“Today, my administration announced that this year the deficit fell by $1.4 trillion — the largest one-year drop in American history — $1.4 trillion decline in the deficit.”

~ President Joe Biden, October 21, 2022(1)

 

Is this accurate? Are we out of debt? What does that statement even mean? 

Before I answer these questions, it’s important to note that the United States Federal Government operates on a fiscal year, not a calendar year. A fiscal year is a 52- or 53-week period used by governments and businesses for financial planning, scheduling, and reporting purposes. (2) The U.S. Federal Government’s fiscal year runs from October 1st through September 30th of the following year. 

What is a federal deficit? Simply put, a federal deficit occurs when the government spends more money (expenses) than what it brings in (tax revenue). 

Is what the President said accurate?  Yes. The U.S. Department of the Treasury released the numbers and In Fiscal Year 2022, the U.S. Government spent $6.27 trillion while the total revenue earned was $4.9 trillion. This leaves a deficit of $1.38 trillion. According to a joint statement released by Janet Yellen, Secretary of the Treasury, and Shalanda Young, Director of the Office of Management and Budget, that figure is a decrease of more than 50% from 2021. (3)

Does that mean the United States is out of debt? No. The national deficit is different from the national debt. The national debt is the sum of all of the national deficits, plus any interest owed, minus any repayments the government has made towards the total debt amount. As of this writing, the federal government is in a debt (brace yourself)of over $31 trillion.(4)

Has the U.S. ever run in surplus? Yes. Believe it or not, the federal government has shown a surplus 5 times over the last 50 years. A surplus is the opposite of a deficit and occurs when more money is earned by the government than what it spends during their fiscal year. 

Why did the deficit drop? This answer depends on who you ask. If you ask the President’s Administration, it’s due to his economic policies. According to the Treasury Department, the reduction was due to the ending of many pandemic emergency spending, which includes most of the American Rescue Plan, and an increase of tax receipts. 

 

  1. https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/10/21/remarks-by-president-biden-on-historic-deficit-reduction/
  2. https://www.thebalancemoney.com/fiscal-year-definition-federal-budget-examples-3305794
  3. https://home.treasury.gov/news/press-releases/jy1043
  4. https://www.pgpf.org/national-debt-clock#:~:text=The%20%2431%20trillion%20gross%20federal,to%20measure%20our%20national%20debt.