© Stocksak. FILE PHOTO – An American flag is seen flying outside the U.S. Capitol dome, Washington, U.S.A, January 15, 2020. REUTERS/Tom Brenner
By David Lawder
WASHINGTON, (Stocksak), – The U.S. government reported Friday that its fiscal 2022 budget deficit plunged half a year from a prior year to $1.375 billion. This was due in part to declining COVID-19 assistance spending and record revenues fueled largely by a hot economic environment. However, student loan forgiveness cost limitations limited the reduction.
According to the U.S. Treasury the $1.400 trillion deficit reduction was still a significant improvement in the U.S. fiscal situation in a single year. Revenues reached a record $4.896 billion, an increase of $850 billion or 21% over fiscal 2021.
In remarks at the White House, Delaware State University, President Joe Biden highlighted the deficit reductions. He said that the deficit would shrink by $250 billion more over the next ten years, given Medicare’s ability negotiate lower drug prices.
Biden lashed out at Republicans who voted against deficit reduction. His administration reduced the deficit but increased spending on infrastructure and provided more benefits to low- and middle-income Americans.
Biden stated, “You know, we’ve gone through an historically strong economic recovery into a steady, stable growth, while decreasing the deficit.”
Fiscal 2022’s outlays, which ended Sept. 30, were record lows of $550billion, or 8%, compared to last year’s figure of $6.272 trillion. However, September’s fiscal year end outlays included $430 Billion in costs related to the Biden administration’s plan to forgive student loans up to $20,000 for ex-college students earning under $125,000 per annum and under $250,000 for married couple.
This move brought September’s budget deficit to $430billion, six times more than the $65billion deficit in September of previous years. September is a surplus month in most cases due to the quarterly payment of individual and corporate taxes.
According to the Congressional Budget Office, the plan would cost around $400 billion. It also includes a COVID-19 extension on student loan payments through 2022. This added $21 billion to budgetary costs.
Non-governmental budget analysts estimate that the plan would erase a much-touted deficit decrease from Democrats’ recently enacted climate and healthcare funding bill.
Janet Yellen, U.S. Treasury Secretary, told reporters that the Biden administration was pursuing a “credible fiscal strategy” despite the unfunded student loan relief that was a Biden campaign promise.
She stated that she believes the country’s debt is on a responsible track, and that net interest on it as a percentage of GDP would only rise to 1%, which is a historic low.
September’s revenue growth was slower than the previous months. It grew by 6% to $488 Billion, compared to the same period last year.
CBO projects that revenues will decline further in future years as the economy slows and the Federal Reserve interest rate rises. The agency, which is not partisan in fiscal refereeing, predicts that rising interest costs will begin to consume more of the federal budget.
Marc Goldwein, senior policy advisor for the Committee for a Responsible Federal Budget (a fiscal watchdog group), stated that the recognition student loan forgiveness costs will result in a steady decline of deficits from the pandemic – not a sharper narrowing to about $1 trillion, followed up by an increase to approximately $1.4 trillion for Fiscal 2023.
CBO had projected a deficit fiscal 2023 of approximately $984 billion. The deficits would continue to rise steadily until they reach nearly $2 trillion by 2030.
“I believe it’s better to recognize the costs of the debt cancellation, which will largely occur in fiscal 2023. Goldwein stated that the government has some latitude in this area.