Biden Goes on the Offensive

Biden Trumpets Falling Deficit, Slams Republican Agenda

With less than three weeks to go until Election Day, President Joe Biden on Friday sought to pitch Americans on the progress of his economic agenda and the strength of the economy, pointing to a plunging federal budget deficit for fiscal year 2022 and warning that Republicans would reverse the fiscal gains and could "crash the economy next year" if they win control of the House.

He then tore into Republicans ahead of the November election, arguing that the previous administration drove up the deficit each year and that GOP lawmakers will wreck the economy, take an axe to Social Security and undo a new law to lower drug prices if given the chance.

"Congressional Republicans love to call Democrats big spenders, and they always claim to be for less federal spending," Biden said. "But let’s look at the facts. The federal deficit went up every single year in the Trump administration, every single year he was president. It went up before the pandemic. It went up during the pandemic. It went up every single year on his watch, the Republican watch."

Biden slammed Republicans for seeking to extend the Trump tax cuts, repeal Democrats’ corporate minimum tax of 15% and reverse a cost-saving measure allowing Medicare to negotiate some prescription drug prices. "Put it all together and the Republican plan would add about $3 trillion to the deficit — $3 trillion," Biden said. "Adding another $3 trillion to the deficit is reckless, it’s irresponsible, and it would make inflation worse."

Biden, continuing an effort to make Social Security a key issue in the election, also warned about Republicans plans to leverage the nation’s debt limit to force spending cuts. A number of Republicans, including House Minority Leader Kevin McCarthy (R-CA) have indicated that they’ll try to extract concessions from Biden, potentially including changes to entitlement programs, in exchange for raising the debt ceiling.

"If you’re worried about the economy, you need to know this: The Republican leadership in Congress has made it clear they will crash the economy next year by threatening the full faith and credit of the United States for the first time in our history, putting the United States in default unless we yield to their demand to cut Social Security and Medicare," Biden said. "Let me be really clear: I will not yield. I will not cut Social Security. I will not cut Medicare, no matter how hard they work at it."

Republicans say their proposed changes are meant to ensure the long-term solvency of both Social Security and Medicare.

Biden often says he wants voters to compare him to the alternative, not the almighty. In that vein, his remarks Friday sought to frame the midterm elections as a choice rather than a referendum on his record. "Its mega MAGA trickle-down," Biden said of the GOP agenda. "The kind of policies that have failed the country before and will fail it again. It’ll mean more wealth to the very wealthy, higher inflation for the middle class. That's the choice we're facing."

What’s really behind the record deficit drop: While Biden sought to claim credit for the record drop in the deficit, the decline — from $2.776 trillion last year to $1.375 trillion this year, to be a bit more precise — was driven entirely by the expiration of temporary emergency pandemic spending programs.

Tax revenues jumped 21% from a year ago, and spending fell 8%. Yet an analysis by the Committee for a Responsible Federal Budget, a nonpartisan group that advocates for deficit reduction, found that more than 100% of the decline in the deficit was due to shrinking or expiring Covid relief spending. The group challenges Biden’s claims to fiscal responsibility, saying that the president’s actions while in office have added increased deficits by $4.8 trillion through 2031.

"The budget figures released Friday by the Treasury Department reveal dueling visions about what it means to be financially responsible," notes Josh Boak of the Associated Press. "Biden can rightly claim that the budget deficit for fiscal 2022 plunged $1.4 trillion from the prior year; critics can use the same report to say that forgiving education loans pushed up the federal debt by roughly $400 billion as the government booked the full expense."

The bottom line: While the drop in the deficit may be historic, the $1.4 trillion budget gap remains historically huge. And the election outlook as of now suggests plenty of high-stakes fiscal fights ahead in 2023.

"What I’ve been telling congressional leaders is the most important thing is to cut spending as much as possible," conservative economist Stephen Moore told The Washington Post. "The new deadly virus is out-of-control spending. They have to take a hatchet to the budget."

Liberal economist Dean Baker countered that such steep cuts combined with the Federal Reserve’s rate hikes would inflict tremendous pain. "If you want to throw the economy into a recession," he told the Post, "coupling big rate hikes with sharp cutbacks in spending pretty much guarantees it."

Dems Mull Eliminating the Debt Ceiling, but Biden Says No

A group of Democrats in the House are reportedly discussing a plan to deny Republicans the ability to use the debt ceiling as leverage in negotiations over federal spending next year, as House Minority Leader Kevin McCarthy (R-CA) and other Republican leaders have said they plan to do if they win the majority.

Led by Rep. Brendan Boyle (D-PA), the group reportedly sent a letter to Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Chuck Schumer (D-NY) urging them to raise the debt ceiling "permanently" after the midterm elections, thereby denying Republicans the use of a weapon in their battle against government spending — a weapon that potentially puts the global economy at risk.

"With the 117th Congress coming to a close at the end of 2022, and the makeup of the 118th Congress’ House and Senate not yet known, we urge you to use the remaining months to take legislative action that will permanently undo the threat posed by the debt limit," the lawmakers wrote in the letter obtained by Punchbowl News. "The only hope of avoiding these potential repercussions is for us to implement a solution more permanent and reliable than the current practice of hastily taking action each time we approach the dollar amount of the debt limit or the expiration of an enacted suspension."

There are multiple options to accomplish this, the lawmakers said, including repealing the debt limit or giving the Treasury secretary the power to unilaterally raise the limit as needed, without permission from Congress.

A tough hill to climb: Punchbowl’s John Bresnahan says it won’t be easy for Democrats to take pass major legislation during the lame-duck session of Congress in December, since Republicans will oppose it and time will be short.

Even if Democrats can get organized and somehow pass a bill over GOP objections, it looks like President Biden would refuse to sign the legislation. Asked about the issue Friday, Biden rejected the idea. "The permanent repeal of the debt ceiling, what do you mean?" he said to reporters. "You mean just say we don't have a debt limit? No, that'd be irresponsible."

Why Red States Get More From the Federal Government

Some states receive more money from the federal government than they send in the form of taxes, while others are net donors. According to a new analysis by the personal finance site MoneyGeek, New Mexico leads the pack when it comes to getting more from the federal government, receiving $3.69 for every $1 in total taxes it sends to Washington. West Virginia comes in second, at $3.09, followed by Mississippi ($2.60), Alaska ($2.41) and Kentucky ($1.89).

Delaware gets the least amount from the federal government per tax dollar, receiving just $0.32 per $1. Massachusetts comes next at $0.54, followed by New Jersey ($0.56), Illinois ($0.60) and Ohio ($0.62).

There is a political pattern in the ranking, with conservative, Republican-leaning states generally receiving more from the federal government than Democratic-leaning states. Mark Shepard, a research fellow at the National Bureau of Economic Research who teaches at the Harvard Kennedy School of Government, told MoneyGeek that there’s a pretty simple explanation for the pattern. "If red states pay less in taxes than they receive in benefits, that's because they are generally poorer and program rules are progressive," he said.

Residents of wealthy states have been paying even more lately overall due to the cap imposed on the state and local tax deduction in the 2017 GOP tax overhaul, Public Consulting Group’s Kathy Fallon says. "Higher-income states produce the majority of the tax dollars that go into the federal government's pocket," Fallon told MoneyGeek. "Before, people who paid large state income taxes would deduct those from their federal tax payments. Ironically, [the deduction cap] means the wealthier states' populations are paying even more."

• Federal Budget Deficit Fell to $1.4 Trillion as Pandemic Spending Eased – New York Times
• Biden Warns Republicans Will ‘Crash the Economy’ as They Vow to Use Debt Limit to Force Spending Cuts – Washington Post
• Biden Touts Plunging Deficit as GOP Prepares for Spending Fights – Washington Post
• Biden Tries Out a New Economic Message – Politico
• Deficit Figures Set Up Competing Visions From Biden and GOP – Associated Press
• Biden Rules Out Eliminating the Debt Ceiling – Politico
• Biden’s Student Debt Relief Notches Early Victories From GOP-Appointed Judges – Politico
• Mitch McConnell Is Sounding a Different Tune on Ukraine Than Kevin McCarthy – Politico
• ‘No Quick Fixes’: Walensky’s Push for Change at CDC Meets Reality – Politico

• Did Liz Truss Finally Kill the Tax Cut Zombie? – Monica Prasad, Politico
• There’s a ‘Canary in the Coal Mine’ for the U.S. in the U.K. Economic Fiasco – Joseph Zeballos-Roig, Semafor
• Finally, Democrats Push for an End to GOP Debt Ceiling Extortion – Greg Sargent, Washington Post
• The Real Problem With America's Gerontocracy – Michael Schaffer, Politico