President Joe Biden plans to highlight deficit reduction in remarks at the White House, signaling that the government will pay off the national debt this quarter for the first time in six years.
Biden will emphasize on Wednesday how strong job gains have boosted total revenue and generated additional tax revenue that has improved the government’s balance sheet, said a White House official who insisted on anonymity to preview the president’s speech.
In addition to the quarterly reduction in the national debt, the Treasury Department estimates that this fiscal year’s budget deficit will decrease by $1.5 trillion. That decline marks an improvement over initial forecasts and would likely bring the annual deficit below $1.3 trillion.
The Democratic president has placed a renewed emphasis on reducing the deficit heading into the midterm elections, with administration officials saying the $1.9 trillion blast in coronavirus relief approved in 2021 has already paid off in way faster growth now makes it easier to stabilize the government. finance.
Reducing the deficit also coincides with a priority of US Senator Joe Manchin of West Virginia, the key Democratic vote in the evenly split Senate that blocked passage of Biden’s environmental and national agenda in December. The reduction also comes amid rising interest rates on US Treasuries, on the back of inflation reaching a 40-year high and efforts by the Federal Reserve to reduce pressures on prices.
It’s unclear whether greater fiscal responsibility can pay off politically for Biden as Democrats try to defend control of Congress. His two most recent Democratic predecessors, Bill Clinton and Barack Obama, also cut budget deficits, only to leave office and watch their Republican successors use the savings on tax cuts.
Still, Biden hopes to draw a stark contrast to former President Donald Trump, whom he defeated in 2020. Trump, among a multitude of promises, pledged to reduce the national debt, but failed to do so during any financial quarter of his presidency. Biden has repeatedly taken aim at that broken promise.
Introducing his budget plan in March, Biden said that after “fiscal mismanagement” by his Republican predecessor, his administration is “reducing Trump’s deficits and putting our fiscal house back in order.”
One of the challenges for Biden is that deficit increases have been largely ignored by voters and have rarely rewarded deficit cuts. Voters may discuss the idea of reducing deficits with pollsters, but health care, income and inflation are often top of mind when they cast their ballots.
Norman Ornstein, a scholar emeritus at the conservative American Enterprise Institute, noted that deficits are often “abstract” to voters. Recent low interest rates have also muted any potential economic drag from higher deficits, which have risen in the aftermath of the COVID-19 pandemic and, separately, the 2008 financial crisis, to help the economy recover.
“They are more likely to respond to things that are in their wheelhouse or that they think will have a more direct effect on their lives,” Ornstein said. Deficits are “one step away for most voters, and we’ve been through periods where we’ve had huge deficits and debt and it’s not like it’s directly devastated people’s lives.”