While President Biden’s Fiscal Year (FY) 2023 budget calls for $1.05 trillion of welcomed deficit reduction, the Administration has largely been focused on taking credit for the expected $1.3 trillion fall in the deficit between FY 2021 and 2022. The Administration touting this victory is highly misleading; deficits are falling mainly because COVID relief is ending, and deficits will remain high even after this decline.
In President Biden’s State of the Union address, a White House fact sheet and press release, and several Twitter posts, the Administration has taken credit for what it calls “historic deficit reduction.” In a tweet in late March, President Biden declared, “my Administration is on track to cut the deficit by more than $1.3 trillion.”
While deficits are projected to decline from $2.8 trillion in 2021 to $1.4 trillion in 2022, this is mainly because Congress and the Administration increased deficits in 2021 (by $1.2 trillion), not because they reduced deficits in 2022.
Indeed, the main source of falling deficits is the expiration of most COVID relief such as enhanced unemployment benefits and recovery rebates. The remaining decrease is largely the result of strong income growth and high inflation.
SOURCE: Committee for a Responsible Federal Budget