WASHINGTON (AP) – President Joe Biden plans to highlight the reduction in the deficit in his White House speech Wednesday, noting that the government will repay the national debt this quarter for the first time in six years.
Biden will highlight how strong job gains have increased total incomes and led to additional tax revenues that have improved the government’s balance sheet, said a White House spokesman who reviewed the speech on condition of anonymity.
In addition to the quarterly reduction of national debt, the Ministry of Finance estimates that the budget deficit for this fiscal year will be reduced by $ 1.5 trillion. This decline is an improvement on initial forecasts and is likely to put the annual deficit below $ 1.3 trillion.
The Democratic president has put renewed emphasis on reducing the deficit in the by-elections, with administration officials saying that the $ 1.9 trillion coronavirus relief blast approved in 2021 has already paid off in the form of faster growth. which now facilitates the stabilization of government finances.
Reducing the deficit is also in line with the priority of Senator Joe Manchin of West Virginia, a key democratic vote in the evenly divided Senate that blocked the adoption of Biden’s domestic and environmental agendas in December. The decline comes amid rising interest rates on US government bonds as a result of 40 years of inflation and the Federal Reserve’s efforts to reduce price pressures.
It is unclear whether greater fiscal responsibility can deliver political results for Biden as Democrats try to defend control of Congress. His two most recent predecessors, Democrats Bill Clinton and Barack Obama, also cut the budget deficit, only to step down and see their Republican successors use the savings to cut taxes.
However, Biden hopes to contrast sharply with former President Donald Trump, whom he defeated in 2020. Trump, among many promises, promised to reduce national debt, but failed to do so in any financial quarter of his presidency. Biden has repeatedly targeted this broken promise.
Earlier this week, the finance ministry said it expected to repay $ 26 billion in private debt from April to June this year. However, the hope of debt reduction may be overshadowed by the expectation of the Ministry of Finance to borrow $ 182 billion in private debt from July to September.
When he unveiled his budget plan in March, Biden said that after his Republican predecessor’s “fiscal mismanagement,” his administration was “reducing Trump’s deficits and getting our fiscal house back on track.”
One of the challenges for Biden is that voters largely reject increasing the deficit and rarely reward reducing the deficit. Voters can discuss the idea of reducing deficits with sociologists, but health care, income and inflation often come first when they vote.
Norman Ornstein, an honorary scientist at the conservative American Enterprise Institute, noted that deficits are often “abstract” for voters. The recent low interest rates have also dampened any potential economic impacts from higher deficits that have risen since the COVID-19 pandemic and, in particular, the 2008 financial crisis, to help the economy recover.
“They are more likely to react 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 debt, and it is not like directly devastating people’s lives.”
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