U.S. Public Finances Better than Pre-Pandemic

On June 15th, Eurostat will release its analysis of government finances for the first quarter of 2022. These will be the first numbers since the general end of pandemic-related policy measures.

Corresponding data for the U.S. economy show that American public finances have recovered from the pandemic. The numbers for the first quarter of this year were released by the Bureau of Economic Analysis with the May 26th package of data on gross domestic product and corporate profits. They show a 30% rise in revenue for the federal government over the pre-pandemic first quarter of 2019. Current expenditures have increased by 25%over the same period.

While the U.S. government is running a larger deficit for the first quarter of 2022 than for the same period in 2019—$237.7 billion vs. $226.9 billion—the deficit as share of total spending has declined from 19.4% to 16.3%. 

The strongest rise in revenue came from U.S. government assets (up 61% since Q1 2019), followed by taxes on corporate income (up 45%). 

The U.S. states and local governments took in 32% more revenue in Q1 of 2022 compared to Q1 of 2019. Spending was up 17.6%; a result of the faster increase in revenue is a total budget surplus of $44.7 billion. This is an almost exact mirror image of the Q1 2019 aggregated deficit of $44.9 billion.

Almost the entire surplus in the state-and-local government sector is accounted for by an excess increase in federal aid paid out to state governments. A disproportionate 61% rise in federal aid to states (general revenue increased 32%) is almost exactly equal to the consolidated budget surplus for the sector. 

All in all, U.S. government finances have improved since before the pandemic. The numbers released by Eurostat on June 15th will indicate whether the same is true in the European Union.