President Joe Biden will likely tout a decreasing federal budget deficit in his 2023 State of the Union address Tuesday night. In October 2022, President Biden celebrated what he called “record” deficit reduction on his watch:
“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.
Let me repeat that: the largest-ever decline in the federal deficit.”
Is President Biden correct?
Yes, but his remarks require context.
The deficit did, indeed, decline by $1.4 trillion from fiscal year (FY) 2021 to FY 2022 on President Biden’s watch, from $2.775 trillion in FY 2021 to $1.377 trillion in FY 2022.
What President Biden did not share is that the $1.337 trillion deficit in FY 2022 is more than the three times the 30-year historical average deficit before COVID-19, and marks the fourth largest annual deficit on a nominal basis in U.S. history.
The only years with higher deficits were 2020 ($3.132 trillion), 2021 ($2.775 trillion), and 2010 ($1.413 trillion), according to the nonpartisan Congressional Budget Office.
The historic decrease President Biden references is largely due to the end of special pandemic-related government spending programs, including massive rebate checks sent to tens of millions of Americans, the Paycheck Protection Program, and expanded Child Tax and Earned Income Tax Credits. Those policies, some of which earned the support of both Republicans and Democrats during the Trump administration and some of which only earned the support of Democrats in the early months of the Biden administration, contributed to a record $5.9 trillion in deficits over just two fiscal years (2020 and 2021).
The upcoming fiscal year, Biden’s third as president, is projected to have a deficit of near $1 trillion. This would not be the highest on record but would still be more than double the 30-year historical average before COVID-19.
When President Biden mentions the deficit drop during his administration, he should clarify that this is not due to reductions in spending other than the expiration of pandemic spending, and that the deficit after this reduction is still at a historically high level.