Backup Failed

Doesn't Time Machine automatically clear out extra backups?

Yes. Time Machine will delete old, "expired" backups, leaving an absolute minimum of one and only one previous backup. It will not be altered until after a subsequent one is finished, which then becomes its "one and only one previous backup".

TM is reporting there isn't enough space to do that. Do what it says.

Why messing up with the TM when you can make a Clone and have it ready in case of disaster. Restoring from TM takes hours on top of more hours and you'll have a big mess in your hands. TM is for birds.

Have the clone making application do a "Smart Backup" once per week and you are set to rock'n'roll