President Biden’s executive actions to cancel student loan debt are a major contributor to the federal government’s projected $400 billion deficit increase in 2024.
On Tuesday, the Congressional Budget Office released a revised estimate from February, calculating the deficit to total $1.9 trillion.
CBO said in the report that the cost of student loan cancellation for Biden is expected to be $145 billion higher than the agency’s February estimate.
But the Congressional Budget Office noted that their forecast may be $66 billion too low, depending on whether the Biden administration’s changes to student loan rules can be completed before the end of the fiscal year, which is September 30.
The Wall Street Journal calculated that in this scenario, the total cost increase for the year could be as high as $211 billion.
In August 2023, the U.S. Supreme Court rejected Biden’s original student loan relief plan, holding that the president had exceeded his executive powers.
The total cost of the program, based on provisions in the 2003 HEROES Act, is estimated at $430 billion.
In a 6-3 ruling, the court cited precedent and said it was “extremely unlikely” that Congress would have approved such a sweeping loan cancellation program by allowing for such a subtle “modification.”
The justices said such “significant questions” must be decided through congressional action.
Since that ruling, Biden has announced several smaller steps relying on different legal authorities, but those have also been challenged in court.
In addition to the government’s student debt cancellation plan, other factors that will increase the deficit by $400 billion this year include $95 billion in defense funding for the wars in Ukraine and Israel, and increased allied military readiness in the Indo-Pacific.
In addition, the federal government lost $70 billion due to bank failures.
In addition, Medicaid costs were $50 billion higher than expected, and the federal government passed a new discretionary spending plan that added $60 billion.
A major component of the overall federal budget deficit is the increased cost of interest payments on the national debt, which is expected to exceed $1 trillion by fiscal year 2026.
A Federal Reserve chart shows that U.S. interest payments this year will exceed the Department of Defense’s total funding costs, the largest single item after Social Security and Medicare benefit programs.
U.S. federal interest payments now exceed the defense budget. pic.twitter.com/joZadHMP0U
— (((Daily Shot))) (@SoberLook) June 18, 2024
The nonpartisan Committee for a Responsible Federal Budget further broke down the interest payment figures for the fiscal year ending Sept. 30.
“Interest is expected to reach $870 billion in 2024, exceeding total defense spending ($822 billion) and growing well beyond the defense budget over time,” CRFB said.
By comparison, it noted, net interest payments on debt were $223 billion in fiscal 2015 and $352 billion in fiscal 2021, which includes Biden’s first nine months in office.
Some of the major new spending passed under Biden include the $1.9 trillion American Rescue Plan, which has no support from congressional Republicans; the $1 trillion infrastructure bill, which has support from some Senate Republicans and a handful of House members; and There is no Republican-backed Inflation Reduction Act.
In April 2023, researchers at the University of Pennsylvania’s Wharton School of Business, working with investment firm Goldman Sachs, updated the estimated cost of IRA green measures from $385 billion over 10 years to more than $1 trillion.
The Wall Street Journal editorial board noted in a Wednesday opinion piece titled “Spiking U.S. Debt Is a Spending Problem” that federal revenue as a percentage of gross domestic product (the total size of the economy) has remained steady.
“Revenues this year are expected to reach 17.2% of GDP, about the 50-year average before the outbreak,” however, they added, spending this year is expected to reach 24.2% of GDP.
The ratio has exceeded 24% only once since World War II, in 2009, the first year of President Barack Obama’s administration, as he addressed the financial crisis with a “stimulus spree.”
Federal spending totals $6.1 trillion in fiscal year 2023, not far from the $6.6 trillion in 2020 at the height of the pandemic.
That compares with the pre-pandemic deficit of $4.4 trillion and the fiscal 2019 deficit of $984 billion under then-President Donald Trump.
The editorial board noted: “If spending as a share of GDP remains at the pre-pandemic average, this year’s deficit will be about $890 billion.”
They suggested that if Trump wins in November and wants to maintain current tax policy, “the best way to finance it would be to repeal Biden’s spending blowout, student loan write-offs and pandemic-era welfare expansions in the Inflation Cutting Act” “.
“Failure to meet this challenge means either significant tax increases or a future debt panic.”
This article originally appeared in Western Daily News.
