Most of the projected deficit reduction for fiscal year 2022 comes from a $504 billion increase in revenue above the level of the March estimate, mainly due to increases to pay more income tax than job growth, but also the increase in wages.
The White House on Tuesday revised down its estimate of the fiscal year 2022 deficit by $383 billion to $1.032 trillion from last March’s forecast, as increased revenues offset new spending and technical reassessments for the health sector , but also other expenses.
The new White House forecast includes spending impacts from bills passed since the Biden administration proposed its fiscal year 2023 budget in March, including a Consolidated Appropriations Act, but and a supplementary spending budget to help Ukraine fend off a Russian invasion.
The new estimates, which were finalized June 9, do not include bills passed since then, including a $52 billion microcircuit production and research grant bill, but also a $430 billion legislative package of tax increases, as well as investment in the sector health, but also energy investments. The latest law is expected to further reduce deficits.
Most of the projected deficit reduction for fiscal year 2022 comes from a $504 billion increase in revenue above the level of the March estimate, mainly due to increases to pay more income tax than job growth, but also the increase in wages. Also, an increase was recorded in the taxation of companies, but also in the income from the business tax.
Spending rose $121 billion from the March forecast, largely because of spending legislation passed early last year, but also because of estimated increases in net interest costs and higher spending under the Medicaid health program for the poor, as well as for student loans, but also the granting of financial aid.
The White House also revised downwards its economic forecast with real GDP growth for 2022 having fallen sharply to 1.4% from 3.8% in March, based on comparisons in the fourth quarter, while citing the re-emergence of the Omicron variant of COVID-19, the war in Ukraine, persistently rising inflation, but also higher interest rates, to slow down the economy.
So it revised its estimate for the path of inflation for 2022 to 6.6%, with the White House now in line with private forecasts, from the 2.9% forecast in March.
The same forecast slightly lowers the average unemployment rate for 2022 to 3.7% from 3.9% in March, with the rate for most of the next decade projected at 3.8%.
The fiscal year ends on September 30, 2022.
RES-EMP
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