The gap between what the government borrows and what it spends narrowed amid less spending and higher tax receipts.
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President Biden said on Friday that the federal budget deficit fell to $1.4 trillion.
WASHINGTON — The federal budget deficit fell to $1.4 trillion for fiscal 2022 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 touted the deficit reduction on Friday morning. With soaring inflation 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. On Friday, the administration said that cutting the annual deficit roughly in half was evidence that Mr. Biden’s economic policies were working.
“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.
“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.”
But deficit hawks were quick to attribute the deficit reduction to the phasing-out of pandemic relief spending, including Mr. Biden’s $1.9 trillion program. 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, president of the Committee For a Responsible 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.”
While the deficit fell from pandemic-level highs, the federal government continued to spend more than it earns 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; as the Federal Reserve raises interest rates, those costs are rising.
Interest on the public debt increased 28 percent from last year to $718 billion.
The federal budget deficit for 2022 amounted to 5.5 percent of gross domestic product.
This is a developing story. Check back for updates.
Source: nytimes.com
