During a Sunday interview with CBS’ “60 Minutes,” President Joe Biden touted his administration’s efforts to rein in federal debt.
Biden’s comments came in an exchange with interviewer Scott Pelley, who asked what the president would do to prevent a recession and how he’d expand the nation’s economy. Biden said the economy was already growing, and cited gains in manufacturing jobs. Biden also said he’d work to “give hardworking people a break,” pointing to legislation he signed that would allow Medicare to negotiate with drugmakers, which is expected to reduce costs for beneficiaries.
Then, Biden turned to the federal deficit and debt.
“We’ve also reduced the debt and reduced the debt by $350 billion my first year,” Biden said. “This year, it’s going to be over $1.5 trillion (that we’ve) reduced the debt.”
Biden has a point that his administration has presided over smaller deficits than were seen under the Trump administration, based on Congressional Budget Office estimates. But Biden’s remark leaves out important context. The debt had risen because of a temporary phase of unusual federal spending.
First, a refresher about deficits and debt. The federal deficit is determined by subtracting federal spending from federal revenue, primarily tax collections. If revenue exceeds spending, there’s a surplus; if spending exceeds revenue, there’s a deficit. (There hasn’t been a federal surplus since 2001.)
Meanwhile, the national debt amounts to the accumulation of all past deficits, minus any surpluses. The national debt lets the federal government pay for programs and services for Americans even if it does not immediately have the money. This debt lets the government fulfill its constitutional duty, stated in the preamble, to “provide for the common defense,” and “promote the general welfare.”
Now, let’s look at the current figures for the deficit and the debt.
The Congressional Budget Office’s most recent estimate projects a 2022 deficit of about $944 billion. That’s much less than $2.7 trillion seen the previous year.
This decrease of more than $1.7 trillion is in line with the “over $1.5 trillion” figure Biden cited in the interview (although, officially, this number is a moving target until the end of the fiscal year on Sept. 30).
Nevertheless, this figure deserves an asterisk. This year’s projected decline is larger than any previous one-year reduction in the deficit because of an extraordinary historic occurrence: the coronavirus pandemic and the unprecedented government response.
During 2020 and 2021, the federal government’s spending skyrocketed as both the Trump and Biden administrations tried to ease the pandemic’s economic blow. Moves included enacting stimulus payments, extending unemployment insurance, instituting business operation grants and increasing public health spending.
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From 2019 to 2020, federal spending rose by 47%, and then remained at a similar level in 2021, CBO data shows.
Because tax revenue didn’t keep pace with spending, the deficit surged in 2020 and 2021. The deficit rose from $983 billion before the pandemic in 2019 to about $3.1 trillion in 2020 and $2.8 trillion in 2021.
Vaccines and therapies have cut the risks associated with COVID-19, and the economy has opened up again.
Spending programs passed earlier in the pandemic began expiring this year, meaning federal outlays have declined. The Committee for a Responsible Federal Budget, a nonprofit public policy group, has estimated that more than 80% of the $1.7 trillion reduction in the deficit can be explained by expiring or shrinking COVID-19 relief. The White House argued in an exchange with PolitiFact that revenues have also risen because of improvements in the economy.
The White House also said the 2022 deficit as a share of GDP is a few tenths of a percentage point lower than it was expected to be before passage of the American Rescue Plan, Biden’s coronavirus and economic relief bill that was enacted in early 2021.
In absolute dollars, the current deficit is much more in line with what it was in pre-pandemic 2019.
“If the pandemic is over, as the president said in the interview, then it stands to reason that pandemic spending would be down as well,” said Steve Ellis, president of the nonprofit budget group Taxpayers for Common Sense.
The second caveat for Biden’s remark is that the federal debt is not lower today than it had been, but rather that it has not gone up as fast as it would have otherwise.
Since Biden was sworn in Jan. 20, 2021, the publicly held federal debt has risen about $2.6 trillion on his watch, to almost $24.3 trillion from $21.6 trillion.
Without the reduced deficits Biden referred to, the federal debt would have been higher than $24.3 trillion, probably $1.7 trillion higher, if we use CBO’s estimate.
“You can reduce the rate of growth, as is the case here,” Ellis said, referring to the national debt, but as long as there is a deficit, then there is going to be an increase.”
Biden said, “This year, it’s going to be over $1.5 trillion (that we’ve) reduced the debt”
The latest deficit projection does show the national debt is about $1.7 trillion lower now than it was in 2021. But this statement needs context.
This large decrease is because of an unusual historical circumstance, the expiration of large, temporary spending programs related to coronavirus pandemic relief. And the federal debt is not lower today than it had been. Instead, it has not gone up as fast as it would have otherwise.
We rate the statement Half True.