Federal Monthly Deficit Jumps 562 Percent as Biden’s Student Relief Costs Hit
The Treasury Department said Friday that the monthly federal deficit in September was over 500 percent higher than in the comparable month last year, with the unusually large jump due to President Joe Biden’s student debt relief costs being booked in one fell swoop.
The federal agency said in a statement (pdf) that the monthly deficit in September 2021 was $64.9 billion.
Last month, that figure ballooned to an eye-popping $429.7 billion, an increase of around 562 percent.
The deficit surge is because, in September, the government booked the full expense of Biden’s student debt relief program, effectively compressing three decades’ worth of costs into a single month.
The move to reflect the entire cost as a one-time item came as little surprise, with a senior administration official telling the Wall Street Journal at the beginning of October to expect as much.
Including the cost of the student debt relief in the budget for the 2022 fiscal year, which ended at the end of September, means that those costs won’t be reflected in the 2023 fiscal year.
Some economists said booking the full expense now makes for good optics for the Biden administration in that it gives the president more leeway to claim deficit reduction next year.
“My cynical answer is they did it this way so next year they can say the deficit is lower,” economist Marc Goldwein of the Committee for a Responsible Federal Budget told The Washington Free Beacon.
“If instead they put it in the 2023 fiscal year, it would look more obvious that they’re increasing the deficit,” he said.
The federal budget deficit totaled $1.38 trillion this year, including the $400 billion or so in student debt relief. That’s down from $2.78 trillion in fiscal 2021.
Tacking on student debt cancellation costs this year means that, if spending stays roughly constant, the Biden administration is looking at a deficit of around $1 trillion next year, which would be a further reduction from this year’s $1.4 trillion.
The annual deficit roughly halved in size in the 2022 fiscal year because of the end of spending tied to COVID-19 pandemic relief and higher tax revenues as more Americans found jobs. Biden has attributed the deficit drop to his policies.
“Despite what Republican officials say, we can afford student relief,” Biden said at the White House on Oct. 21. “Folks, in just 20 months since I’ve been in office, we cut the deficit in half.”
Republicans have criticized Biden’s student loan cancellation scheme as unfair, calling it a giveaway that puts blue-collar workers and those who didn’t attend college at a disadvantage.
Biden administration officials have argued that forgiving student debt will make it easier for borrowers to achieve life milestones like buying a home and starting a family.
The National Taxpayers Union Foundation (NTUF) once estimated the student debt cancellation scheme would impose a burden of between $386 billion and $405 billion in net costs on taxpayers—equivalent to every single American taxpayer having to pay around $2,500.
A study from the Wharton business school at the University of Pennsylvania found the price tag could be between $469 billion and $520 billion.
The Biden administration’s own estimates are lower, at around $380 billion.
The Treasury statement showed that outlays on the Department of Education for September were $445.6 billion, which is $412.1 billion more than August’s $33.5 billion.
The roughly $400 billion difference is in line with estimates for the price tag of Biden’s student debt relief.