The federal deficit declined to $1.4 trillion in the just-ended fiscal year, as tax revenues increased and pandemic-related spending fell sharply, according to estimates from the nonpartisan Congressional Budget Office.
The CBO’s preliminary deficit figures for the 2022 fiscal year, which ended Sept. 30, show the federal budget shortfall fell by half from nearly $2.8 trillion the prior year, a roughly $1.4 trillion decline.
The CBO said the drop came as government revenues increased in all major categories, particularly from individual income taxes. Expenditures related to Covid-19 programs, such as stimulus checks and small-business loans, fell. In fiscal year 2019, before the pandemic, the government reported a roughly $984 billion deficit.
The Biden administration has highlighted the deficit’s decline this year, arguing that its policies helped spur economic growth and labor-market strength that bolstered revenues the government received in 2022 from income, corporate and other taxes. Republicans and other critics have argued the deficit’s reduction is largely the result of the end of pandemic programs designed to be temporary, rather than any specific administration action, and have said Mr. Biden’s policies reflect fiscal irresponsibility. Those criticisms have intensified as the Federal Reserve lifts interest rates to combat inflation, pushing up the government’s borrowing costs.
“Unfortunately, trillion-dollar-plus deficits seem to have become the norm,” said
chief executive of the nonpartisan
Peter G. Peterson
Foundation, which advocates for deficit reduction. “As we face high inflation and rising interest rates, we should be adding certainty to our fiscal foundation.”
The CBO’s deficit estimate is about $341 billion more than it projected earlier in 2022, mainly because of the costs associated with President Biden’s plan to offer student-loan forgiveness to millions of Americans. The CBO said that according to federal budgeting law, the multiyear costs of the student-loan forgiveness plan are recorded upfront.
The deficit’s projected decline is an economic accomplishment for the Biden administration and even with student-loan forgiveness, the estimated reduction stands on its own, said Jared Bernstein, a member of the White House Council of Economic Advisers.
The CBO estimates that total receipts were $4.9 trillion in fiscal year 2022, a 21% increase from the prior year, with individual income taxes collected up 29% from the year before. Total spending, meanwhile, was $6.3 trillion, an 8% drop from the year before, the CBO said.
Write to Amara Omeokwe at [email protected]
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