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Remember when the White House suggested, only weeks ago, that President Biden’s student-loan cancellation wouldn’t add much to the federal budget deficit this year? That turns out to be false. The Congressional Budget Office made that clear Tuesday in reporting that the write-off would cost some $426 billion and push the federal deficit to $1.4 trillion for all of fiscal 2022 that ended on Sept. 30.
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As recently as May CBO said the deficit would come in at $1 trillion or so. Tax receipts have since come in $60 billion more than estimated. But outlays soared by $401 billion more. The budget gnomes note in their deathless prose that the increase “primarily stems from $426 billion in costs estimated and recorded by the Administration in September 2022 to reflect the long-term costs of certain forms of student debt relief.”
CBO is obliged to account for the present value of the cancellation costs under the Federal Credit Reform Act. But it adds that the $426 billion doesn’t cover the costs of Mr. Biden’s new income-driven replacement plans that haven’t been finalized. You can probably add at least a couple hundred billion more from those forgiveness plans.
The total deficit fell sharply from fiscal 2021 as many pandemic-era programs finally lapsed. But it should have been much lower because taxpayers sent a remarkable $850 billion more to Washington than in 2021.
Individual income taxes rose 29%, or $593 billion in fiscal 2022; payroll taxes by 13%, and corporate income taxes rose $53 billion, or 14%. Overall federal tax receipts rose 21% for the year to reach $4.9 trillion, by far the biggest tax haul ever.
Nancy Pelosi
thanks you, or at least she ought to.
The fiscal problem is that spending didn’t fall nearly as fast as revenues rose. Outlays were down only 8% in the year to $6.3 trillion. Medicaid spending in particular keeps climbing despite the economic recovery, rising 14% to $593 billion.
CBO notes that enrollment in that program that used to be for the poor “has risen largely because” states can’t pare back their rolls even for able-bodied adults who aren’t normally eligible until the pandemic emergency is over. Which is why Mr. Biden won’t officially declare that it’s over, though he said recently on
CBS’s
“60 Minutes” that “the pandemic is over.”
In a sign of deficits to come, CBO says interest payments on the federal debt held by the public rose 29%, or $121 billion, in 2022. As interest rates rise, so will these payments.
We were amused this week to read the assertion in a prominent progressive newspaper that, while Mr. Biden often says things that are false, they usually concern small matters. Does nearly half a trillion dollars in misstated deficit math qualify as small? Asking for a taxpayer friend.
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Appeared in the October 12, 2022, print edition as ‘The Student Loan Bill Comes Due.’
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