WASHINGTON (AP) — President Joe Biden on Wednesday highlighted new numbers showing the government’s red ink will rise less than expected this year and the national debt will decline this quarter as he tried to counter criticism of his economic leadership amid growing dismay over inflation. midterm elections that will decide control of Congress.
Biden, embracing deficit reduction as a way to fight inflation, stressed the national debt cut would be the first in six years, an achievement that eluded former President Donald Trump despite his promises to improve the federal balance sheet.
“Ultimately, the deficit grew every year under my predecessor before the pandemic and during the pandemic. It’s been down the two years since I’ve been here,” Biden said. “Why is it important? Because cutting the deficit is a way to ease inflationary pressures.
The president is putting a renewed emphasis on cutting the deficit — which is the gap between what the nation spends and what it takes in — to blunt Republican criticism that the 1.9 coronavirus relief package trillion dollars has worsened the situation of the American economy. It’s an attempt to restore his image as a responsible manager of the economy while trying to fend off criticism of inflation at its highest level in 40 years. The reopening of the economy in the wake of the coronavirus pandemic and the shortage of raw materials resulting from the Russian-Ukrainian war have made high prices a key political risk for Democrats.
But it’s unclear whether greater fiscal responsibility can bring Biden politically as Democrats try to defend their control of the House and Senate. His two most recent Democratic predecessors, Bill Clinton and Barack Obama, also cut budget deficits, only to leave office and see their Republican successors use the savings from tax cuts.
When reporters tried to ask Biden about other topics after his remarks, the president pushed, “You don’t want to ask about deficits?”
Sen. Joe Manchin, DW.Va., says inflation will be the determining factor for midterm reviews. (Source: CNN/Pool)
Bidden makes a nuanced argument about how the fiscal outlook has improved: Strong job creation over the past 16 months has boosted total incomes and led to additional tax revenue. This means that the budget deficit this fiscal year will shrink by $1.5 trillion, much better than the $1.3 trillion originally projected. The reduction in public borrowing will in turn limit the financial sources of inflation.
But the expected $26 billion drop this quarter in the national debt — which is money the United States owes due to deficits accumulated over time — will be short-lived, as the debt already stands at 23.9 trillion dollars and will continue to increase in the second half of this year. And while Biden expects his plans to improve the outlook for budget deficits over the next decade, the national debt would continue to climb. The Biden administration believes the cost of servicing debt is low enough to sustain borrowing, while critics say structural changes are needed to improve long-term prospects.
“There needs to be real budget restructuring because we keep seeing these trillion-dollar deficits as far as the eye can see,” said Douglas Holtz-Eakin, former director of the Congressional Budget Office who now leads America’s center-right. Equity Forum.
Holtz-Eakin said the Biden administration takes credit for declining deficits over the past two years, which largely happened due to the end of coronavirus-related spending, rather than fixing finances Medicare and Social Security that will determine the long-term fiscal outlook. .
“That doesn’t seem like the right aspiration for a great country,” Holtz-Eakin said. “What they’re doing is basically deferring the need to do anything real and actually fix the programs that are important to people.”
Deficit reduction is also a priority of Sen. Joe Manchin of West Virginia, the key Democratic vote in the equally divided Senate that blocked passage of Biden’s national and environmental agenda in December. The reduction also comes amid rising interest rates on US Treasuries, driven by 8.5% inflation and efforts by the Federal Reserve to reduce price pressures.
Less than an hour after Biden’s remarks, Senate Republicans gathered to challenge Biden’s economic policies. Their main criticism is that overspending in response to COVID-19 has been associated with restrictions on domestic oil and natural gas production, resulting in higher gasoline prices than under Trump.
“The biggest drag on the US economy right now involves rising energy costs,” said Sen. Dan Sullivan, R-Alaska. “This is purely a self-inflicted wound by the Biden administration.”
One of the challenges for Biden is that voters have largely ignored deficit increases and rarely rewarded deficit cuts. Voters might debate the idea of cutting deficits with pollsters, but health care, incomes and inflation are often tops when they vote.
Norman Ornstein, senior scholar at the conservative American Enterprise Institute, noted that deficits are often “abstract” to voters. Recent low interest rates have also eased any potential economic drag from higher deficits, which have risen following the COVID-19 pandemic and, separately, the 2008 financial crisis, to help the economy. to straighten up.
“They’re more likely to react to things that are in their wheelhouse or that they think will have a more direct effect on their lives,” Ornstein said. Deficits are “a cut-out stage for most voters, and we’ve been through periods where we’ve had big deficits and debts and it’s not like it’s directly devastated people’s lives.”
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