Biden Trumpets Falling Deficit, Slams Republican Agenda
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With less than three weeks to go until Election Day, President Joe Biden on Friday sought to pitch Americans on the progress of his economic agenda and the strength of the economy, pointing to a plunging federal budget deficit for fiscal year 2022 and warning that Republicans would reverse the fiscal gains and could “crash the economy next year” if they win control of the House.
The Treasury Department said Friday that the full-year deficit for 2022 totaled about $1.4 trillion, about half of the $2.8 trillion shortfall last year (see below for more details). Biden touted the decline as the largest one-year drop in American history. “Today we have further proof that we’re rebuilding the economy in a responsible way,” he said. “We’re going from historically strong economic recovery to a steady and stable growth while reducing the deficit.”
He then tore into Republicans ahead of the November election, arguing that the previous administration drove up the deficit each year and that GOP lawmakers will wreck the economy, take an axe to Social Security and undo a new law to lower drug prices if given the chance.
“Congressional Republicans love to call Democrats big spenders, and they always claim to be for less federal spending,” Biden said. “But let’s look at the facts. The federal deficit went up every single year in the Trump administration, every single year he was president. It went up before the pandemic. It went up during the pandemic. It went up every single year on his watch, the Republican watch.”
Biden slammed Republicans for seeking to extend the Trump tax cuts, repeal Democrats’ corporate minimum tax of 15% and reverse a cost-saving measure allowing Medicare to negotiate some prescription drug prices. “Put it all together and the Republican plan would add about $3 trillion to the deficit — $3 trillion,” Biden said. “Adding another $3 trillion to the deficit is reckless, it’s irresponsible, and it would make inflation worse.”
Biden, continuing an effort to make Social Security a key issue in the election, also warned about Republicans plans to leverage the nation’s debt limit to force spending cuts. A number of Republicans, including House Minority Leader Kevin McCarthy (R-CA) have indicated that they’ll try to extract concessions from Biden, potentially including changes to entitlement programs, in exchange for raising the debt ceiling.
“If you’re worried about the economy, you need to know this: The Republican leadership in Congress has made it clear they will crash the economy next year by threatening the full faith and credit of the United States for the first time in our history, putting the United States in default unless we yield to their demand to cut Social Security and Medicare,” Biden said. “Let me be really clear: I will not yield. I will not cut Social Security. I will not cut Medicare, no matter how hard they work at it.”
Republicans say their proposed changes are meant to ensure the long-term solvency of both Social Security and Medicare.
Biden often says he wants voters to compare him to the alternative, not the almighty. In that vein, his remarks Friday sought to frame the midterm elections as a choice rather than a referendum on his record. “Its mega MAGA trickle-down,” Biden said of the GOP agenda. “The kind of policies that have failed the country before and will fail it again. It’ll mean more wealth to the very wealthy, higher inflation for the middle class. That's the choice we're facing.”
What’s really behind the record deficit drop: While Biden sought to claim credit for the record drop in the deficit, the decline — from $2.776 trillion last year to $1.375 trillion this year, to be a bit more precise — was driven entirely by the expiration of temporary emergency pandemic spending programs.
Tax revenues jumped 21% from a year ago, and spending fell 8%. Yet an analysis by the Committee for a Responsible Federal Budget, a nonpartisan group that advocates for deficit reduction, found that more than 100% of the decline in the deficit was due to shrinking or expiring Covid relief spending. The group challenges Biden’s claims to fiscal responsibility, saying that the president’s actions while in office have added increased deficits by $4.8 trillion through 2031.
“The budget figures released Friday by the Treasury Department reveal dueling visions about what it means to be financially responsible,” notes Josh Boak of the Associated Press. “Biden can rightly claim that the budget deficit for fiscal 2022 plunged $1.4 trillion from the prior year; critics can use the same report to say that forgiving education loans pushed up the federal debt by roughly $400 billion as the government booked the full expense.”
The bottom line: While the drop in the deficit may be historic, the $1.4 trillion budget gap remains historically huge. And the election outlook as of now suggests plenty of high-stakes fiscal fights ahead in 2023.
“What I’ve been telling congressional leaders is the most important thing is to cut spending as much as possible,” conservative economist Stephen Moore told The Washington Post. “The new deadly virus is out-of-control spending. They have to take a hatchet to the budget.”
Liberal economist Dean Baker countered that such steep cuts combined with the Federal Reserve’s rate hikes would inflict tremendous pain. “If you want to throw the economy into a recession,” he told the Post, “coupling big rate hikes with sharp cutbacks in spending pretty much guarantees it.”
