President Joe Biden has often touted that his administration has cut the federal deficit, sometimes communicating that r
ecord more accurately than others.Before Biden’s third State of the Union address, we wanted to take a deeper look into the reasons for the declining deficit.
The federal deficit is calculated by subtracting federal spending from federal revenue, primarily tax collections, for a given year. If revenue exceeds spending, there’s a surplus for that year; if spending exceeds revenue, there’s a deficit. A smaller deficit does not mean the federal debt has been reduced; only a surplus can do that. A smaller deficit means only that the debt grows more slowly than it did before.
But the coronavirus pandemic sent the annual deficit into record territory. In 2020, Trump’s fourth year, the deficit skyrocketed to $3.13 trillion, largely because of government stimulus payments, unemployment insurance expansions, business operation grants and increased funding for public health. The $1.4 trillion decline in the deficit from 2021 to 2022 was larger than any previous one-year reduction in the deficit.The White House told PolitiFact that Biden deserves some credit for successfully tamping down the pandemic, which was aided by the administration’s embrace of vaccinations.
Even at its reduced levels, the deficit remains higher under Biden than it was pre-pandemic. The deficit in 2022 and 2023 under Biden was higher than in each of Trump’s first three years, partly because of bills such as the 2021 American Rescue Plan.
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