The federal budget deficit totaled $2.8 trillion in fiscal year 2021, the U.S. Treasury Department announced Friday. The results were in line with the estimate released by the Congressional Budget Office two weeks ago.
Surging tax payments helped trim the deficit, which ended up $360 billion smaller than the record level reported in 2020, and $897 billion less than projected by the White House in February.
Government spending rose 4.1% to $6.82 trillion in fiscal year 2021, the Treasury Department said, while tax receipts topped $4 trillion, $465 billion higher than White House estimates.
Relative to the size of the economy, the deficit equaled 12.4% of gross domestic product, down from 15% in fiscal year 2020.
Though the deficit is still at unusually high levels, Treasury Secretary Janet Yellen said the fact that it is starting to shrink is a good sign. “Today’s joint budget statement is further evidence that America’s economy is in the midst of a recovery,” Yellen said, attributing the positive momentum to the Biden administration’s American Rescue Plan.
At the same time, Yellen warned that the recovery is still “fragile,” and called for Congress to pass President Biden’s Build Back Better plan, which she said would help “grow the economy, help workers and families, and strengthen our nation’s long-term fiscal outlook.”
The CBO estimates that the deficit will fall to $1.15 trillion in fiscal year 2022 and dip below $1 trillion for three years before climbing above $1 trillion again through 2031.