President Joe Biden on Wednesday tried to cast his administration as spending hawks, touting sizable reductions in the federal deficit this fiscal year as a key departure from what he characterized as rampant spending by his Republican predecessor.
While the Treasury Department estimates that this year’s budget deficit will decline by $1.5 trillion, the reason for the smaller deficits is a matter of debate.
Under former President Donald Trump, the U.S. poured trillions into the economy to lessen the impact of Covid-19 lockdowns at the height of the pandemic and to develop and manufacture vaccines, masks and other gear needed to protect health workers and others from the virus.
As those pandemic-era programs end, the federal government will spend less — even as the Biden administration works with Sen. Mitt Romney, R-Utah, on legislation providing another $10 billion in Covid relief.
The president’s more-modest budget proposal doesn’t include a majority of the cost of Biden’s massive Build Back Better agenda, a transportation and technology infrastructure program that Democrats haven’t been able to pass. The administration priced the plan at $1.75 trillion, but it phased out some of the programs that would likely be permanent to reduce the price tag on paper. The Congressional Budget Office estimated its costs at around $4.73 trillion if the programs were permanent.
The plan also would have included significant tax increases on high-income households to help pay for the programs.
“We’re on track to cut the federal deficit by another — another — $1.5 trillion by the end of this fiscal year, the biggest decline in a single year in American history,” Biden said from the White House.
The president has recast his economic strategy in recent months to focus on deficit reduction and stricter spending controls as dozens of his fellow Democrats face close midterm elections that will decide the composition of Congress in the final two years of his first term.
Comments about the more-frugal budget plan come as the White House looks for ways to sympathize with and assist voters frustrated by skyrocketing inflation rates not seen since the 1980s.
“We reduce federal borrowing, and we help combat inflation,” he added. “Bringing down the deficit is one way to ease inflationary pressures in an economy where the consequence of a war, and gas prices, and oil and food and — it’s a different world right this moment because of Ukraine and Russia.”
The Federal Reserve, the nation’s central bank tasked to keep prices in check, is set to raise interest rates by a hefty half percentage point later Wednesday in its bid to quell annual inflation of over 8%.
Deficit reduction is a top issue for Sen. Joe Manchin, a conservative Democrat from West Virginia who for much of Biden’s presidency has acted as a key swing vote on major spending initiatives.
But while austerity may please Manchin, it’s unclear whether Democratic voters — many of whom elected Biden to pursue significant climate and infrastructure policy — will feel as rosy about a slimmer federal balance sheet.