U.S. Budget Deficit Narrowed in May as Pandemic Spending Eased

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WASHINGTON—The federal budget ran a $66 billion deficit during May, a 50% decline from a year earlier as the government slashed spending on pandemic programs.

Federal outlays in May fell by 24% to $455 billion, not adjusting for calendar differences, the Treasury Department reported Friday. That reflected a reduction in spending on pandemic programs at the Treasury and Labor Departments and the Small Business Administration.

Government receipts for the month fell by 16% from a year earlier to $389 billion, the Treasury said. Treasury officials said the drop in revenue reflected a return to an April filing deadline for individual tax returns this year compared with 2021, when the deadline was postponed to May.

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Spending so far this fiscal year has fallen 19% from last year, to $3.8 trillion. Receipts so far in the fiscal year are up 29% from 2021 to roughly $3.4 trillion, in part because individual income-tax payments are on pace to reach a record level.

The federal deficit has fallen substantially during the first three quarters of the fiscal year, which began last October. The Biden administration has been highlighting the declining deficit as it attempts to respond to the highest inflation in decades, including through a recently launched messaging campaign to emphasize strengths in the U.S. economy.

The federal deficit is on track to fall to $1 trillion this fiscal year, compared with roughly $2.8 trillion the previous year, according to estimates from the nonpartisan Congressional Budget Office.

Republicans have argued that the Democratic Biden administration’s policies, including its push to enact a $1.9 trillion pandemic aid package in early 2021, have helped fuel price increases. Consumer inflation touched a four-decade high in May. The White House has argued its policies spurred job growth and have helped fight the pandemic.

Elevated inflation is leading to increased borrowing costs for the federal government. The Federal Reserve is lifting interest rates in an attempt to cool the rise in consumer prices.

Interest payments were up by $27 billion, or 59%, in May from a year earlier and have risen 32% so far in the fiscal year compared with 2021.

Treasury officials said most of the rise can be attributed to compensation on inflation-protected securities, and that further increases in interest expenses will start being recognized as the average interest rate on government securities increases. The officials said the average yield on total government securities outstanding had been declining until recent months.

The cumulative federal deficit in the current fiscal year through May stood at $426 billion, a 79% decline from the roughly $2.1 trillion shortfall during the same period a year earlier.

Write to Amara Omeokwe at [email protected]

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