October 7, 2021

Fact Check on Democrats' Reckless Tax and Spend Spree


KEY TAKEAWAYS

  • Democrats are in disarray over their $3.5 trillion reckless tax and spend spree.
  • Senator Manchin has laid out a case for why the approach other Democrats are taking is dangerous. He’s right. 

Democrats have been in a mad rush to ram through their $3.5 trillion reckless tax and spend spree before the American people realize what’s in it. As most of the party caves to its extreme left wing, their ire has been focused on the few Democrats in Washington who have questioned the wisdom of that approach: how the legislation is being done; how much it spends; and what the radical policy changes would do to America. Senator Joe Manchin explained several objections in an op-ed for the Wall Street Journal on September 2 and a press release on September 29. Do these critiques withstand scrutiny?

Social Security and Medicare

“Spending trillions more on new and expanded government programs, when we can’t even pay for the essential social programs, like Social Security and Medicare, is the definition of fiscal insanity.”

True!

Democrats would like to add dental, vision, and hearing to Medicare’s list of benefits. Medicare Advantage plans already offer these benefits to enrollees with little to no additional cost. Adding broad new benefits to the Physician Fee Schedule, which has budget-neutrality requirements, could exacerbate physician payment cuts and push more practices to close. Every year, the Medicare trustees warn about the need to address the program’s fiscal standing. They have pointed out the growing strain of increased enrollment in the program and the decline in the number of workers supporting beneficiaries. Instead of addressing the fiscal issues with the program and building on Medicare Advantage’s success, Democrats are proposing to undermine the program even further.

The trustees have warned repeatedly about Social Security’s trust fund. They reported this year that the trust fund will be able to pay retirement and survivors’ benefits until 2033, at which point “the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 76 percent of scheduled benefits.”

Jobs

“Proposing a historic expansion of social programs while ignoring the fact that we are not in a recession and that millions of jobs remain open will only feed a dysfunction that could weaken our economic recovery.”

True!

Businesses across the country are trying to hire workers for nearly 11 million open jobs – a record number. Half of small businesses say they have jobs they have struggled to fill. Congress has provided unprecedented funding to help job creators, including small businesses, get through the pandemic. Now, businesses are trying to keep up with customer demand as the economy recovers, but worker shortages have forced many to cut their hours or limit their services. On top of that, businesses are facing costly supply chain bottlenecks and higher prices on things like raw materials and transportation. Creating and expanding government handouts that are unconnected to need or to work, as Democrats propose, will not help businesses hire the workers they need. It’s not what will help the economy recover.

Inflation

“Inflation continues to rise and is bleeding the value of Americans’ wages and income.”

True!

Democrats’ spending spree began in March, with their $2 trillion COVID-19 relief law, which economists on both sides of the aisle warned could provoke higher inflation. For months, Americans have been feeling the sting of high inflation when buying essentials like groceries and gasoline or making big purchases like a new car. In August, consumer prices were up 5.3% from one year ago, following a 5.4% annual jump the month before. The Congressional Budget Office reported in September that “inflation has eroded the purchasing power of families” as wage gains since the middle of last year have been erased by increasing prices. According the University of Michigan’s September survey of consumers, people are worried about inflation lowering their standard of living. Only 30% of households said they thought they would be better off financially in one year. Democrats’ misguided solution is to hike taxes, spend trillions of dollars, and pile up more debt.

Welfare Programs

“Any expansion of social programs must be targeted to those in need, not expanded beyond what is fiscally possible.”

True!

Democrats aim to make permanent the expanded subsidies for Obamacare plans they had enacted temporarily in March. This expansion removes any income limits on who can get premium subsidies, increases the amount of the subsidy for those already eligible, and provides subsidies that cover 100% of premium costs for people with incomes from 100% to 150% of the federal poverty level. The proposal unfairly benefits older, high-income earners while younger people with lower incomes receive much smaller subsidies.

They are also promising to provide tuition-free community college for everyone, regardless of need. The government already spends more than $28 billion each year to give Pell Grants to students who need financial help, and the average grant is higher than the average cost of community college tuition. The new program would be duplicative and, because it is not based on need, amounts to a handout for wealthier families who could afford to pay their own way.

Taxes

“Our tax code … should not weaken our global competitiveness or the ability of millions of small businesses to compete.”

True!

The 2017 Republican-led tax law followed bipartisan consensus that we needed to bring the U.S. in line with our global competitors. It led to more jobs, higher wages, and more investment in the United States. Democrats have proposed hiking the combined U.S. corporate rate back up to the third-highest among Organization for Economic Cooperation and Development countries. Their proposed 30.9% combined tax rate for U.S. companies would far exceed the 25% rate competing businesses in China pay.

Democrats are also aiming several of their tax hikes at small businesses and family farms organized as pass-through businesses, with plans to hike their taxes by 57% at the top marginal rate: from 29.6% to 46.4%. According to the Tax Foundation, more than half of all pass-through income would be hit by Democrats’ tax hike.