White House revises fiscal 2022 deficit projection lower

US President Joe Biden, surrounded by Democratic lawmakers, signs the Inflation Reduction Act, at the White House, on Aug 16, 2022. PHOTO: EPA-EFE

WASHINGTON (REUTERS) - The White House on Tuesday (Aug 23) revised down its projected fiscal 2022 deficit to US$1.032 trillion (S$1.4 trillion), a US$383 billion reduction from its budget forecast in March, reflecting stronger-than-expected revenues offset by new spending and technical re-estimates of healthcare and other outlays.

The White House’s mid-session budget review includes the impact of legislation passed since President Joe Biden’s administration proposed its fiscal 2023 budget in March, including the Consolidated Appropriations Act and a supplemental spending Bill to help Ukraine fight the Russian invasion.

The new forecasts, completed on June 9, do not include legislation passed since then, including a US$52 billion semiconductor and research subsidy act and a US$430 billion package of tax increases and healthcare and clean energy investments.

The latter law is expected to reduce deficits further.

The biggest part of the reduced deficit projection for fiscal 2022 comes from a US$504 billion increase in revenues above levels forecast in March, mainly due to higher individual income tax receipts spurred by stronger job and wage growth, but also from increased corporate and excise taxes.

Outlays increased US$121 billion from the March forecast, largely due to spending legislation passed earlier this year, and estimated increases in net interest costs and higher spending on Medicaid healthcare for the poor, as well as student loans and financial assistance.

The White House also adjusted down its economic projections, with 2022 US real GDP growth cut sharply to 1.4 per cent from 3.8 per cent in March, based on fourth-quarter comparisons.

It cited the resurgence of the Covid-19 Omicron variant, the war in Ukraine, persistent inflation and higher interest rates for the slowdown.

It revised its inflation projection for 2022 to 6.6 per cent, now in line with private forecasters, from 2.9 per cent in the March forecast.

The forecast revises the 2022 average unemployment rate slightly lower, to 3.7 per cent from 3.9 per cent in March, with much of the next decade at 3.8 per cent.

The fiscal year ends Sept 30, 2022.

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