President Joe Biden speaks in the Roosevelt Room of the White House, Wednesday, May 4, 2022, in Washington. From left, Office of Management and Budget Director Shalanda Young, Biden, Cecilia Rouse, chair of the Council of Economic Advisersand Brian Deese, Assistant to the President and Director of the National Economic Council.
The president is placing a renewed emphasis on reducing the deficit — which is the gap between what the nation spends and what it takes in — in order to blunt Republican criticism that the $1.9 trillion coronavirus relief package has left the U.S. economy worse off. It's an attempt to burnish his credentials as a responsible steward of the economy while trying to fend off criticism about inflation at a 40-year high.
Biden is making a nuanced argument about how the financial outlook has improved: Strong job gains over the past 16 months have increased total incomes and led to additional tax revenues. That means that this fiscal year’s budget deficit will decline $1.5 trillion, much better than the $1.3 trillion that was initially forecast. Less government borrowing will, in turn, limit the financial sources of inflation.
Holtz-Eakin said the Biden administration is taking credit for lower deficits over the past two years that largely occurred due to the end of coronavirus-related spending, rather than fixing the finances of Medicare and Social Security that will determine the long-term budget outlook. Within an hour of Biden’s remarks, Senate Republicans gathered to challenge Biden’s economic policies. Their core critique is that overspending in response to COVID-19 was paired with restrictions on domestic oil and natural gas production, leading to higher gasoline prices than under Trump.