In just his first 100 days, President Biden has rolled out ambitious spending plans meant to vastly increase federal funding for everything from infrastructure to jobs to families. The whopping $6 trillion price tag on these combined proposals has raised many eyebrows about how a nation more than $28 trillion in debt can afford such a splurge.
Article by Brad Polumbo from FEE.
But one prominent economist is warning that the true cost of Biden’s plans could be more than three times higher than advertised.
Steve Hanke is a Professor of Applied Economics at Johns Hopkins University and Director of the Troubled Currencies Project at the Cato Institute. In a new op-ed for the Wall Street Journal, he argues that the true cost of the president’s spending proposals is really closer to $17.1 trillion. (That’s roughly $119,000 per federal taxpayer!)
Why are the current price tags such vast underestimates? The Foundation for Economic Education interviewed Hanke to find out.
The economist started by pointing out that “The collection of taxes is not a costless exercise.”
“There are hidden costs associated with it,” Hanke said. “One isn’t even hidden, actually, it’s the financing of the federal government’s tax extraction operation, namely, the Internal Revenue Service. Then, in addition to that, there’s the hidden costs incurred by the taxpayer, literally to prepare their taxes and to adjust their economic activity to comply with the tax code.”
Between the two, Hanke estimates these costs at 10 to 25 cents per dollar in tax revenue collected. Despite the assumption that underlies traditional spending legislation price tags, the economist noted that “a dollar doesn’t flow in frictionlessly to the federal government.”
So it’s fair to assume that the surface-level price tag of spending proposals underestimates the true cost by 10 to 25 percent. Nowadays, that’s not a rounding error—it’s a difference in the hundreds of billions to trillions.
However, Hanke says that the hidden costs associated with taxation extend far beyond collection and compliance. He explained that there’s an “excess burden,” what in economics would be called “deadweight loss,” associated with increases in taxation as well.
Sound complicated? It’s not.
“[It’s simply] the cost associated with all the distortions that taxes put into the economy,” Hanke explained. For example, higher income taxes discourage work. And higher taxes on business discourage investment.
As Henry Hazlitt lucidly explained in Economics in One Lesson, “taxes inevitably affect the actions and incentives of those from whom they are taken.” He specified that “the larger the percentage of the national income taken by taxes the greater the deterrent to private production and employment.”
“[Such] distortions cause the economy to generate a lot less revenue and income than would otherwise be the case,” Hanke continued. The excess burden simply accounts for all these losses.
And it makes IRS expenses look like chump change. Hanke pointed out multiple studies showing the excess burden of taxation is between $2.65 and $3.00. “So, any new government expenditures you’ve got to multiple them by three to get the true cost.”
I asked the economist whether this holds true even if the spending is financed by federal debt or money-printing. He noted that ultimately it all leads to higher taxation, and pointed out that the Biden administration has repeatedly said it will offset its spending proposals with direct increases in taxation.
You might be wondering: Why is this the first I’m hearing of all this? Well, the nonpartisan institutions like the Congressional Budget Office commonly relied upon for cost estimates don’t factor in the excess burden of tax increases. They just use face-value “frictionless” revenue assumptions.
Why don’t these agencies take these crucial figures into account? Hanke answered that to do so would be “politically incendiary,” because if they did, very few spending proposals would ever pass a cost-benefit analysis.
This oversight plays right into the hands of big-spending politicians. When the full costs are taken into account, Hanke says it’s “almost inconceivable” that President Biden’s spending proposals would be worth the expense.
YouTube, Spotify, and other Big Tech platforms are taking Freedom First Network down
It’s no secret we speak our minds and bring on guests who do the same. That’s one of the biggest reasons we put together the Freedom First Network in the first place. There are far too many news outlets, including so-called “conservative” media companies, who are so beholden to Big Tech that they temper their perspectives at best and outright coverup the truth at worst. Many, as you all know, will blatantly lie in order to maintain the narrative that supports the radical agenda taking over much of the United States.
We have had our YouTube channel taken down. Many of our shows have been suppressed or removed by Facebook and Twitter. Spotify banned one of our shows completely from their platform. Google hates us. We’ve even been censored by some of the smaller players like Medium, Transistor, and Captivate. But we stand behind our reporting and perspectives and we refuse to bow down to Big Tech tyranny for the sake of pageviews or video plays.
This isn’t the easiest road to travel, especially for a media company that is so new. We launched Freedom First Network in 2020 to fight against the very censorship that we’re seeing so widespread today. We have found great homes for our content on freer speech platforms like Rumble and we’re putting our best efforts forward into building our presence on Locals. Nevertheless, we cannot do it alone. We need help.
One of the things cofounders Jeff Dornik and JD Rucker agreed to from the start was to never be the pawns of companies that do not embrace our worldview. Finding advertisers and affiliates is easy; we receive requests by companies wanting to be pushed on our shows every day. But it’s important to us that we’re promoting companies, services, and products that are beneficial to maintaining a Freedom First stance in America. As a result, we do not take on sponsors easily. We would rather rely on our own products like Freedom First Coffee and the support of our wonderful viewers, listeners, and readers.
Those who want to support us and help keep the fight for America’s future moving forward can do so by donating through our Locals page. There, you can donate monthly or one-time. Some have told us to use Patreon or GoFundMe, but both of those platforms have demonstrated a hatred for free speech. Locals does not. They embrace it. We encourage everyone to join us on Locals, but donations are greatly appreciated as well. We do not have day jobs. Our fight for freedom is a full-time gig.
Please feel free to reach out to us through our contact form. It goes directly to our founders, so if you’re interested in getting involved, investing, sponsoring, or even bringing a show to our network, let us know. May God Bless the United States of America!
