Monthly Budget Review: Summary for Fiscal Year 2022
In fiscal year 2022, the federal deficit totaled nearly $1.4 trillion. That deficit was equal to 5.5 percent of GDP, down from 12.3 percent in 2021, but still larger than the 4.6 percent recorded in 2019—the most recent year not affected by the pandemic.
In fiscal year 2022, which ended on September 30, the federal budget deficit totaled nearly $1.4 trillion. The marked decline in the deficit from the previous year reflected waning spending in response to the coronavirus pandemic and increased revenues driven by higher inflation and the continued recovery of economic activity.
In 2022, the deficit was equal to 5.5 percent of the nation’s gross domestic product (GDP), down from 12.3 percent in 2021, but still larger than the 4.6 percent recorded in 2019—the most recent year not affected by the pandemic. The 2022 deficit was the third largest as a percentage of GDP over the past decade and greater than the 50-year average of 3.6 percent.
Compared with the size of the economy, federal debt held by the public fell to 97.0 percent of GDP in 2022 from 98.4 percent of GDP at the end of fiscal year 2021 and 100.1 percent of GDP at the end of 2020. That decline occurred, despite the large 2022 deficit, because nominal GDP increased by a larger percentage than did the debt. In contrast, debt held by the public stood at 79.4 percent of GDP at the end of 2019, before the pandemic.
The deficit in 2022 was $339 billion larger than the shortfall estimated in CBO’s most recent baseline budgetary projections, which were issued in May 2022. Outlays and receipts alike were greater than CBO anticipated in May—outlays by $400 billion (or 7 percent) and receipts by $60 billion (or 1 percent).
The increase in outlays stemmed primarily from $426 billion in costs estimated and recorded by the Administration in September 2022 to reflect the long-term effects of some actions it took to provide student debt relief, including $379 billion in costs to forgive portions of federal student loans for many borrowers. (Other federal spending, on net, was less than CBO projected in May.) The largest policy change—forgiving portions of federal student loans—was announced in August. In accordance with the Federal Credit Reform Act, the estimated full multiyear costs were recorded up front on a present-value basis. Excluded from the amount are the costs of the proposed income-driven repayment plan, also announced in August, which will be recorded when the plan is made final.
Receipts from final payments of nonwithheld individual income taxes for 2021 were larger than CBO expected but that difference was partly offset by smaller-than-anticipated amounts withheld from paychecks for individual income and payroll taxes. Corporate income tax collections also were larger than projected.