Federal Deficit Decreasing: Is it too early to Celebrate?

Last updated on May 15, 2022

A study by the Congressional Budget Office (CBO) predicts that this year’s federal deficit is going to fall to $642 billion. In fact, the U.S. Treasury received a surplus of revenue in April. The surplus touched $113 billion. Even though the reasons for the surplus might be temporary, the decreasing deficit will give policymakers even more time to draft a long-term solution.

With the gaping U.S. deficit still is a concern, the Obama administration has looked to increase the borrowing limit before it reaches the limit. The twin policy of increased taxes for revenue generation and cutting government spending may not be enough to bring the deficit down in time.

It may be difficult for the government to increase taxes across all income levels, considering that American taxpayers are already paying more in taxes because of the expiration of payroll tax cuts. Therefore, an increase in revenue generation through higher taxes is not an option the government will consider.

With the federal deficit declining and the economy slowly, but steady recovering, there is hope that effective policies may accelerate economic growth and substantially decrease the deficit.