https://www.huffpost.com/entry/biden-budget-deficit-student-loans_n_6352ca63e4b051268c547ecc
<https://www.huffpost.com/entry/biden-budget-deficit-student-loans_n_6352ca63e4b051268c547ecc>
Budget Deficit Figures Set Up Competing Visions From Biden And GOP
The budget deficit has roughly halved in size, but critics say student loan
forgiveness adds unnecessary red ink.
Oct 21, 2022
This fiscal year’s budget deficit shrunk in half from last year, but the red
ink soared on a monthly basis in September largely because of President Joe
Biden <https://www.huffpost.com/news/topic/joe-biden>’s plans to forgive
student debt
<https://www.huffpost.com/entry/biden-administration-opens-student-loan-forgiveness-application_n_634dce93e4b0b7f89f59c12e>,
as three decades’ worth of costs were compressed into a single month.
The budget figures released Friday by the Treasury Department reveal dueling
visions about what it means to be financially responsible: Biden can rightly
claim that the budget deficit for fiscal 2022 plunged $1.4 trillion from the
prior year; critics can use the same report to say that forgiving education
loans pushed up the federal debt by roughly $400 billion as the government
booked the full expense.
Buried in the numbers is a deeper battle between Democrats
<https://www.huffpost.com/news/topic/democratic-party> and Republicans
<https://www.huffpost.com/news/topic/republican-party> about what it means to
be good financial stewards. The federal budget deficit totaled $1.38 trillion
this year. That’s down from $2.78 trillion in fiscal 2021 —and it’s a message
that Biden wants to sell to voters going into the midterm elections.
“Today we have further proof that we’re rebuilding the economy in a
responsible way,” Biden said in remarks at the White House. “Republicans in
Congress are doubling down on a commitment to explode the deficit again.”
The annual deficit roughly halved in size because of the end of spending tied
to coronavirus pandemic relief and higher tax revenues as more Americans
found jobs — an improvement that Biden credits to his policies.
Republicans counter that Biden’s $1.9 trillion coronavirus relief plan that
helped fuel those job gains also helped to trigger high inflation, a key
concern of voters going into the midterms. They also want to reverse his
recent 15% minimum tax on corporations and expanded funding for the IRS, even
though both could reduce forecasted deficits.
The government will likely need to raise its legal capacity to borrow and
House Republican leader Kevin McCarthy has signaled that he would push for
spending cuts if the GOP gains a majority.
“You can’t just continue down the path to keep spending and adding to the
debt,” McCarthy said in an interview this week with Punchbowl News. “There
comes a point in time where, okay, we’ll provide you more money, but you got
to change your current behavior. We’re not just going to keep lifting your
credit card limit, right?”
Biden interpreted those comments as a threat to hold U.S. government funding
hostage and possibly make it impossible for the government to repay its debt.
“They will crash the economy next year by threatening the full faith and
credit of the United States, for the first time in our history putting the
United States in default unless unless we yield to their demand to cut Social
Security, Medicare,” Biden said.
Administration officials have argued that the forgiveness of student debt
will allow borrowers to achieve life milestones such as buying a home and
starting a family. Republican lawmakers counter that the forgiveness is a
giveaway that disadvantages blue collar workers and those who did not attend
college.
The monthly report added to those tensions, as much of the cost of debt
forgiveness was booked in September, even though the repayment of the loans
would have likely occurred over several years.
Biden in August announced $10,000 in federal student debt cancellation for
those with incomes below $125,000 a year, or households that make less than
$250,000 a year. Those who received federal Pell Grants to attend college are
eligible for an additional $10,000 in forgiveness.
Biden’s plan makes 20 million people eligible to get their federal student
debt erased entirely.
States and groups affiliated with Republicans have filed lawsuits to try to
block the forgiveness. A federal judge on Thursday dismissed a suit from six
GOP-led states, saying the states lacked legal standing, a decision that the
states intend to appeal.
Federal finances improved over the past 12 months as the unemployment rate
dropped to 3.5% from 4.7% in September 2021. The job gains enabled tax
revenues to jump 21% from a year ago, while overall spending fell 8% as the
government’s coronavirus-related aid has faded.
In May, the Congressional Budget Office expected the federal deficit to fall
in 2023 and then start to rise in the years ahead to $2.25 trillion a decade
from now.
