The Democrats’ proposed budget is a political and substantive disaster

Last week, the Biden administration released their proposed budget for the fiscal year 2022. The proposal is arguably a political and substantive disaster for the Democratic party’s chances in the 2022 midterm election.

The budget nearly doubles the capital gains tax — made retroactive to April — and creates a top-rate of 43.4 percent. This alone could well tank the economy, and would likely also tank the party’s electoral fortunes in the 2022 midterms.

To be sure, voters do not focus on relatively arcane issues like capital gains taxes — which few voters, if many, understand. But the impact of a massive increase in the rate to the tax rate for ordinary income will retard economic activity, slow business formation, stunt job creation and otherwise put our tenuous economic recovery at risk.

More generally, by massively increasing the debt and the deficit, the Democrats also risk increasing inflation and potentially, as we saw earlier in the year, putting the stock market’s most recent gains up for grabs.

Make no mistake, we have rebounded from the recession and were never in a depression. Yet, the Biden administration’s policies seem closer to those of Franklin Delano Roosevelt’s New Deal than they do to those of a president who is trying to manage a mostly healthy economy in which one of the major challenges is finding enough workers to keep businesses growing and thriving.

Having been hired by Bill Clinton in 1994 after the Democrats’ blow-out defeat in that year’s midterm election, I well-remember the deleterious political impact of the then-largest tax increase in history, which the then-Democratic Congress passed that year without Republican support.

History could repeat itself again this year if the Biden administration and the Democratic leadership in Congress seek to pass — largely intact — the more than $6 trillion-dollar budget that was released last week.

Both politically and substantively, the Democrats would benefit from scaling the proposal back and beginning to work more seriously and constructively on a less expensive and expansive infrastructure bill that focuses only on traditional infrastructure, like the improvement of roads and highways. Such a proposal would not focus on unrelated priorities like childcare, education, and cybersecurity — no matter how worthy these individual initiatives may well be.

That being said, this is unlikely to happen. Currently, the Democrats’ theory of the case is that redistribution of wealth focusing on taxing the rich is politically valuable and will not cause any electoral backlash. 

However, the viability of that approach remains to be seen. Though, my own experience along with past history suggests that theory is at best problematic. 

For the sake of the Democratic party and its electoral prospects, I would urge President Biden and White House chief of staff Ron Klain, as well as House Speaker Nancy Pelosi (D-Calif.) and Democratic Majority Leader Chuck Schumer (D-N.Y.) to rethink these proposals that could put them in a weakened position — and potentially in the minority in Congress, making a Republican victory in the 2024 presidential election much more likely.

Douglas E. Schoen is a political consultant who served as an adviser to President Clinton and to the 2020 presidential campaign of Michael Bloomberg. His new book is “The End of Democracy? Russia and China on the Rise and America in Retreat.”