Surplus in April reduces year-so-far gap to $360B

The federal government posted a $308.2 billion surplus in April, shrinking the year-to-date federal budget deficit to $360 billion for the first seven months of fiscal 2022, which ends Sept. 30.

In its monthly treasury statement released Wednesday, the U.S. Department of the Treasury said that overall revenue was up 39.1% through April compared with the same period a year ago. Spending was down 17.9% over the first seven months of the federal budget year, dropping from $4.1 trillion to $3.3 trillion.

“This fiscal year has been better than the last couple ones because the covid-related stimulus and extra spending for health, for households and businesses has started to taper off,” Mervin Jebaraj, director for the Center for Business and Economic Research at the University of Arkansas, Fayetteville, said Wednesday.

“So it’s smaller in this fiscal year than we’ve seen in the past two years and deficits are more on par with what’s considered normal. I think our deficit level is on par with where we were in the 2019 fiscal year before the pandemic,” he said.

Jebaraj pointed to several trillion dollars in covid pandemic-related stimulus funding that was disbursed at the onset of the pandemic in 2020, noting “nothing of that scale” in terms of federal spending is happening at this time.

The New York Times reported Monday that the Biden administration is preparing for the possibility that 100 million Americans will become infected with the virus in fall and winter.

Congress has been considering $10 billion in additional covid-related funding for treatments and testing and has been preparing for future surges of the virus since April, even though Congress hasn’t approved the additional funding.

While the government reported a monthly budget deficit of $ 192.6 billion in March, it saw a surplus of $308.2 billion in April.

In April, the government collected $ 863.6 billion in revenue from areas such as individual and corporate income taxes, excise taxes and customs duties, including $593 billion in individual income taxes, which are typically paid to the government in April.

“In the last year, incomes have been up significantly for households, as wages are going up, so people are paying more taxes on it and then on the flip side, corporate profits are up as well, so corporations are paying more taxes,” Jebaraj said.

Consumer spending was depressed a year ago because of the coronavirus pandemic as some people may not have been working or were on unemployment benefits, Jebaraj said.

Unemployment rates have since decreased as more people are working and making higher wages.

“Wages across the board have gone up but have gone up particularly for lower-income workers,” Jebaraj said. “So that has raised the amount of people who are paying in individual income taxes when they file them this year, and corporate taxes are up as well because people are going out and buying things so corporations are making higher profits, and corporate income taxes.”

Jebaraj, asked how higher interest rates affect the government’s revenue, said: “It does try to slow down the overall pace of the economy. That would mean that we expect to see less revenue next year, but I don’t expect wages to stop rising this year.”

“So individual income taxes will still be high, with corporate income taxes it’s going to be a little bit difficult to tell, some sectors will likely see reduced corporate profits, but on the other hand, oil companies for example continue to see high corporate profits going through the rest of this year with gas prices expected to remain high, so I think it’s going to be a bit of a mixed bag, other than with individual income taxes.”

In fiscal 2021, which ended Sept. 30, the federal budget deficit hit $2.78 trillion. Earlier this year, economists predicted that the federal budget deficit for 2022 will be about half the size of the 2021 shortfall.

Accumulating deficits add to the overall federal debt, which totaled nearly $30.4 trillion as of Monday. That figure includes more than $6.5 trillion in intragovernmental holdings, or money the government owes itself, including about $2.9 trillion borrowed from the Social Security Trust Fund, according to Treasury Department reports.

Arkansas Democrat-Gazette