On Monday, the Congressional Budget Office (CBO) estimated that U.S. federal budget deficit totaled US$360 billion in the first seven months of FY2022 (from Oct. 2021 to April 2022).
That amount is about one-fifth of the US$1.9 trillion shortfall recorded during the same period in FY2021. Revenues were US$843 billion, or 39 percent higher and outlays were US$729 billion, or 18 percent lower than a year ago.
The deficit at this point last year and in 2020, US$1.9 trillion and US$1.5 trillion, respectively, was much larger because of spending in response to the COVID-19 pandemic — mostly for the recovery rebates, unemployment compensation, and pandemic relief.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a budget watch group, noted that over the first seven months of this fiscal year, the federal government borrowed a “staggering” US$1.6 billion per day.
“Meanwhile, our debt remains near record highs, inflation is the worst it’s been in 40 years, and lawmakers haven’t even started to discuss putting forward a budget. The country needs a plan to get our borrowing under control,” MacGuineas said, noting that as a starting point, lawmakers should avoid legislative and executive actions that further add to deficits.
As talk of the federal budget deficit picks up before Biden’s State of the Union Address, let’s remember the importance of America’s biggest, least-discussed deficit — the deficit in public investment.
We can afford to invest in the American people. We can’t afford not to. pic.twitter.com/pzy9nwYUEF
— Robert Reich (@RBReich) March 1, 2022
The Peter G. Peterson Foundation noted that the Federal Reserve’s decision to raise its target federal funds rate also has implications for the federal government’s borrowing costs and therefore the nation’s fiscal picture.
“As interest rates on U.S. Treasury securities rise, so too will the federal government’s borrowing costs. As the Federal Reserve increases the federal funds rate, short-term rates on Treasury securities will rise as well, making some federal borrowing more expensive,” the Foundation said, adding that expectations about short-term rates and inflation have already pushed up longer-term rates as well.
The group noted that Congresses and presidents of both parties, over many years, have “avoided making hard choices about our budget and failed to put it on a sustainable path. It is vital for lawmakers to take action on the growing debt to ensure a stable economic future.”
