In recent speeches, President Joe Biden has misleadingly claimed credit for reducing federal deficits by historic amounts, even though most of the deficit reduction is the result of pandemic emergency spending coming due. Deficits fell between fiscal 2020 and 2021 much less than initially projected after Biden increased them with more emergency infrastructure and pandemic spending.

And deficits under Biden and beyond are projected to remain historically high compared to pre-pandemic levels.

In recent comments, Biden took credit for reducing the deficit by $350 billion in fiscal year 2021 and claimed that his proposed budget for fiscal year 2022 will reduce the deficit by $1.3 trillion this year.

“You know, the budget that I submitted, my first budget that passed and became law, reduced the federal deficit by $350 billion,” Biden said in a speech on April 19. “We cut the deficit by $350 billion. And the budget that I proposed this year, if it comes to fruition in its entirety, will reduce the deficit by $1.3 trillion. So when my Republican friends start talking about ‘big spenders’ and why there is inflation, take a look. Have a look. We have drastically reduced the deficit. … Last year, as I said, we cut the deficit by more than 350 thousand — billion dollars. This year, we are on track to achieve $1.3 billion in cuts. And look, that would be the largest debt reduction in the history of the United States.”

“Don’t listen to my Republican friends in Congress: Last year, we cut, my budget cut the deficit by $350 billion,” Biden said in a speech in Portland, Oregon, on April 21. “Do you hear me? We don’t spend, we don’t increase the deficit one penny. We reduced it by $350 billion.”

In February 2021, shortly after Biden took office and before any of Biden’s fiscal policies were enacted, the nonpartisan Congressional Budget Office projected a federal budget deficit of about $2.3 trillion in 2021, down $874 billion than the deficit recorded in 2020. It projected that the deficits would fall again to a deficit of $1.1 trillion in fiscal year 2022, which means another $1.2 trillion reduction in the deficit from 2021. Combined, they were expected to deficits in fiscal years 2021 and 2022 will total $3.3 trillion. Those projections did not involve new changes in federal law.

But on March 11, 2021, Biden signed the American rescue plan in law The new emergency law for the relief of the pandemic included, among other things, increased child care tax credits, extended unemployment payments, small business support, and $1,400 checks for qualifying Americans. The law cost estimated 1.9 trillion dollars in 10 years.

Fast forward to July, when the CBO could take into account the new spending approved by Biden. Instead of an $874 billion drop in deficits between 2020 and 2021, the deficit was projected to fall by just $126 billion, from $3.13 trillion to $3 trillion. Additionally, the combined deficits for 2021 and 2022 were projected to total nearly $4.2 trillion, $842 billion more than the February forecast.

“It’s pretty dumb” marc goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget, on Biden’s claims about deficit reduction. “The [Biden] It did not reduce the deficit, it increased it.”

“They take credit for the fact that deficits fell in 2021-2022,” Goldwein said. “If they had done nothing, the deficits would have been reduced by a trillion dollars. They fell much less than they were going to fall.”

We should also note that while Biden credited “the budget I presented” last year for cutting deficits, the Fiscal Year 2022 Budget Biden’s proposal in May 2021 did not become law. As we’ve explained in the past, presidents’ budgets are largely symbolic statements of priorities, not legislation that Congress actually votes on.

“Congress never passed anything like Biden’s budget,” Howard Gleckman, a senior fellow at the Urban-Brookings Center for Fiscal Policy, told us via email. Congress “finally passed an omnibus appropriations bill in the middle of the fiscal year,” she said. “But he funded most of the programs at prior year levels plus a small increase, and did not include any of Biden’s ambitious tax increases.”

By last, CBO said Fiscal year 2021 ended with a deficit of nearly $2.8 trillion, about $360 billion less than the deficit in 2020. That’s similar to the $350 billion figure Biden uses. CBO noted that the deficit for 2021 ended up being smaller than it had projected in July “primarily because income tax receipts were higher than CBO projected.”

CBO said The higher-than-expected revenue growth in 2021 was due to “strong growth in economic activity, following substantial disruption in 2020 caused by the pandemic.” CBO credited, in part, “legislation enacted in response to the pandemic.”

“As a share of GDP, which is really the way to look at this, deficits would decline from 12.4% of GDP in 2021 to 5.8% this year to 4.5% next year,” Gleckman said. “But most of that action is due to two factors: the booming economy that will likely boost revenues substantially, and a sharp decline in pandemic-related spending/tax cuts.

“I guess Biden gets some credit for this since he and the [Democrats in Congress] designed the US Rescue Plan to include temporary spending,” Gleckman said. “But it’s not like this year’s budget includes major spending cuts. In fact, many of his proposals would increase spending.”

in a fact sheet On the president’s proposed budget for 2023, the White House boasted “the president’s strategy to grow the economy from the bottom up and from the middle out and his effective management of the American Rescue Plan, a strategy that is It was based on smart and fiscally prudent investments that helped boost our economy.”

However, in an April 8 blog post titled “No, President Biden has not implemented a historic deficit reduction”, CRFB wrote (with this emphasis) that “the Main source of falling deficits is expiration of most COVID relief such as enhanced unemployment benefits and recovery reimbursements. The remaining decline is largely the result of strong revenue growth and high inflation. CRFB also noted that even after this post-pandemic drop, deficits will remain historically high.

“The President’s actions to date have not reduced deficits but rather increased them,” CRFB wrote. “Between the American rescue planthe bipartisan infrastructure billand various executive orders, we estimate that at least $2.5 trillion has been added to deficits through 2031 during the president’s tenure thus far.”

jon huntleysenior economist at Penn Wharton Budget Model, agreed that the deficit reduction is mainly due to the expiration of pandemic spending by the federal government.

“Deficit decline between fiscal years 2021 and 2022 was largely expected,” Huntley told us by email. “As the Committee for a Responsible Federal Budget Notes, deficits were forecast to decline by about $1.4 trillion from 2021 to 2022. The 2021 The long-term budget outlook from the Congressional Budget Office (CBO) highlights the reason for this decline: Under current law, a large amount of mandatory spending was scheduled to expire in 2022. , the federal deficit was to decline under current law. Congress would have had to explicitly approve an extension of these mandated spending programs to maintain 2021 federal spending levels. Because no such extension was approved, spending fell by more than a trillion dollars in fiscal year 2022.”

A budget model from Penn Wharton analysis of Biden’s proposed federal budget for fiscal year 2023, which includes more federal spending but also new revenue, such as higher taxes on high-income individuals, concluded that it would reduce government debt in the first decade (relative to the law (i.e., the law without Biden’s budget enactment) according to a conventional “static” forecast. That’s relatively in line with the White House outgoing that his budget would reduce deficits by more than $1 trillion over 10 years.

In a “dynamic” analysis, which includes economic commentary that takes into account a projected reduction in the workforce tied to the proposed child tax credits, PWBM projected a 2.1% increase in federal debt over the next 10 years ( relative to the current law), but a 1.7% reduction in public debt by 2050.

Biden’s proposed budget assumes passage of most of what was in Biden’s Build Back Better plan, which would increase government spending on public health, education, housing, crime prevention and other programs, but would offset, in part, with new taxes on high incomes. high-income and wealthy households.

The Build Back Better Bill stagnant after Democratic Senator Joe Manchin announced in December that he would not support it. But Biden since you said who has confidence in Congress can pass parts of the Build Back Better agenda. Senators Manchin and Kyrsten Sinema, the Democrats who resisted killing the legislation last year, are reportedly reluctant review the bill this year.


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