US Government achieves second budget surplus in FY 2023.
The U.S. government recorded an $89 billion budget surplus in August, a significant turnaround from a $220 billion deficit in the same month last year, according to the Department of the Treasury.
This is exciting news as it marks the first monthly budget surplus since April. The surplus was driven by a remarkable 63 percent decrease in outlays, totaling $194 billion. Although revenues dropped by 7 percent to $283 billion, the surplus still stands.
However, let’s not get too carried away. In the first 11 months of the fiscal year, the total budget deficit has reached a staggering $1.524 trillion, a 61 percent increase compared to the same period last year.
The primary reason for this positive budget outcome is an interesting one. It turns out that technical government accounting played a significant role.
The federal government had allocated $319 billion for the White House student loan forgiveness program. However, due to a U.S. Supreme Court blockage, the funds remained unspent. This unexpected turn of events allowed Washington to record a surplus instead of a larger deficit.
President Joe Biden’s student loan forgiveness initiative aimed to provide up to $20,000 in relief to millions of borrowers burdened by outstanding debt. Unfortunately, Chief Justice John Roberts, speaking for the conservative supermajority, deemed the administration’s plan as an extensive rewriting of the statute rather than a fair waiver.
As a result, interest on student loans has started accruing this month, and payments will commence in October.
Meanwhile, the largest spending categories include Social Security ($116 billion), Medicare ($73 billion), health care ($71 billion), defense ($70 billion), and net interest ($69 billion). Year to date, interest payments have reached a staggering $864.731 billion.
According to the Committee for a Responsible Federal Budget, the rolling 12-month deficit currently stands at $2 trillion, a $310 billion decrease from the previous month.
Over the past year, federal spending has accounted for 24.1 percent of the gross domestic product, up from 23.7 percent in the previous year. This increase is primarily driven by higher spending on Social Security, Medicare, and interest payments.
On the Double
The federal deficit is projected to double from $1 trillion last year to $2 trillion in the current fiscal year, according to the Congressional Budget Office (CBO). The main factors contributing to this are approximately 10 percent lower revenues and 3 percent higher outlays compared to the previous year.
The CBO, in its monthly budget review, highlights that the deficit will widen further when excluding President Biden’s plan to forgive student loans. However, when accounting for the proposal, the deficit will be approximately $330 billion lower due to adjustments.
“The deficit was larger in 2022 and is smaller in 2023 by amounts that are largely offsetting because of actions related to the administration’s planned cancellation of outstanding student loans for many borrowers,” wrote CBO researchers. “The cancellation was never implemented because of the Supreme Court’s June 2023 decision prohibiting it.”
Prior to the release of the Treasury’s monthly budget statement, the CBO estimated an August budget surplus of $90 billion, a significant improvement compared to the $220 billion deficit in the same month last year.
Meanwhile, the latest Treasury information follows a warning from Torsten Slok, the chief economist at Apollo Global Management. He revealed that nearly one-third of all publicly held U.S. government debt, totaling $7.6 trillion, is set to mature within the next 12 months. Additionally, daily interest payments have risen from $1 billion to $2 billion over the past year.
Last month, the Treasury Department confirmed plans to borrow over $1 trillion in the third quarter and another $852 billion in the fourth quarter.
Since 2001, the federal government has consistently spent more money than it takes.
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