By Michael Every of Rabobank
The Six Trillion Dollar Man / The Fall Guy
Oscar Goldman (Sachs): “Joe Biden, President: a man barely alive. Gentlemen, we can rebuild him. We have the technology. We have the capability to make the world’s first bionic man. Joe Biden will be that man. Better than he was before. Better, Stronger, Faster. And much Greener.”
The above in an updated version of the intro of the TV show ‘The Six Million Dollar Man’, starring Lee Majors, which ran from 1974-78. At that time, USD6m was enough to build an Elon Musk-style superhero: now it doesn’t even buy an Elon Musk-style house. And today US President Biden will propose the next US federal budget (at 13:30 New York Time, just ahead of a three-day weekend): and it will contain $6 trillion in spending, making him the Six Trillion Dollar Man.
To put this in a context other than schlocky TV, the last CBO projection from February said the US was set to spend USD5.7 trillion in fiscal 2021 – although that was before the recent passage of the one-off USD1.9 trillion Covid-19 stimulus package. Considering we all hope the US economy has re-opened by October, when the next budget kicks in, this is a huge step-up from the pre-Covid level of spending. Indeed, the budget would boost federal spending by 5% above the 2021 projected level, and spending will keep rising to reach USD8.2 trillion by end-2031. At the same time, federal debt will exceed the historical peak seen at the end of WW2 within just a few years –despite the war against the virus being over– and hit 117% of GDP by end-2031, versus around 100% of GDP now.
Back in 1974, when ‘The Six Million Dollar Man’ was first on TV, the federal spend was USD320bn, and US public debt 30.8% of GDP. When the show went off TV in 1978, the figures were USD486bn and 31.9%, respectively.
A few observations can be made without the need for a bionic eye:
This obviously encompasses the multi-trillion dollar (man) packages already flying around DC, from infrastructure to,…infrastructure, given almost everything is now classified as such;
This is unlikely to pass Congress in the present form without reconciliation,