President Joe Biden on Wednesday highlighted new figures showing the government's red ink will grow less than expected this year and the national debt will shrink this quarter as he tried to counter criticism of his economic leadership amid growing dismay over inflation going into midterm elections that will decide control of Congress.
The president, embracing deficit reduction as a way to fight inflation, stressed that the dip in the national debt would be the first in six years, an achievement that eluded former President Donald Trump despite his promises to improve the federal balance sheet.
“The bottom line is the deficit went up every year under my predecessor before the pandemic and during the pandemic. It has gone down both years since I’ve been here,” President Biden said. “Why is it important? Because bringing down the deficit is one way to ease inflationary pressures.”
He is placing a renewed emphasis on reducing the deficit — which is the gap between what the nation spends and what it takes in — in order to blunt Republican criticism that the $1.9 trillion coronavirus relief package has left the U.S. economy worse off. It's an attempt to burnish his credentials as a responsible steward of the economy while trying to fend off criticism about inflation at a 40-year high. The reopening of the economy coming out of the coronavirus pandemic and the commodity squeeze resulting from the Russia-Ukraine war has made high prices a key political risk for Democrats.
But it is unclear if greater fiscal responsibility can deliver politically for the president 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 on tax cuts.
When reporters tried to question President Biden about other topics after his remarks, the president prodded, “You don't want to ask about deficits?”
He is making a nuanced argument about how the financial outlook has improved: Strong job gains over the past 16 months have increased total incomes and led to additional tax revenues. That means that this fiscal year’s budget deficit will decline $1.5 trillion, much better than the $1.3 trillion that was initially forecast. Less government 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 U.S. owes due to accumulated deficits over time — will be short-lived, as the debt already totals $23.9 trillion and will continue to rise in the second half of this year. And while President Biden expects his plans will improve the outlook for budget deficits over the next decade, the national debt would continue to climb. The Biden administration believes that the cost of servicing the debt is low enough to sustain the borrowing, while critics say structural changes are needed to improve the long-term outlook.
Additional reporting by The Associated Press.