President Joe Biden delivers remarks on Labor Day at a parade in Philadelphia on September 4, 2023. Credit - Kyle Mazza—Anadolu Agency via Getty Images
During President Biden’s first two years in office, the federal deficit shrank by $1.7 trillion dollars. It's a point he has bragged about repeatedly in recent months, and attributed to his policies effectively steering the country beyond the COVID-19 shutdowns and stabilizing the economy.
But the deficit is projected to roughly double this year, growing by a trillion dollars, before beginning a few years of steady decline. Biden for now is continuing to focus on the earlier drop.
There he was on Labor Day, working in a boast about the deficit as he spoke at the Sheet Metal Workers’ Local 19 in Philadelphia about how his administration was creating “good-paying union jobs” and boosting manufacturing.
“And even with what we’ve done—unlike the last President—in my first two years, all this stuff—guess what? I cut the deficit $1.7 trillion,” Biden said. “Here’s the bottom line: My economic plan is working. It’s reducing the deficit."
The jump this year in how much the U.S. has to borrow to pay its bills is a result of the federal government taking in less taxes, as well as increased borrowing costs from higher interest rates on the US’s existing debt, and higher costs for the Social Security, Medicare and Medicaid programs, according to the Congressional Budget Office.
The bump in the deficit, even if short lived, adds to Biden’s challenge of convincing Americans the economy is better than they think. Democrats frequently point out that unemployment is at a record low, average hourly earnings are up, inflation has ticked downward and is lower than in other major economies, and the US has so far avoided falling into a recession.
But Americans are still feeling uneasy. A CNN poll conducted in July found that 51% of Americans felt the economy is still in a downturn and conditions are continuing to worsen. Of those surveyed, 75% rated the economic conditions in the country today as "poor.”
Marc Goldwein, a senior vice president and senior policy director at the non-profit Committee for a Responsible Federal Budget, says that even Biden’s efforts to take credit for those two years of deficit reductions are “misleading.” That’s because Biden entered office when the deficit was very high after Congress and the Trump administration approved massive spending bills during the pandemic to bolster the economy. Then the deficit dropped even further down in 2022 when the Treasury received an unexpected windfall in capital gains taxes and other factors.
And now economists have watched the deficit tick back up for nearly a year. “It’s a hugely out-of-date talking point in that deficits have been climbing for 11 months,” Goldwein says.
The rising deficit is likely to draw more attention as House Republicans return this week from a summer recess, as some are intent on shutting down the government to force Senate Democrats and Biden to accept spending cuts. A smaller group of Republicans, like Rep. Marjorie Taylor Greene of Georgia, are threatening to hold up funding the government to pressure House Republican leaders to open an impeachment inquiry into Biden, based on flimsy allegations that he was involved in his son Hunter Biden’s overseas business dealings.
White House officials point out that Biden’s proposed budget would reduce the deficit by an additional $2.5 billion by increasing the corporate tax rate and requiring that the wealthiest 0.01% of Americans pay at least a 25% tax rate. But that doesn’t have the votes in Congress, and Republicans haven’t come to the table to offer a plan of their own for cutting the deficit. Administration officials also note that the deficit is influenced by various factors. “Deficits from year to year can be volatile,” said White House Press Secretary Karine Jean-Pierre in response to a question from TIME. “The President has a real plan — as we’ve laid out multiple times — to reduce the deficit, and we don’t see Republicans having a real plan.”
Convincing voters that the economy has actually improved will be a central effort of Biden’s reelection campaign. Democrats know they have their work cut out for them, and arguments over whether the deficit is rising or falling under his leadership could muddle that effort. “I think it’s gonna be very important for us not to make the economic conversation over the next year about what the government’s done or what the White House has done, but what we’ve done together and how the American people got through COVID, built one of the strongest economies in American history,” says Simon Rosenberg, a veteran Democratic strategist.
Part of that will be a robust television and online advertising strategy to change people’s minds. Adds Rosenberg: “I’m confident that over time and with money behind ads, that we’re going to be able to make our case successfully to the American people.” This year’s spike in the deficit may have made that hill a little steeper to climb.
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