Why did the US fiscal 2022 deficit halve?

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US Fiscal 2022 Budget Deficit Halved Amidst Economic Recovery and Reduced Spending

The United States fiscal 2022 budget deficit was reduced by half compared to the previous year, reaching US$1.375 trillion. This significant reduction was primarily driven by a substantial decrease in federal spending related to Covid-19 relief measures and a surge in government revenue, boosted by a robust economy. While these factors contributed to the largest single-year improvement in the nation's fiscal position, the recognition of costs associated with the Biden administration's student loan forgiveness plan limited the overall extent of the deficit reduction.
Record Revenues and Reduced Outlays Drove Deficit Narrowing

Fiscal 2022 saw government receipts climb to a record US$4.896 trillion, an increase of US$850 billion or 21 per cent from fiscal 2021. This surge in revenue reflects the strong performance of the economy during the period. Concurrently, federal outlays experienced a record decrease of US$550 billion, or 8 per cent, bringing the total spending to US$6.272 trillion. This combination of higher income and lower expenditure was the principal mechanism behind the deficit's substantial narrowing.
Student Loan Forgiveness Costs Impacted Deficit Reduction

The Biden administration's plan to forgive up to US$20,000 in student debt for eligible former college students, earning under US$125,000 annually, resulted in an estimated US$400 billion in budgetary costs. The recognition of these costs in fiscal 2022, specifically within the September 2022 outlays which reached US$430 billion, significantly offset the otherwise sharper decline in the deficit. An extension of the Covid moratorium on student loan payments until the end of 2022 added approximately US$21 billion to these budgetary costs.
Future Fiscal Outlook Projects Rising Deficits

Looking ahead, projections indicate a slowdown in revenue growth and an increase in future deficits. The Congressional Budget Office anticipates that a cooling economy, coupled with higher interest rates set by the Federal Reserve, will lead to reduced revenue collection. Furthermore, rising interest costs on national debt are expected to consume an increasingly larger portion of the federal budget in the coming years, potentially reversing the trend of deficit reduction observed in fiscal 2022.

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Why did the US fiscal 2022 deficit halve?

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