Issues & Insights

If Biden’s Economic Plan Is ‘Working,’ Why Are Tax Revenues Plunging?

President Joe Biden loves to brag about the masterful job he’s doing managing the nation’s economy, as he did on Tuesday when cheering the latest inflation news – which saw food prices up almost 7% from last year – and “our historic economic progress.”

The day before that, the Treasury Department released its monthly financial statement, which shows that the federal deficit for this fiscal year has already topped $1 trillion and that’s a big factor behind this is a sharp reduction in federal tax revenues from last year.

Wait, you say. If the economy is “strong” and “historic” as Biden claims, why are revenues cratering and deficits exploding?

Or, as the Washington Times put it: “Uncle Sam’s income has plummeted this year, sending the federal deficit spiraling deeper into the red than analysts had predicted and leaving officials grasping for answers.”

Here’s what the “Monthly Treasury Statement” shows:

By the end of May, cumulative deficits for fiscal year 2023 (which started last October) hit $1.165 trillion. The projected deficit for the entire year is now close to $1.6 trillion, which is almost $300 billion higher than Treasury projected at the start of this fiscal year.

But here’s the real kicker: Revenues in the first eight months of this fiscal year are down $380 billion compared with the same period last year.

And most of that shortfall happened just in the past two months. April revenues were 25% below last year’s, and May’s came in 20% shy.

It was this sharp drop in tax revenues that forced Biden to open negotiations with Republicans over the debt ceiling, because Treasury realized it was fast running out of wiggle room when it came to paying its bills.

What’s more, the revenue shortfall is the result of a steep decline in individual income taxes. So far, these have brought in $1.5 trillion, compared with $1.9 trillion over the same period last year.

How can that be when Biden keeps telling us how the job market is going gangbusters?

Corporate income tax receipts, meanwhile, are flat compared with last year, which also doesn’t make sense in a “strong” economy – particularly after Biden imposed a 15% corporate minimum tax that was supposed to squeeze more dollars out of big companies.

“The revenue numbers mystify analysts, who had not figured that tax payments would drop off so quickly,” reports the Washington Times.

The most likely reason why “analysts” are puzzled is that they are too busy parroting White House talking points to pay attention to the real world.

Here’s one example: Along with federal tax revenues, recreational vehicle sales have plunged. What does one have to do with the other?

Nothing really, except that RV sales have been a remarkably accurate predictor of recessions. And year-over-year RV sales fallen in the first quarter of this year by roughly 50%.

The Financial Times – in an article headlined “Is the U.S. Economy Finally Starting to Crack?” – notes that because RVs are a discretionary item usually paid for with borrowed money, “demand for RVs is acutely sensitive to business cycles, meaning that more often than not a cooling off typically augurs a weaker economic backdrop.”

There are other warning signs, such as the spike in delinquency rates on loans and the unemployment picture in several states.

“Across the country, well over a dozen states are flashing warning signals, triggering the so-called Sahm rule, which links the start of a recession to when the three-month moving average of the unemployment rate rises at least half a percentage point above its low over the past 12 months,” the FT reports.

We don’t know what all this means, and doubt anyone does. But what we can say for certain is that the only thing “historic” about the current economy is how delusional the president and the media are about what is actually going on.

Correction: The original version of this editorial misstated the Treasury’s current projection for the deficit for fiscal year 2023.

— Written by the I&I Editorial Board

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The Issues and Insights Editorial Board has decades of experience in journalism, commentary and public policy.


  • Many factors at play here. One that is rocking CA now is the federal designation of any county that had any damage from bad weather a “disaster area.” Currently 90% or more of Californians live in such areas — and 99% of the people there have no idea what disaster the federal government is talking about.
    Why is this important? I don’t have to pay ANY federal income tax (including estimated taxes and 2022 taxes) until 15 October. If I wait, I pay ZERO interest and no penalties. And since our CA financial maven Governor Newsom adopted the same policy, I keep my CA tax money until October.
    Since my money earns now earns me over 4% in online bank savings accounts and CD’s, I’d be a fool to pay my income taxes (which are substantial) before 15 October.
    And when it comes to MY money, I’m no fool.
    Both the federal government and California government are now stunned to find that the people AND many businesses who pay big tax bills are now keeping their money until October.
    CA is in DEEP trouble — for this and many other reasons. Unlike the federal government, CA can’t print money, and are required to pass budgets without deficits.

  • I found this article to be very disingenuous. Let’s add a little perspective.

    Biden’s Total FY22 Revenue was $5,214B which was $818B more than previous year.
    Biden’s Total FY21 Revenue was $4,396B which was $668B more than previous year.
    Trump’s Total FY20 Revenue was $3,728B which was $40B less than previous year.
    Trump’s Total FY19 Revenue was $3,768B which was $103B more than previous year.

    Trump’s FY20 Revenue YTD thru June was $378B less than previous year and finished the year at $40B less than previous year (see above).

    At the time did you also lament that Trump’s Economic Plan was not “working”?

    • In an article analyzing future possibilities for our economy, you manage to obsess over the past during two years badly impacted by COVID and manage to avoid about spending. Deficits are spending minus receipts, of course.

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