2022 US budget deficit halves to $1.375 trillion despite student loan costs
WASHINGTON, Oct 21 (Reuters) – The U.S. government said on Friday its budget deficit for fiscal year 2022 plunged by half from a year earlier to $1.375 billion, due to lower government spending. COVID-19 relief and record revenues fueled by a booming economy, but student loan cancellation costs limited the reduction.
The US Treasury said the $1.4 trillion deficit cut was still the biggest single-year improvement in the US fiscal position, with revenue hitting a record $4.896 billion, up $850 billion, or 21%, from fiscal 2021.
President Joe Biden touted deficit reductions in remarks at the White House and Delaware State University, and said the deficit would shrink by another $250 billion over the next decade, being given Medicare’s ability to negotiate lower drug prices.
Biden chastised Republicans for voting against deficit reduction. As his administration cut the deficit, it increased infrastructure spending and expanded benefits for middle- and low-income Americans.
“You know, we’ve moved from a historically strong economic recovery to steady, stable growth, while cutting the deficit,” Biden said.
Spending for the 2022 fiscal year, which ended Sept. 30, fell by a record $550 billion, or 8% from a year ago, to $6.272 trillion. But spending in September, the final month of the fiscal year, included acknowledging $430 billion in costs of the Biden administration’s plan to forgive student debt of up to $20,000 for former students now earning less. $125,000 per year and less than $250,000 for married couples.
The move raised the September budget deficit to $430 billion, more than six times the previous year’s September deficit of $65 billion. Most years, September is a surplus month due to the payment of quarterly corporate and personal taxes.
The Congressional Budget Office estimated the plan would cost about $400 billion. It also includes extending a COVID-19 moratorium on all student loan repayments through the end of 2022, which added about $21 billion in fiscal costs.
Nongovernment budget analysts said the plan would eliminate a much-vaunted deficit reduction from the climate, health care and Internal Revenue Service funding bill recently passed by Democrats.
US Treasury Secretary Janet Yellen told reporters that the Biden administration was maintaining “credible fiscal policy” despite the unfunded student debt relief that was a Biden campaign promise.
“I consider our debt to be on a responsible path,” she said, adding that net interest on debt as a percentage of GDP is only expected to rise to around 1%, a “low” historical level.
Revenue gains in September began to slow from previous months, rising just 6% from a year earlier to $488 billion.
And the CBO predicts that with the economy slowing amid higher Federal Reserve interest rates, revenues will slow further in coming years. Rising interest charges will also begin to eat up more of the federal budget, the nonpartisan tax arbitration agency predicts.
Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, a budget watchdog group, said the effect of recognizing student loan forgiveness costs in fiscal year 2022 will be to show a decline. more constant pandemic deficits – rather than a sharper one narrowing to around $1 trillion, followed by an increase to around $1.4 trillion in fiscal year 2023.
The CBO had projected a 2023 fiscal deficit of around $984 billion, with deficits rising steadily thereafter to nearly $2 trillion by 2030.
“I think it’s more appropriate to recognize the costs because the debt is forgiven, and the bulk of that will happen in fiscal year 2023. But the government has leeway here,” Goldwein said during an interview. a telephone interview prior to publication.
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Reporting by David Lawder, Dan Burns and Nandita Bose; Editing by Andrea Ricci and Aurora Ellis
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