US Government Posts 2nd Budget Surplus of Fiscal Year 2023

The Treasury Department building in Washington, on Jan. 19, 2023. Saul Loeb/AFP via Getty Images

The U.S. government recorded an $89 billion budget surplus in August, a swing from a $220 billion deficit in the same month a year ago, according to the Department of the Treasury.

The primary reason for the better-than-expected number? Technical government accounting.

The Biden administration had planned to spend $319 billion on the White House’s student loan forgiveness program. However, after it was blocked by the U.S. Supreme Court, the funds went unspent, allowing Washington to record a surplus rather than a wider deficit.

That decision created the first monthly budget surplus since April, led by a 63 percent year-over-year decline in outlays, totaling $194 billion. Revenue tumbled 7 percent, to $283 billion.

However, for the first 11 months of the fiscal year that ends on Sept. 30, the total budget deficit stands at $1.524 trillion, up 61 percent from the year-ago period.

President Joe Biden’s student loan forgiveness initiative would have steered as much as $20,000 in relief to millions of borrowers facing outstanding debt levels.

U.S. Supreme Court Chief Justice John Roberts, writing for the conservative supermajority, explained that the administration’s immense student debt cancellation plan couldn’t “fairly be called a waiver.”

“It not only nullifies existing provisions but augments and expands them dramatically,” Justice Roberts wrote. “However broad the meaning of ‘waive or modify,’ that language cannot authorize the kind of exhaustive rewriting of the statute that has taken place here.”

This month, interest on student loans started accruing. Payments will begin next month.

Meanwhile, spending was led by Social Security ($116 billion), Medicare ($73 billion), health care ($71 billion), defense ($70 billion), and net interest ($69 billion). Year to date, interest payments have totaled $864.731 billion.

The rolling 12-month deficit was $2 trillion, down $310 billion from the previous month, according to the Committee for a Responsible Federal Budget.

Over the past year, federal spending has totaled 24.1 percent of gross domestic product, up from 23.7 percent year-over-year. That’s been driven by higher spending for Social Security, Medicare, and interest payments.

On the Double

The federal deficit is expected to double from $1 trillion last year to $2 trillion in the current fiscal year, according to the Congressional Budget Office (CBO). The problem has been that revenues are about 10 percent lower, and outlays are 3 percent higher than the previous year.

The budget watchdog noted in its monthly budget review that the gap will widen when President Joe Biden’s plan to forgive student loans is excluded. However, when the president’s proposal is included, the deficit will be roughly $330 billion less due to accounting adjustments.

“The deficit was larger in 2022 and is smaller in 2023 by amounts that are largely offsetting because of actions related to the administration’s planned cancellation of outstanding student loans for many borrowers,” CBO researchers wrote. “The cancellation was never implemented because of the Supreme Court’s June 2023 decision prohibiting it.”

Before the Treasury’s monthly budget statement was released, the CBO projected that the U.S. government would post a budget surplus of $90 billion in August, compared to the $220 billion deficit in the same month a year ago.

Meanwhile, the latest Treasury information comes after Torsten Slok, chief economist at Apollo Global Management, warned that nearly one-third of all publicly held, outstanding U.S. government debt is poised to mature within the next 12 months.

That totals $7.6 trillion.

Mr. Slok also noted that daily interest payments have risen to $2 billion from $1 billion over the past 12 months.

Last month, the Treasury Department confirmed plans to borrow more than $1 trillion in the third quarter and another $852 billion in the fourth quarter.

Since 2001, the federal government has spent more money than it takes in, forcing Washington to borrow.

Government Shutdown

The new fiscal year starts on Oct. 1, and Congress has yet to pass any of the dozen appropriations bills that are supposed to be enacted each year or a stopgap spending law to delay any issues that might force a government shutdown.

Twenty hard-line House Republicans are demanding fiscal concessions from congressional leadership.

“If a temporary shutdown is more concerning to you than our $2 trillion deficit and $33 trillion national debt, I'd politely suggest you’re part of the problem,” Rep. Ralph Norman (R-S.C.) wrote on X, formerly Twitter, on Sept. 5.

According to Rep. Eli Crane (R-Texas), the 20 House Republicans are requesting border security, an end to the weaponization of the Department of Justice and FBI, an eradication of “woke” military policies, and “ripping up the blank check to Ukraine.”

“Nothing happens in this town without force,” Mr. Crane posted on X.

But House Speaker Kevin McCarthy (R-Calif.) and Senate Majority Leader Chuck Schumer (D-N.Y.) plan to pass short-term funding legislation by the end of the month to ensure a full-year agreement.

Some observers are skeptical that either side will accomplish anything that reins in the skyrocketing national debt and ballooning federal deficit.

“Neither party will fix the deficits. Neither party will do anything about mounting debt,” said Mike Shedlock, a registered investment adviser representative for SitkaPacific Capital Management and author of the blog “Mish Talk.”

“No one will do anything about anything because the political system is totally broken.”