By JOSH BOAK and FATIMA HUSSEIN, Associated Press
WASHINGTON (AP) — President Joe Biden plans to emphasize deficit reduction in his remarks Wednesday at the White House, noting that the government will pay down the national debt this quarter for the first time in six years.
Biden will highlight how the big job gains have boosted total revenue and led to additional tax revenue that has improved the government’s balance sheet, said a White House official who previewed the speech on condition of anonymity.
In addition to the quarterly national debt reduction, the Treasury Department estimates that the budget deficit this fiscal year will shrink by $1.5 trillion. This decrease marks an improvement over initial forecasts and would likely put the annual deficit below $1.3 trillion.
The Democratic president has again focused on deficit reduction ahead of the midterm elections, with administration officials saying the $1.9 trillion coronavirus relief blast approved in 2021 has already paid off in the form of faster growth which is now helping stabilize government finances.
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, a result of inflation at a 40-year high and efforts by the Federal Reserve to reduce price pressures.
It’s unclear whether greater fiscal responsibility can bring Biden politically 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 see their Republican successors use the savings from tax cuts.
Yet Biden hopes to draw a stark contrast to former President Donald Trump, whom he defeated in 2020. Trump, among a host of promises, pledged to reduce the national debt but failed to do so in during any financial quarter of his presidency. Biden has repeatedly taken aim at this broken promise.
Earlier this week, the Treasury said it planned to pay down $26 billion in private debt from April to June this year. However, hope for debt reduction could be dampened by the Treasury’s expectation to borrow $182 billion in private debt from July to September.
When unveiling his budget plan in March, Biden said that after his Republican predecessor’s “fiscal mismanagement” his administration is “cutting Trump’s deficits and getting our fiscal house in order.”
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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