I’m seeing news stories about how the US deficit was reduced by half down to $1.4 Trillion within the last year. How is this possible to move this fast? Does the current government have anything to do with it or is it all external factors?
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The pandemic: government spending went through the roof, while tax revenue went down because businesses were shut down. Then the economy reopened, the government spent several trillion more, but not as much. So….
Deficit is how much more we spend above what we bring in. If we get 1 trillion in taxes and spend 1.5 trillion, the deficit is 500 billion.
Between covid spending and tax cuts for billionaires, the deficit exploded a few years ago.
This year, the deficit decreased by the largest amount in history as revenue streams are up and a bunch of spending is cut, as well as raising corporate tax rates above 0% in most scenarios.
The deficit is funded in many ways.
This year, that ‘overspend’ that went into national credit decreased by the largest amount. We went from…I think overspending 1.5 trillion under mps largest deficit to just over 300 billion this year, the largest decrease in history.
Editing to add: down FROM 1.5 trillion for annual deficit growth. A stated goal of the inflation reduction act was deficit reduction so current govt definitely responsibile.
The deficit is just how much you spend vs how much you take in *for a single year.* It’s really not hard to make that change dramatically.
I mean, think about it as an individual. You can easily have a year without any big emergency purchases and end up building a good bit of savings. But when it’s time for you to buy a new car, buy a house, or do some major repairs on your current house your deficit just shot way up.
For the US specifically, we are comparing the deficit during a global pandemic which brought almost the entire world’s economy to a halt, hugely reducing income. While requiring a massive amount of government support, massively increases expenses.
To a year where thing’s have *sorta* gone back to normal, so tax revenue is way up and expenses are way down.
Deficit isn’t debt. The deficit is the shortfall in any given year, the debt is *all* of the shortfalls across all years.
The deficit has been reduced in major part because there was an immense amount of spending last year due to pulling through COVID without as much revenue, and now we’re going back to normalcy.
“Cutting the deficit in half” in this case is misleading. But it isn’t just a current administration misnomer. It’s a journalistic issue.
The phrase should be “cutting the yearly deficit spending in half”. But again that takes up too much headline space.
What happened here is the government is deficit spending and borrowing half what it did last year.
Since the Clinton administration, deficit spending has floated around $1T a year. Meaning the US government borrows and spends $1T more than it takes in thru taxes. So last year (July 2021-June 2022) the federal government overspent roughly half what was spent (July 2020 – June 2021). It went from a $1.4T down to around $800B. This could be a result of better fiscal stewardship and policies of the Biden Administration, this could be the reduced spending on Covid related programs, this could be the sunsetting of some of the ‘17 tax cuts, the validity and weight of those reasons will be influenced by personal politics and viewpoints.
You go on a shopping spree this month and max out all your credit cards.
Don’t buy anything next month and start paying down one card at a time.
Congratulations 🎉
You’ve cut your deficit spend by 100% but still have a lot of debt.
Deficit is current spending vs. income. Last year the government spent about $3t more than it took in, this year that figure is half that. It’s not a reduction in national debt, just a slowing of growth in national debt.
If I make 1,000 dollars per week, but my expenditures are 1,500 dollars per week, then we are operating at a deficit of 500 dollars per week. We are “losing” 500 dollars per week. That is the deficit. How much we are under the break-even point.
If we make some changes and now our expenditures equal 1,250 dollars instead of 1,500 dollars, our deficit is now 250 dollars instead of 500 dollars (assuming we are still making the same 1000 dollars in income). We are now only “under” the break even point by 250 dollars. That is half of 500 dollars. We have cut the deficit in half.
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