The federal budget deficit was $1.4 trillion in fiscal year 2022, the Congressional Budget Office estimates—about half of last year’s deficit of $2.8 trillion. By CBO’s estimate, revenues were $850 billion (or 21 percent) higher and outlays were $548 billion (or 8 percent) lower than they were in fiscal year 2021.
The federal budget deficit was $1.4 trillion in fiscal year 2022, the Congressional Budget Office estimates—about half of last year’s deficit of $2.8 trillion. Revenues were $850 billion (or 21 percent) higher and outlays were $548 billion (or 8 percent) lower than they were in fiscal year 2021. Outlays in fiscal year 2022 were boosted by the shift of certain payments—totaling $62 billion—from October 1, 2022 (the first day of fiscal year 2023), into September 2022 because October 1 fell on a weekend. If not for that, the 2022 deficit would have been about $1.3 trillion, CBO estimates.
Revenues in all major categories, but notably individual income taxes, were greater than they were in fiscal year 2021. Spending related to the coronavirus pandemic declined, particularly for the recovery rebates (also known as economic impact payments); unemployment compensation; programs of the Small Business Administration (SBA); and transfers to state, local, tribal, and territorial governments.
The deficit CBO now estimates for 2022 is $341 billion larger than the shortfall estimated in its most recent baseline projections, which were issued in May 2022. Outlays and receipts alike are now estimated to be greater than CBO anticipated in May—outlays by $401 billion (or 7 percent) and receipts by $60 billion (or 1 percent).
The increase in outlays primarily stems from $426 billion in costs estimated and recorded by the Administration in September 2022 to reflect the long-term costs of certain forms of student debt relief, including forgiving portions of federal student loans for many borrowers. (Other federal spending, on net, was less than CBO projected in May.) The largest policy change—student debt forgiveness—was announced in August. In accordance with the Federal Credit Reform Act, the full multiyear costs of those actions are recorded up front on a present-value basis. (That amount does not include the costs of the proposed new income-driven repayment plan, also announced in August; that cost will be recorded when the plan is finalized.)
Final payments of nonwithheld individual income taxes for 2021 were larger than expected but offset in part by smaller-than-expected amounts withheld from paychecks for individual income and payroll taxes. Corporate income tax collections also were larger than anticipated.