mar 2024) projecting the nation’s finances over the next 30 years. CBO projects that the debt held by the public will hit a new record share of the economy in just four years and grow to 166 percent of Gross Domestic Product (GDP) by 2054.
CBO also projects that the Social Security Old-Age and Survivors Insurance trust fund will be exhausted in 2033, the Medicare Hospital Insurance trust fund in 2035, and the Highway Trust Fund in 2028.
Deficits will average 6.7% of GDP over the 30-year period, which is 3.0 percentage points more than they averaged over the past 50 years. Debt held by the public will reach 107% of GDP in 2029, exceeding the historical peak reached just after World War II, and its growth continues to accelerate through 2054.
Even under current law, CBO projects debt to double as a share of the economy relative to pre-pandemic levels. Major trust funds supporting Social Security, highways, and Medicare face insolvency.
High levels of debt have several adverse effects, including slowing income and wage growth, raising interest payments on the national debt, exerting upward pressure on interest rates, imposing an excessive burden on future generations, and heightening the risk of a fiscal crisis.
Net interest payments are projected to surpass spending on defense, Medicaid, and Medicare in Fiscal Year (FY) 2024, making debt servicing the second-largest federal program for that year. Deficits are expected to escalate further as expenditures on Social Security and health-related programs continue to expand at a much faster pace relative to revenues as a share of GDP.
Higher debt and interest rates are driving the cost of interest payments.
E.J. Antoni, Ph.D. succinctly sums up the soaring interest on the debt problem:
Gross issuance includes new debt (currently $3.0-trillion annualized rate) but also old debt being rolled over from 2-3% interest to 4-5%, effectively doubling cost to service that same old debt; by last quarter of 2030, interest on the debt is set to hit annualized $3 trillion:
The Biden administration had projected a $1. 6 trillion deficit for the current year but the Treasury has been borrowing at almost twice the projected amount.
The government doesn’t pay off debt, but only rolls some of it over. The Treasury issues new debt to cover repayment of what was originally borrowed, plus the accrued interest that’s due. About $8 trillion of debt will be rolled over this year.
The Treasury bills being rolled over were issued within the last year, so they already have relatively high rates of interest. Treasury notes or bonds, which were issued between two and 30 years ago, have an interest rate about half of current rates. As these notes and bonds are rolled over, the interest expense of the Treasury will continue skyrocketing.
Between new debt issued to cover current deficits and old debt being rolled over, the Treasury will auction about $10 trillion of debt this year, much of it having an interest rate of about 5%. This is less than one third of the federal debt but will cost $500 billion annually to service.
The rest of the debt, about 70%, will cost another $500 billion annually because the interest rates on the remaining notes and bonds are still relatively low. While that buys America some time to try and diffuse this debt bomb, it still means we’re paying over $1 trillion a year just in interest on the debt.
This is already the federal government’s third-largest single line item in the budget. It will grow to first place in just a few years. Interest on the debt is now so large that it exceeded 60% of all personal income taxes collected in February. This is the Treasury’s largest source of tax receipts, and most of it is being consumed by interest.
Decades of artificially low interest rates hid the true cost of government deficit spending. The day of reckoning is fast approaching and there’s not much time left to cut spending.
Biden’s proposed FY2025 budget would dramatically increase social spending and taxes.
Last year the CBO projected an average interest rate of 4.1 percent on 10-year Treasury notes, but this has now climbed to 4.3 percent in the March report. The real interest rate on these notes has risen from a projected 1.7 percent to 1.9 percent. If the 10-year yields remain as high as the CBO projects, the stock market’s current [forward] price-to-earnings ratio will likely reset to a lower multiple. One that is more appropriate for a higher discount rate.
Additionally, the average nominal interest rate on all federal debt held by the public is now forecasted at 3.6 percent, up from the previous projection of 3.4 percent.
Expectations point to a deceleration in economic growth.
The CBO’s projection indicates a reduction in the annual growth of real potential GDP compared to the period 1994 to 2023, during which it averaged an estimated 2.4 percent. From 2024 to 2054, real potential GDP is anticipated to decrease to an average rate of 1.8 percent annually, further declining to an average of 1.6 percent over the period from 2045 to 2054.
Real potential GDP represents an estimation of the quantity of real GDP that can be generated when labor and capital are used at their utmost sustainable rates. Real GDP denotes nominal GDP adjusted to eliminate the impacts of fluctuations in prices—inflation.
Persistent primary deficits alongside increasing interest rates and expanding debt will result in net outlays for interest surpassing twice the GDP by 2054. These factors will contribute to pushing the total deficit up to 8.5 percent of GDP by that year. Over the coming 30 years, deficits are expected to average 6.7% of GDP, marking an increase of 3.0 percentage points compared to their average over the past 50 years.
The bureaucratic state and the Democratic Party
Biden and the Democrats appear indifferent to the consequences of their policies as long as they benefit their coalition and big donor class. Even if, as seems likely given our current trajectory, our country deteriorates into a state resembling a third-world country, the leaders of the coalition will continue to wield influence in Washington. This is precisely why many believe we need Trump back in office. During Biden’s tenure, the bureaucratic state, commonly referred to as the swamp, has only grown larger, deeper, and more powerful.
We seem to be following a path akin to countries like Argentina, which have faltered miserably in the name of ‘social justice’ and ‘equity.’ Unfortunately, the pursuit of this progressive utopia often calls for government coercion and curtails individual freedoms, leading to authoritarian state socialism. While the rich elites and Democratic Party coalition members prosper, the rest of the population suffers. The gap between the affluent and the disadvantaged widens, fueling social unrest, cultural divisions, and an increase in violence, crime, homelessness, and drug-related fatalities.
Politicians like Bernie Sanders, AOC, Elizabeth Warren, and members of the progressive caucus, along with certain government agency heads, prioritize a woke ideology over the well-being of working Americans. They exploit fears about climate change to push through their agenda of malinvestments and wealth redistribution, despite the burdens placed on struggling taxpayers and workers. This is often masked as ‘fairness’ and ‘protecting democracy,’ but in reality, it smothers dissent through censorship and legal maneuvers.
The media, once considered objective, has become a partisan tool, advancing the Democratic Party’s agenda through divisive rhetoric focused on class and race/gender warfare. Outlets such as CNN, MSNBC, ABC, NBC, and NPR have aligned themselves with destructive policies that deepen divisions within our society.
Governments often welcome inflation as it alleviates unsustainable debt levels, albeit at the cost of creating an illusion of wealth. Our country is hurtling toward a future reminiscent of South and Central American countries, with stark socioeconomic divides and a powerful elite controlling the government. At the same time, the impoverished masses struggle to survive. This is the reason many seek to come to our country ‒ yet our government’s approach is exacerbating poverty and undermining our nation’s foundations.
The pursuit of a progressive utopia threatens to culminate in a dystopian nightmare for millions of Americans, mirroring the fate of numerous countries that crumbled in their delusional quest for social justice. Nowhere in Emma Lazarus’s famous sonnet “Give me your tired, your poor/ Your huddled masses yearning to breathe free” does it say, “Come to America where everything is yours for the asking.”
Two great points Paul. I would add those that pay must have say! We have been sliced and diced into tribes by the neo-Marxists on the Left. A cultural war that appears to be intensifying.
1. We need to establish the flip side of "no taxation without representation", meaning if you're not taxed you don't get a say. I would propose a ballot for every tax form that is filled out that doesn't require a complete reimbursement. Thus, some people would vote twice, individual tax return, and corporate tax return.
2. Separate. We are no longer one nation, and one culture, picking different routes to get to the same end point. We are now two cultures going in two separate directions to two separate ends. We should not allow ourselves to be dragged down with the mob.