Federal deficit cut in half, ends year at $1.4 trillion in the red

The good news is that the federal budget deficit has been significantly cut in half over the past year. The bad news is that it was still $1.4 trillion.

The Treasury Department on Friday announced final numbers for fiscal year 2022, which ended Sept. 30. The data showed significant improvement as pandemic-related spending declined and the economy hummed.

Uncle Sam collected nearly $4.9 trillion in revenue, down from $4 trillion in 2021. And spending fell from $6.8 trillion last year to $6.3 trillion This year.

But the resulting $1.4 trillion gap between spending and income is still the fourth worst on record, behind the pandemic of 2020 and 2021 and the Wall Street crash of 2009.

The 2022 deficit would have been even lower had it not been for President Biden’s new student loan debt forgiveness, which the Congressional Budget Office says punched a $426 billion hole in September’s numbers because the cost full multi-year term has been recorded in advance on a present value basis.

Apart from that, the CBO said government spending was lower than it had forecast for the year, while revenue was higher.

“Revenues in all major categories, but notably personal income tax, were higher than they were in fiscal year 2021. Expenses related to the coronavirus pandemic were down, in particular for stimulus rebates (also called economic impact payments); Unemployment benefits; Small Business Administration (SBA) programs; and transfers to state, local, tribal and territorial governments,” the CBO said in its year-end analysis.

The government’s major social safety net programs continue to grow, with Social Security spending up $83 billion or 7% and Medicaid spending up $72 billion or 14% in 2022.

And interest payments on the public debt rose by $121 billion or 29% as rising inflation forced Uncle Sam to pay more.


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