The numbers: The U.S. budget deficit narrowed to $66 billion in May from double that amount a year earlier, keeping it on track to fall below $1 trillion in fiscal 2022 for the first time since the start of the pandemic.
Key details: Government spending declined in May by 24% to $455 billion compared to outlays of $596 billion in the same month one year ago.
Most of the dropoff reflects the end of federal stimulus payments to businesses and individuals. The government doled out hundreds of billions of dollars in relief payments last year.
The amount of taxes collected last month fell by 16% to $389 billion from a year earlier, but mainly because the government collected more taxes in April. Total receipts in April hit a record high.
Last year, the government pushed back tax filings because of the pandemic. That helped boost tax receipts in May. This year the deadline was moved back to its original April date.
For the first eight months of the current fiscal year, the deficit totaled $426 billion compared to $2.1 trillion in the same period last year.
The fiscal year began Oct. 1 and ends Sept. 30.
Big picture: The big decline in government spending could reduce consumer and business demand and perhaps even help a little bit in the fight against high inflation. But deficits are likely to remain high for years to come barring a big change in federal spending trends.
The one big surprise has been a huge increase in individual and corporate taxes, but receipts could slow if the economy takes a turn for the worse. The government has taken in $3.38 trillion in taxes so far in fiscal 2022 vs. $2.61 trillion in the same period last year.
The Federal Reserve is primed to raise interest rates rapidly to try to quell the worst outbreak of inflation in 40 years, a strategy that risks plunging the U.S, into recession if the central bank makes a misstep.
The U.S. national debt recently topped $30 trillion.