Annual deficit was $360 billion less than the previous year
The Treasury Department said on Friday that the US federal budget deficit during the 2021 fiscal year totaled $2.8 trillion, the second-largest budget shortfall on record, but improved slightly from the previous year as the economy recovered from the COVID-19 pandemic.
The annual deficit was $360 billion less than last year, which the Biden administration said was “a better economy because of the American Rescue Plan Act 2021 (ARP) and the COVID-19 vaccination rollout.” The budget year ended on 30 September.
“Today’s joint budget statement is further evidence that the US economy is in the midst of a recovery,” Treasury Secretary Janet Yellen said in a statement.
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The deficit widened to $3.1 trillion in fiscal 2021 as the COVID-19 pandemic brought the economy to a virtual standstill and forced a nationwide lockdown. The previous record was a deficit of $1.4 trillion after the 2008 financial crisis.
The government generated $4 trillion in tax revenue, up from $465 billion estimated. Officials said the increase was partly due to higher-than-expected collections from personal and corporate income taxes. Government revenue increased by 18.3%.
The deficit figures were announced amid ongoing debate on Capitol Hill about President Biden’s social spending bill, which is expected to cost nearly $2 trillion. President Biden and Democrats argue that the plan is entirely covered by a proposed tax increase on wealthy Americans, while Republicans say the plan would increase the federal deficit and fuel rising inflation.
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The Congressional Budget Office estimates the deficit will drop to $1.15 trillion for the current fiscal year and will continue to decline over the next three years. Those estimates do not account for the passage of Biden’s proposed infrastructure and spending bills.