President Joe Biden plans to highlight the deficit reduction in remarks to the White House, noting that the government will pay off the national debt this quarter for the first time in six years.
Biden on Wednesday will highlight how strong job earnings increased total incomes and led to additional tax revenue that improved the government’s budget, 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. This decrease marks an improvement from initial forecasts and would likely drive the annual deficit below $ 1.3 trillion.
The Democratic president has once again put the emphasis on reducing the deficit ahead of the mid-term elections, with administration officials saying that the $ 1.9 trillion explosion in coronavirus aid approved in 2021 has already paid off. It pays off in the form of faster growth that now makes it easier to stabilize government finances.
Reducing the deficit also matches a priority for US Senator Joe Manchin of West Virginia, the top Democratic vote in the equally divided Senate that blocked approval of Biden’s internal and environmental agenda in December. The reduction also occurs due to rising interest rates on US Treasury bills, a consequence of inflation that has peaked in the last 40 years and the Federal Reserve’s efforts to reduce price pressures.
It is unclear whether greater fiscal responsibility could be politically beneficial to Biden as Democrats seek to defend Congressional control. 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 their savings on tax cuts.
However, Biden hopes to create a stark contrast to former President Donald Trump, whom he beat in 2020. Trump, amid a multitude of promises, pledged to reduce national debt but failed to do so during any financial quarter of the country. his presidency. Biden has repeatedly targeted that unfulfilled promise.
When he presented his budget plan in March, Biden said that after his Republican predecessor’s “fiscal mismanagement”, his administration is “reducing Trump’s deficits and putting our fiscal house in order.”
One of the challenges for Biden is that voters have largely shrugged off deficit increases and rarely rewarded deficit cuts. Voters might discuss the idea of reducing deficits with pollsters, but health care, incomes and inflation often come first when voting.
Norman Ornstein, scholar emeritus with the conservative American Enterprise Institute, noted that deficits are often “abstract” for voters. Recent low interest rates have also eased any potential economic drag stemming from rising deficits, which increased following 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 believe will have a more direct effect on their lives,” Ornstein said. Deficits are “a step removed for most voters and we have gone through periods where we have had large deficits and debts and it’s not like it has directly devastated people’s lives.”