The first three months of fiscal 2022 are in the books, and the numbers show the federal government’s deficit has gone from the catastrophic levels of last year back to the merely grave situation pre-pandemic.
Spending is still running high, but tax revenue has begun to catch up, according to Treasury Department data released Wednesday.
Uncle Sam collected $1.052 trillion in revenue from October through December. That’s about $250 billion more than the same period last year. By contrast, spending was up only a little more than $50 billion, at $1.430 trillion.
Things are still deeply in arrears, with a $378 billion deficit for the three months. But that’s considerably better than the $573 billion deficit at the same point last year.
It’s also only slightly off the $357 billion deficit the government ran from October to December 2019. That was the last full quarter before the pandemic hit, pressuring Congress to open up the federal spending spigot to stem the pain of economic calamity and pump billions into combating the coronavirus itself.
The Congressional Budget Office says most of the revenue increase has come from higher paycheck withholding, as workers’ wages and salaries rise. That’s particularly true among higher-income workers, who pay taxes at higher rates, the CBO said.
Corporate tax payments were also up 44%, or $30 billion, CBO said.
On the spending side much of the early pandemic spending has expired — particularly enhanced unemployment benefits. That program dropped from $80 billion in the first quarter of fiscal year 2021 to just $13 billion in 2022.
But President Biden’s $1.9 trillion stimulus package, which cleared Congress in March, has ensured overall spending remains high.
Expanded eligibility for food stamps, expanded eligibility for Medicaid, emergency pandemic spending by the Education Department and a major expansion of tax credits all contributed to hefty spending totals.
Net interest on the debt has also risen sharply, up 18% so far this year, chiefly because of soaring inflation, CBO said.
The federal government ran a $2.77 trillion deficit in 2021 — the second worst on record, trailing only the pandemic-plagued 2020.
But if finances are running closer to pre-pandemic levels, that suggests this year’s deficit could run closer to the $1 trillion level projected for 2020, before the pandemic struck.