Federal Budget Deficit Narrowed in December

In December of the previous fiscal year, the government ran a deficit of roughly $144 billion.

The monthly deficit last month was the smallest since December 2019, when it was roughly $13.3 billion. Receipts from individual withheld and payroll taxes were up 44% in December compared with the same period in the previous year, which Treasury officials said was partially due to employers nearing a deadline to pay payroll taxes they had been allowed to defer as part of federal coronavirus relief.

The level of federal spending and deficits has drawn attention in recent months as President

Biden

pushed for a roughly $2 trillion spending bill for education, climate initiatives and other social programs. The legislation is stalled amid opposition from Sen.

Joe Manchin

(D., W.Va.), a key vote in the closely divided Senate, who has repeatedly raised concerns about additional, large-scale government spending following previous rounds of federal pandemic aid.

Wednesday’s data show the U.S. is running a smaller deficit so far in the current fiscal year, which began in October, than in the previous one. The cumulative deficit in the first three months of the fiscal year stood at $378 billion compared with $573 billion at the same point the prior year.

Federal receipts have risen at a faster rate than outlays during the first quarter of the fiscal year, partly reflecting an increase in workers’ taxable wages and salaries.

The federal government so far in the fiscal year doled out more in refundable tax credits, such as the expanded child tax-credit program, and Social Security payments, according to the Congressional Budget Office. Spending on unemployment programs, Medicare, Medicaid and interest on the public debt all fell over the quarter compared with the same period in the previous fiscal year.

The federal government this fiscal year is beginning implementation of a roughly $1 trillion infrastructure bill that became law in November 2021. The Treasury Department is also still administering several portions of the $2 trillion pandemic aid package that Congress passed last March—including assistance for state and local governments, rental relief and small-business funding—although several of the bill’s other programs have ended. The Labor Department has seen its spending drop sharply this fiscal year following the expiration of special pandemic unemployment programs, for example.

Mr. Biden and Democrats have continued to push for the passage of the social-spending bill, but its fate remains unclear. Congress last month did raise the nation’s debt limit by $2.5 trillion to roughly $31.4 trillion, a level private analysts project should allow the federal government to meet all of its financial obligations through 2022.

Write to Amara Omeokwe at amara.omeokwe@wsj.com