White House cuts 2023 US deficit forecast after student loan forgiveness struck down
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The US Supreme Court ruled that the Biden administration had overstepped its authority with its plan to wipe out more than US$400 billion (S$532 billion) in student debt.
PHOTO: REUTERS
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WASHINGTON – The White House on Friday revised its fiscal 2023 United States budget deficit forecast to US$1.543 trillion (S$2.1 trillion), a decrease of US$26 billion from its March budget forecast, due largely to a major reduction in outlays after the US Supreme Court struck down President Joe Biden’s student loan forgiveness programme.
The Office of Management and Budget (OMB) said in its mid-session review update that the student loan decision would reduce outlays by US$259 billion, offset partly by an increase in spending due to rule changes for income-driven repayments.
The Biden administration had taken a pre-emptive charge of US$430 billion against fiscal 2022 budget results, increasing the deficit that year. The US$259 billion reduction in outlays only partly reverses those costs after the Covid-19 general student loan repayment moratorium was extended through September 2022 when interest starts to accrue.
The reduction was offset by increases in 2023 outlays for Social Security and Medicare and the Federal Deposit Insurance Corporation, while decreases for the unemployment compensation and the Child Tax Credit categories led to a net reduction in outlays of US$242 billion in 2023.
Estimates for clean energy tax credit costs associated with Biden’s Inflation Reduction Act were US$4 billion higher than previously forecast for 2023, and US$120 billion higher over a decade.
The reduction in outlays for 2023 was substantially offset by a US$215 billion net reduction in receipts, mostly due to lower collections to date and technical revisions based on new tax reporting data, the budget office said.
Economic forecast changes had little impact on the budget forecast revisions, increasing 2023 receipts by only US$4 billion compared to March forecasts. Based on data as of June 1, OMB left unchanged its forecast for 2023 US real gross domestic product growth of 0.4 per cent, while decreasing its 2024 growth forecast to 1.8 per cent from 2.1 per cent
But OMB forecast lower unemployment in 2023 at 3.8 per cent compared to 4.3 per cent in March, while it forecast 4.4 per cent unemployment in 2024, down from 4.6 per cent in March. REUTERS
