The real federal budget deficit is on track to double this year, according to new projections that puncture hopes of a post-pandemic fiscal honeymoon and indicate rough fiscal seas ahead.
With one month to go in the fiscal year, the government is $1.524 trillion in the red, the Treasury Department announced Wednesday.
By the end of this month it will be closer to $1.7 trillion, and that’s only because of accounting tactics surrounding President Biden’s student loan forgiveness plan, which the Supreme Court nixed in June.
Without that, the deficit for fiscal year 2023 would reach $2 trillion, or double what last year’s deficit would have been without the student loan forgiveness tactics, the Congressional Budget Office said.
“At this rate, the Biden administration might as well be taking money straight from people’s pockets,” said Sen. Charles E. Grassley of Iowa, the top Republican on the Senate Budget Committee.
Spending is up this year compared to 2022, which is not surprising given Washington’s general approach to budgeting. But revenue is down, which has surprised analysts who say that’s unusual for a period when the economy is still expanding.
Tax withholdings are up, reflecting that economic growth and the higher wages and salaries it brings. But nonwithholding tax payments are down nearly $280 billion, or 26%, compared to last year. CBO said the decline, which began in January, may be due to lower capital gains realizations.
The result is that over the last 11 months, the government has collected $4.896 trillion in revenue, but spent $6.272 trillion, Treasury reported.
The fiscal year ends Sept. 30.
Projections are for the country to run trillion-dollar deficits for the foreseeable future.
The deficit figures for both last year and this year have been skewed by Mr. Biden’s massive student loan forgiveness plan, which the president announced last year, but the Supreme Court nixed in June.
Because of budget accounting rules, the Treasury Department wrote off $379 billion worth of debt last year, categorizing it as an outlay, or new spending, in the student loan program.
After the court’s ruling, Treasury last month recorded a $330 billion reduction in student loan spending.
That means the deficit last year was artificially inflated, and the deficit this year is artificially lowered, even though the actual debt cancellation was never implemented.
The difference between last year’s write-off and this year’s savings is due to a second, smaller student loan plan the administration finalized in June.
“Excluding the effects of the changing plans for student loans, the deficit is on track to double from $1.0 trillion in 2022 to $2.0 trillion in 2023,” CBO said in its monthly analysis of the government’s budget position.
The student loan situation also skews the government’s overall spending figure.
On the books, the government is spending a modest 3% more this year. But once the student loan money is unwound from those figures, real spending has jumped more than half a trillion dollars, or 10%, CBO said.
Social Security spending is up 11% as the program pays more people, and the payments are higher due to inflation. Medicare spending is up 18%.
Inflation is also doing a number on interest payments on the public debt, which rose 30% to total $644 billion over the last 11 months.
That is now more than the federal government pays for Medicaid, and is nearing the amount allocated to the Defense Department, CBO said.
The Pentagon has seen a 7% increase in spending this year.
The grim numbers come even as the pandemic wanes, and spending on the health emergency slows by hundreds of billions of dollars.