LARRY KUDLOW: This radical economics has only produced high inflation

Save America, spend less

If you think Joe Biden's response to the Chinese balloons and other flying saucers is baffling, wait until you get to the part about the budget deficit and spending in general. 

Biden keeps telling folks that Republicans are going to cut Medicare and Social Security, which is a complete untruth — Speaker Kevin McCarthy has ruled that off the table, but you know that. 

Then, Biden has this made-up number about Republicans wanting to add $3 trillion to the deficit, which is basically focused on the Trump tax cuts, which we have already learned paid for themselves with a $250 billion revenue surplus after the first two years, but you already know that also. Now, today, press secretary Karine Jean-Pierre said this. I can't figure it out.

KARINE JEAN-PIERRE: The president has been very clear. You see it in his record, 1.7 trillion. Then you're going to see it again when he puts his budget out on March 9. I'm not going to get ahead of the president. I'm just saying what he laid out to all of you yesterday, $2 trillion he's going to do. He's going to lower the deficit and that shows fiscal responsibility, and that's something that the president has talked about as vice president, as senator and he's shown it, he's shown it. He has the receipts.


Karine Jean-Pierre

Karine Jean-Pierre, White House press secretary, speaks during a news conference in the James S. Brady Press Briefing Room at the White House in Washington, D.C., US, on Wednesday, June 15, 2022.  (Ting Shen/Bloomberg via Getty Images / Getty Images)

Man, vice president, senator, president, $2 trillion, $1.7 trillion. If you can figure all that out — what it means, well then, you're a very smart person. I think the basic point here is that President Biden is trying to take credit for the lower deficit in fiscal year 2022, by all accounts including the Committee for a Responsible Federal Budget, a function of expiring emergency COVID spending

That's all. By the way, this year already, they're running twice as much, so it could be a gigantic number. If you then look at the CBO report out yesterday, you will see that deficits go up, not down. I just want to make that point. They go up. They go way up. In fact, they go from $1.4 trillion in '23 all the way up to $2.85 trillion in 2033, and they go up steadily year after year after year. 

They total $20 trillion. That's right, $20 trillion of new deficits on the CBO scorecard. This is not down, Mr. President. This is up. We have a fundamental directional disagreement. $20 trillion more in deficits is up, not down. Just saying. 

Meanwhile, debt held by the public goes from $24 trillion in FY 2022 to $46 trillion in FY 2033, according to CBO projections. Put another way, from 97% of GDP last year to 118% in 2033. That is up, not down, sir. It's up.

The fundamental cause of the rising deficits and debt is excess federal spending, which goes from $6.2 trillion last year to nearly $10 trillion in 2033. The 10-year total for spending is just short of $80 trillion. That's the total — $80 trillion in additional spending.

As a share of the economy, spending continues at 24% to 25% of GDP. Historically, federal budgets have tended to run no higher than 20% or 21% of GDP. So, when we talk about big government socialism, Mr. Biden's left-wing central planners must be very happy because they're right on target running the economy from Washington, D.C. By the by, estimates have been made that suggest federal, state and local spending runs upward of 44% of GDP. 

So, Uncle Sam's running about a quarter of the economy and when combined with states and localities, the central planners are running nearly half of the American economy. Just to connect the dots with all this spending, it's no wonder that the CBO economic estimates, which are really mainstream economics, show another decade of secular stagnation. 

In other words, all this spending and borrowing gets you nowhere in terms of true prosperity. I mean, a good Keynesian, or a good socialist, should be arguing that all this massive spending will stimulate the economy to grow 3%, 4%, 5% or more, but in fact they show less than 2%. 

In other words, socialism, as always, doesn't really deliver the goods, does it? Because all that spending distorts the economy, comes with massive regulatory strings — think Steve Forbes's 'modern socialism through the regulatory state' — and plenty of taxation to blunt employment, production and investment incentives. 

I mean, think around the world, have these socialist models ever delivered the goods? I mean, historically, is Venezuela growing at a rapid rate, are their people really happy? Iran? Even China, which has thrown away its market reforms, they've come down from 15% to 20% growth to less than 3% and falling, so the answer is no, it didn't deliver.


Joe Biden

President Joe Biden speaks about efforts to combat COVID-19, in the State Dining Room of the White House, Tuesday, March 2, 2021, in Washington. (AP Photo/Evan Vucci) (AP Photo/Evan Vucci / AP Newsroom)

All this radical economics doesn't work, doesn't make people happy. I mean, if I were the Bidens, I would want to proudly exclaim to the country what a great success our big government policies have produced, but the only thing it's really produced is high inflation, which makes people very unhappy, which is not the socialist paradise we've been promised. 

Alright, enough already. Let me just summarize quickly: Save America. Spend less. Tax less. Regulate less. Inflate less and restore free-market capitalism. That's my wish — just a wish.