Federal deficit falls 17% at outset of budget year
Drop caused by revenue topping spending
WASHINGTON — The U.S. federal budget deficit totaled $356.4 billion in the first two months of the budget year, down 17% compared with the same period a year ago thanks to a sharp jump in government revenue that offset a smaller increase in spending.
In its monthly budget report, the U.S. Treasury Department said Friday that the government’s deficit in October and November — $356.4 billion — was $72.9 billion below the deficit over the same two months last year. The government’s budget year started on Oct. 1. For the month of November, the Treasury report said the deficit totaled $191.3 billion, a record for the month of November.
The improvement was due to government revenue rising at a faster pace than spending over the past two months.
For the October-November period, tax revenue totaled $565.1 billion, 23.6% above revenue compared with the same period last year and a record for the first two months of the budget year.
The increase reflected an improving economy that has seen corporate profits rise and millions of people going back to work, which boosts individual tax payments. In addition, businesses are having to make up for their portion of Social Security tax payments that were deferred last year as part of the tax relief Congress granted during the pandemic-triggered recession.
Government spending totaled $921.5 billion, also a record for the first two months of a budget year, and 3.9% higher than the same two months a year ago.
The budget deficit totaled $2.77 trillion for the 2021 budget year that ended Sept. 30. That was the second highest annual deficit on record, exceeded only by the $3.13 trillion deficit for 2020.
The deficits for both years were inflated by the trillions of dollars in government spending approved by Congress to keep the country from sliding into a deeper downturn because of shutdowns caused by the coronavirus pandemic.
The Congressional Budget Office is forecasting that the deficit for the current fiscal 2022 budget year will narrow further to $1.2 trillion. The budget office is projecting that annual deficits will remain below $1 trillion until 2026 when they will once again top the $1 trillion mark.
Nancy Vanden Houten, senior economist at Oxford Economics, said she is forecasting a deficit for this fiscal year of $1.33 trillion. That assumes that in addition to the infrastructure bill of around $1 trillion that Congress has already passed, lawmakers will end up passing a social welfare and climate measure of around $1.8 trillion. The price tag for both measures covers 10 years.
Accumulating deficits add to the overall federal debt, which totaled more than $28.91 trillion as of Thursday. That figure includes more than $6.2 trillion the government owes itself, including about $2.9 trillion borrowed from the Social Security Trust Fund, according to Treasury Department reports.