President Biden intends to make reducing the deficit a focal point in his 2024 budget and intends to push Republicans to concentrate on government revenue rather than just spending, as reported by Axios. This move by the White House is a tactical advantage in the upcoming showdown with congressional Republicans over the debt limit, and will test the Republicans’ commitment to reducing annual deficits over the next decade.
Officials plan to revisit various proposed tax hikes on corporations and wealthy individuals, including Biden’s plan to increase rates on billionaires, to decrease the difference between the government’s income and expenses. Biden’s budget will include around $238 billion in deficit reduction from the Inflation Reduction Act. However, the potential cost of his student loan forgiveness plan, which is currently pending in the courts, is unclear if it will be counted. Biden also aims to achieve his goal by slowing down spending rates. Republicans have called for cuts without providing specific details. Biden hinted at his strategy in his State of the Union address, saying, “The plan I’m going to show you is going to cut the deficit by another $2 trillion.”
Biden’s aspirations for reducing the deficit are complicated by rising interest rates which will result in the Treasury Department having to spend more on servicing the federal debt, which is now above the $31.4 trillion debt ceiling. Officials also face the challenge of decreased revenue from a slowing economy. Last year, with surging inflation and Senator Joe Manchin’s concern about deficit spending, Biden’s budget focused on increasing revenue. This year’s budget will follow a similar approach, but with larger goals.
Biden proposed a total spending of $5.8 trillion in his 2023 fiscal budget, with a deficit of $1.2 trillion for the year. In last year’s budget, he proposed spending $14.4 trillion more than the government’s projected revenue over 10 years. This pace of spending would result in a total debt of $44.8 trillion by the end of 2032, with interest payments on the debt climbing to $1.2 trillion per year by 2032, amounting to 3.3% of the projected GDP according to the Congressional Budget Office.
Biden and his team want recognition for reducing deficit spending in 2022 compared to 2021 and 2020, during President Trump’s final year in office. However, independent fact-checkers have rejected these claims, noting that the year-to-year decrease in deficit spending was largely due to the pandemic-era stimulus tapering off. Biden officials argue that the economy would have been worse without the $1.9 trillion they pumped into it in March 2021 and they want credit for the healthy economy and the revenue it generates.
In conclusion, budget season in Washington is primarily a symbolic act, focusing more on values rather than actual spending. This year’s budget process will have a greater impact, with both Republicans and Democrats using it to set the tone for their debt-ceiling strategies.