The Federal Budget Deficit Fell to $1.4 Trillion as Pandemic Spending Eased

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Washington— For the 2022 fiscal year, the federal budget deficit went from $2.8 trillion the year before to $1.4 trillion. This was due to spending on pandemic emergencies and tax income.

President Joe Biden hailed the deficit reduction as proof that his economic policies are succeeding. Biden has talked a lot about lowering inflation by cutting the budget deficit before close congressional elections.

Biden said from the White House, “We’re responsibly rebuilding the economy.” We’re moving from a historically strong economic recovery to one with slower growth and less debt.

Biden used the time to say that the November elections for Congress will be a “choice” between his economic plan and the Republican plan. He said that Republicans will cut Social Security benefits, raise the budget, and undo what he did to lower drug prices.

“Mega-MAGA trickles down,” said Biden. He criticized Republicans for Trump’s deficit-fueled tax cuts. “These failed policies will fail again,” he added.

Budget hawks said that Biden’s reduction in the deficit was due to cutting back on spending for pandemic relief, especially the $1.9 trillion American Rescue Plan. They said that Biden’s promises to get rid of student debt would put a strain on the country’s finances.

The Federal Budget Deficit Fell to $1.4 Trillion as Pandemic Spending Eased

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which works to reduce the deficit, said that the deficit would have been $400 billion lower if the Biden administration hadn’t passed a plan to forgive student loans in August that would have caused inflation, wasted money, and hurt people who were already in debt.

When government officials keep taking out more loans, it’s not surprising that the Fed has trouble keeping inflation in check. Republicans contended Biden misled Americans about the deficit and that the president’s policies fueled inflation.

Rep. Jason Smith, R-Mo., said in a tweet that Biden is ignoring the facts about how much money he has spent. Even though his plans cut the deficit, he spends more and raises prices. Smith also said that the Democrats’ expensive stimulus plan from last year made the deficits worse.

Long-term U.S. debt cannot be paid off. This month, the United States gross national debt went over $31 trillion, but the Biden administration didn’t celebrate.

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COVID spending helped bring down the deficit, but the economy’s quick recovery from the pandemic caused corporate tax income to rise faster than expected.

Individual income tax receipts have gone up because the job market is strong and wages are going up faster than inflation. The deficit was equal to 5.5% of GDP.

In 2022, the government spent more than it made and had to borrow money fast. Total government borrowing went up by $2 trillion to $24.3 trillion, and deficit financing was the main reason for this. When the Fed raises interest rates, the cost of interest for the U.S. government goes up.

Interest on the government’s debt went up 28% last year, and if the Fed raises rates, it’s likely to go up even more. Peterson Foundation thinks that higher rates could make the federal government pay an extra $1 trillion in interest this decade. In May, the Congressional Budget Office said that $8.1 trillion in debt costs would be a record.

The Federal Budget Deficit Fell to $1.4 Trillion as Pandemic Spending Eased

The government said that the deficit in 2022 was a sign of a healthy economy and a commitment to improving the “fiscal health” of the United States.

Janet Yellen, who is in charge of the Treasury, said, “Today’s joint budget release is more proof of our remarkable economic recovery.” It shows how much President Biden cares about the economy.

Biden said it would be “irresponsible” to raise the debt limit to pay for spending that Congress has already approved.

The president said that he thinks the recent outlook for the U.S. economy will give Democrats an advantage in the midterm elections.

In a poll done this month by the New York Times and Siena College, 44% of people who might vote said that economic issues were the most important, which is up from 36% in July.

Biden thinks we’ll get one more win. “Let me explain. There are signs of good economic news.

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