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Federal Budget Deficit Fell to $1.4 Trillion as Pandemic Spending Eased Federal Budget Deficit Fell to $1.4 Trillion as Pandemic Spending Eased
(30 minutes later)
WASHINGTON — The federal budget deficit fell to $1.4 trillion for the 2022 fiscal year, from $2.8 trillion a year ago, a reduction driven primarily by the winding down of pandemic emergency spending and a surge in tax receipts, according to the Treasury Department.WASHINGTON — The federal budget deficit fell to $1.4 trillion for the 2022 fiscal year, from $2.8 trillion a year ago, a reduction driven primarily by the winding down of pandemic emergency spending and a surge in tax receipts, according to the Treasury Department.
President Biden trumpeted the deficit reduction on Friday morning, saying the fact that it was cut roughly in half was evidence that his economic policies were working. With soaring inflation as one of the top concerns among voters ahead of tight congressional elections, Mr. Biden has often cited a shrinking budget deficit as a way to bring down rising costs.President Biden trumpeted the deficit reduction on Friday morning, saying the fact that it was cut roughly in half was evidence that his economic policies were working. With soaring inflation as one of the top concerns among voters ahead of tight congressional elections, Mr. Biden has often cited a shrinking budget deficit as a way to bring down rising costs.
“Today we have further proof that we’re rebuilding the economy in a responsible way,” Mr. Biden said during his remarks from the White House. “We’re going from historically strong economic recovery to a steady and stable growth while reducing the deficit.”“Today we have further proof that we’re rebuilding the economy in a responsible way,” Mr. Biden said during his remarks from the White House. “We’re going from historically strong economic recovery to a steady and stable growth while reducing the deficit.”
Mr. Biden seized on the moment to also portray the November congressional elections as not a referendum on his administration but a “choice” between his economic agenda and the policies he said would be put in effect by a Republican-controlled Congress. He said Republicans would cut Social Security benefits, increase the deficit and undo his efforts to lower prescription drug prices. Mr. Biden seized on the moment to also portray the November congressional elections as not a referendum on his administration but a “choice” between his economic agenda and the policies that he said a Republican-controlled Congress would put in effect. He said Republicans would cut Social Security benefits, increase the deficit and undo his efforts to lower prescription drug prices.
“It’s Mega-MAGA trickle down,” Mr. Biden said. He blamed Republicans for fueling the deficit during the Trump administration with large tax cuts. “The kind of policies that have failed the country before, and it’ll fail it again,” he said. “It’s mega-MAGA trickle down,” Mr. Biden said. He blamed Republicans for fueling the deficit during the Trump administration with large tax cuts. “The kind of policies that have failed the country before, and it’ll fail it again,” he said.
Deficit hawks were quick to attribute the deficit reduction under Mr. Biden to the phasing-out of pandemic relief spending, including the president’s $1.9 trillion American Rescue Plan. And they warned that Mr. Biden’s plans to forgive certain amounts of student debt would weigh heavily on the nation’s finances going forward.Deficit hawks were quick to attribute the deficit reduction under Mr. Biden to the phasing-out of pandemic relief spending, including the president’s $1.9 trillion American Rescue Plan. And they warned that Mr. Biden’s plans to forgive certain amounts of student debt would weigh heavily on the nation’s finances going forward.
“In fact, the deficit would have been almost $400 billion lower had the Biden administration not decided to enact an inflationary, costly and regressive student debt cancellation plan in August,” Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, which argues for deficit relief, said in a statement. “It should be no surprise that the Federal Reserve is having a hard time getting inflation under control when fiscal policymakers keep making their job even harder with more borrowing.”“In fact, the deficit would have been almost $400 billion lower had the Biden administration not decided to enact an inflationary, costly and regressive student debt cancellation plan in August,” Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, which argues for deficit relief, said in a statement. “It should be no surprise that the Federal Reserve is having a hard time getting inflation under control when fiscal policymakers keep making their job even harder with more borrowing.”
Republicans said that Mr. Biden was misleading Americans about the deficit as he tries to embrace the mantle of fiscal responsibility and argued that the president’s policies have fanned inflation. Republicans said Mr. Biden was misleading Americans about the deficit as he tried to embrace the mantle of fiscal responsibility and argued that the president’s policies had fanned inflation.
“President Biden is ignoring the facts about his own spending to fit his political narrative,” Representative Jason Smith, a Republican from Missouri, said on Twitter. “He says deficits are going down because of his policies, but in reality he’s spending more and fueling higher prices.”“President Biden is ignoring the facts about his own spending to fit his political narrative,” Representative Jason Smith, a Republican from Missouri, said on Twitter. “He says deficits are going down because of his policies, but in reality he’s spending more and fueling higher prices.”
Mr. Smith added that deficits were higher than projected because Democrats passed such an expensive stimulus package last year.Mr. Smith added that deficits were higher than projected because Democrats passed such an expensive stimulus package last year.
The national debt in the United States continues to be unsustainable in the long term. Treasury Department figures released earlier this month revealed that America’s gross national debt exceeded $31 trillion for the first time, a milestone that the Biden administration did not observe with any fanfare. The national debt in the United States continues to be unsustainable in the long term. Treasury Department figures released this month revealed that America’s gross national debt exceeded $31 trillion for the first time, a milestone that the Biden administration did not observe with any fanfare.
While the deficit’s decline was primarily driven by reduced Covid spending, the economic rebound from the depths of the pandemic also gave the government’s coffers a boost, as corporate tax revenue came in faster than expected. A robust labor market and rising wages, which have struggled to keep up with inflation, also resulted in an increase in individual income tax receipts.While the deficit’s decline was primarily driven by reduced Covid spending, the economic rebound from the depths of the pandemic also gave the government’s coffers a boost, as corporate tax revenue came in faster than expected. A robust labor market and rising wages, which have struggled to keep up with inflation, also resulted in an increase in individual income tax receipts.
When measured against the total economic output of the United States, the federal budget deficit amounted to 5.5 percent of gross domestic product.When measured against the total economic output of the United States, the federal budget deficit amounted to 5.5 percent of gross domestic product.
The federal government continued to spend more than it earned in fiscal 2022 and to borrow money at a fast clip. Total federal borrowing increased by $2 trillion to $24.3 trillion total, partly driven by additional borrowing to finance the federal budget deficit. The U.S. government pays interest to its bondholders, and as the Federal Reserve raises interest rates, those costs are rising. The federal government continued to spend more than it earned in the 2022 fiscal year and to borrow money at a fast clip. Total federal borrowing increased by $2 trillion to $24.3 trillion total, partly driven by additional borrowing to finance the federal budget deficit. The U.S. government pays interest to its bondholders, and as the Federal Reserve raises interest rates, those costs are rising.
Interest on the public debt increased 28 percent from last year and is expected to continue growing as the Fed raises rates. Higher rates could add an additional $1 trillion to what the federal government spends on interest payments this decade, according to estimates from the Peterson Foundation. That is on top of the record $8.1 trillion in debt costs that the Congressional Budget Office projected in May.Interest on the public debt increased 28 percent from last year and is expected to continue growing as the Fed raises rates. Higher rates could add an additional $1 trillion to what the federal government spends on interest payments this decade, according to estimates from the Peterson Foundation. That is on top of the record $8.1 trillion in debt costs that the Congressional Budget Office projected in May.
Still, the administration portrayed the 2022 deficit figures as a sign that the economy was strong and that the White House was focused on improving America’s “fiscal health.”Still, the administration portrayed the 2022 deficit figures as a sign that the economy was strong and that the White House was focused on improving America’s “fiscal health.”
“Today’s joint budget statement provides further evidence of our historic economic recovery, driven by our vaccination effort and the American Rescue Plan,” said Janet L. Yellen, the Treasury secretary. “It also demonstrates President Biden’s commitment to strengthening our nation’s fiscal health.”“Today’s joint budget statement provides further evidence of our historic economic recovery, driven by our vaccination effort and the American Rescue Plan,” said Janet L. Yellen, the Treasury secretary. “It also demonstrates President Biden’s commitment to strengthening our nation’s fiscal health.”
Even as some Democrats, as well as Ms. Yellen, have called for the statutory debt limit to be abolished to carry out congressionally authorized government spending, Mr. Biden said such a move would be “irresponsible.”Even as some Democrats, as well as Ms. Yellen, have called for the statutory debt limit to be abolished to carry out congressionally authorized government spending, Mr. Biden said such a move would be “irresponsible.”
But the president, citing the reduced deficit and last month’s streak of gas price declines, said he believed the recent economic outlook of the United States would give Democrats an edge in the midterm elections. A New York Times/Siena College poll this week found Republicans had a slight edge with the share of likely voters who said economic concerns were the most important issues facing America, leaping since July to 44 percent from 36 percent. But the president, citing the reduced deficit and last month’s streak of gas price declines, said he believed the recent economic outlook of the United States would give Democrats an edge in the midterm elections. A New York Times/Siena College poll this month found Republicans had a slight edge with the share of likely voters who said economic concerns were the most important issues facing America, leaping since July to 44 percent from 36 percent.
“I think that we’re going to see one more shift back to our side,” Mr. Biden said. “Let me tell you why I think that. We are starting to see some of the good news on the economy.”“I think that we’re going to see one more shift back to our side,” Mr. Biden said. “Let me tell you why I think that. We are starting to see some of the good news on the economy.”