WASHINGTON, Oct 21 — The US government today reported that its fiscal 2022 budget deficit plunged by half from a year earlier to US$1.375 trillion (RM6.51 trillion), due to fading Covid-19 relief spending and record revenues fuelled by a hot economy, but student loan forgiveness costs limited the reduction.
The US Treasury said the US$1.400 trillion reduction in the deficit was still the largest-ever single-year improvement in the US fiscal position as receipts hit a record US$4.896 trillion, up US$850 billion, or 21 per cent from fiscal 2021.
Outlays for fiscal 2022, which ended September 30, fell by a record US$550 billion, or 8 per cent from last year to US$6.272 trillion. But the outlays for September, the fiscal year’s final month, included the recognition of US$430 billion in costs from the Biden administration’s plan to forgive student debt of up to US$20,000 for former college students now earning under US$125,000 a year and under US$250,000 for married couples.
The move brought the September budget deficit to US$430 billion, more than six times the prior-year September deficit of US$65 billion. In most years, September is a surplus month due to the payment of quarterly corporate and individual taxes.
The Congressional Budget Office estimated that the plan would cost about US$400 billion. It also includes the extension of a Covid moratorium on all student loan payments until the end of 2022, which added about US$21 billion in budgetary costs.
Non-governmental budget analysts have estimated that the plan would wipe out a much-touted deficit reduction from Democrats’ recently enacted climate, healthcare and Internal Revenue Service funding bill.
Revenue gains during September started to slow from prior months, growing only 6 per cent from a year earlier to US$488 billion.
And the CBO is projecting that with the economy slowing further amid higher Federal Reserve interest rates, revenues will slow further and deficits will start to rise in future years. Rising interest costs also will start to consume a bigger share of the federal budget, the non-partisan fiscal referee agency predicts.
Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, a fiscal watchdog group, said the effect of recognizing the student loan forgiveness costs in fiscal 2022 will be to show a steadier decline in deficits from the pandemic — rather than a sharper narrowing to around US$1 trillion, followed by an increase to around US$1.4 trillion for fiscal 2023.
The CBO had forecast a fiscal 2023 deficit of about US$984 billion, with deficits rising steadily thereafter to nearly US$2 trillion by 2030.
“I think it’s more appropriate to recognize the costs as the debt is being canceled, and the bulk of that will happen in fiscal 2023. But the government has latitude here,” he said in a phone interview prior to the release. “They’re not doing anything illegal.”
Should courts strike down the student debt plan, the government could be forced to recognize a sudden reversal of the costs, or a smaller reversal could come if take-up is less than projected, he said. — Reuters
