In fiscal year 2022, the US budget deficit was reduced by half, a record-breaking $1.4 trillion decrease brought on by the cessation of significant pandemic-related spending and an increase in federal government revenue as a result of the economic recovery’s spike in employment and salaries.
The annual budget deficit decreased to $1.38 trillion during the fiscal year that ended on September 30, according to final statistics provided by the Treasury Department on Friday. This is the second year in a row that the deficit has decreased.
In 2021, the deficit hit $2.78 trillion a figure that is still historically high. Before the Covid-19 pandemic, the deficit totaled $980 billion during fiscal year 2019.
The latest numbers would have been even lower if not for the student loan forgiveness program President Joe Biden’s executive order to cancel up to $10,000 in student loans for borrowers under a certain income threshold, and up to $20,000 for Pell Grant recipients according to the Treasury Department. The cost and scope of that program, which has come under heavy fire from Republicans, has a $430 billion impact on the deficit in September, making it the fourth-largest monthly budget gap in history.
Biden is scheduled to tout the program, which officially launched this week, in remarks later Friday at Delaware State University. White House officials have acknowledged the total cost, but argue the benefits to the borrowers and the broader economy far outweigh the risks, particularly in light of the expectation that the deficit numbers would plummet as they did.
The President touted the record-breaking deficit decline Friday morning, saying: “We’re going from a historically strong economic recovery, to a steady and stable growth while reducing the deficit.”
Spending topped $6.27 trillion, a decline of $550 billion from last fiscal year. Revenue increased by more than $850 million to just shy of $4.9 trillion.
But fiscal watchdog group the Committee for a Responsible Budget said Friday that the latest budget is instead a “reminder of how precarious our fiscal situation remains.”
“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,” Maya MacGuineas, president of the Committee for a Responsible Fiscal Budget, said in a statement.