One of the positive signs, Biden said, was that under his administration, the federal government was poised to pay down a portion of the $23.8 trillion federal debt for the first time in several years.
“My Treasury Department is planning to pay down the national debt this quarter, which never happened under my predecessor,” Biden said at the White House on May 10. “Not once. Not once.”
The Treasury Department has said it’s planning to make a modest debt-reduction outlay in the second quarter of 2022, but when looked at in context, this paydown isn’t the notable fiscal turnaround that Biden implies. The White House did not respond to an inquiry for this article.
In a memo released May 2, Treasury announced that it intends to pay down $26 billion in debt during the second quarter of 2022. This is typically accomplished by paying off outstanding Treasury securities so the government doesn’t have to keep paying interest.
The last time the government paid down the debt was in the second quarter of 2016, under President Barack Obama.
This means that under President Donald Trump, the Treasury did not pay down the debt in any quarter.
But there are some important bits of context that Biden left out.
One is that the same Treasury memo that announced the upcoming debt pay-down noted that during the first quarter of 2022, the government needed to borrow $668 billion, and during the third quarter of 2022, it expects to borrow $182 billion.
In other words, the modest paydown in the second quarter would be overwhelmed by the new borrowing during the first and third quarters — complicating the point Biden was trying to make about fiscal responsibility.
Biden is also wrong that the Trump administration was never “planning” to pay down debt.
On Feb. 3, 2020, the Trump administration announced that in the second quarter of 2020, it was planning to pay down $56 billion of debt. Of course, that was a few weeks before the coronavirus pandemic reached the U.S. The debt payment never happened.
At the moment, both Biden and Trump are in the same position: They’ve announced a paydown but haven’t yet completed it; events could still intervene. So at least for now, the two presidents are roughly in the same boat.
It’s also worth noting that the planned and actual paydowns cited here have all occurred during the second quarter of the year. That’s not a coincidence.
Typically, the federal government is flush with cash in the second quarter, thanks to tax payments made around the tax-deadline time of April 15. So if any quarter is going to provide the government with some extra cash to pay down the debt, it’s the second quarter.
“Not every second quarter are we able to pay down the debt, but the most likely quarter to do it is the second quarter,” said Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget.
Having a second-quarter debt paydown doesn’t mean that the government will be able to do similar paydowns in the succeeding three quarters. In recent history, it hasn’t been able to.
Biden said, “My Treasury Department is planning to pay down the national debt this quarter, which never happened under my predecessor.”
The Treasury has announced its intention to pay down $26 billion in debt during the second quarter of 2022.
However, the federal government’s planned paydown during the second quarter — when the government is flush with tax payments — will be swamped by new borrowing during the other three quarters of the year.
In addition, the Trump administration was also “planning” to pay down the debt during the second quarter of 2020 but was stymied by the emergence of the coronavirus pandemic.
We rate the statement Half True.