From August 2022 to this July, the federal government spent roughly $6.7 trillion while bringing in roughly $4.5 trillion. That represents a total increase in spending of 16 percent relative to last year and a 7 percent decrease in revenue, according to the Committee for a Responsible Federal Budget.
The deficit fell dramatically the year before in large part because of the expiration of trillions in emergency covid aid approved during the Trump and Biden administrations. But even as covid spending continued to fall this year, other factors pushed overall spending up.
The Treasury Department is also on track to take in substantially less in new revenue this year, in part because of the stock market’s slump last year. In 2021, amid a cryptocurrency bubble and an explosion in housing prices driven by rock-bottom interest rates, investors recorded huge gains that led them to pay capital gains taxes at record levels. But then the bubble burst, leading to a sharp drop in capital gains tax revenue. Automatic adjustments to the tax brackets to account for inflation also reduced tax obligations for many Americans, resulting in less incoming revenue relative to last year.
Then a number of other spending increases contributed to the rising deficit — Social Security payments increased because they are indexed to inflation; the government spent more on education, veterans benefits and health care; and the bipartisan infrastructure law, as well as the 2022 Inflation Reduction Act, started sending billions of dollars out from the government’s accounts.
Experts are fiercely divided on the extent to which the higher deficit amounts to a pressing problem for the economy.
Federal tax receipt and spending data.