The executive actions of President Joe Biden, particularly those concerning student loan debt cancellation, have been identified as a significant factor in the projected $400 billion increase in the federal government's deficit for 2024, as reported by Gateway Pundit.
The Congressional Budget Office (CBO) released an updated estimate on Tuesday, indicating that the deficit is expected to reach a staggering $1.9 trillion.
The CBO's report revealed that the cost of Biden's student loan cancellation is projected to be $145 billion more than the agency's February estimate. The CBO also cautioned that their projection could be underestimated by $66 billion, contingent on whether a rule change on student loans by the Biden administration can be finalized by the end of the fiscal year on September 30. If this rule change is implemented, the total increase in cost could escalate to as much as $211 billion for the year, according to calculations by The Wall Street Journal.
In August 2023, the U.S. Supreme Court ruled against Biden's original student loan forgiveness plan, asserting that the president had exceeded his executive authority. The plan, which was based on language found in the HEROES Act of 2003, was estimated to cost $430 billion. The Court, in its 6-3 decision, stated, It is highly unlikely that Congress authorized such a sweeping loan cancellation program through such a subtle device as permission to modify, quoting from case precedent. The justices emphasized that such major questions must be decided through congressional action.
Following this ruling, Biden announced several smaller steps, relying on different legal authority. However, these moves are also being challenged in court. Apart from the administrations student debt cancellation programs, other factors contributing to the $400 billion increase in this years deficit include the $95 billion defense appropriations for the wars in Ukraine and Israel, as well as shoring up allied military preparedness in the Indo-Pacific region Congress passed in February. Additionally, the federal government incurred $70 billion in costs due to bank failures.
Medicaid costs were $50 billion higher than expected, and the federal government passed $60 billion more in new discretionary spending programs. A significant component of the federal budget deficit overall is the increased interest payment costs in servicing the national debt, which is expected to exceed $1 trillion by fiscal year 2026.
The Federal Reserve provided a graphic showing that U.S. interest payments this year will surpass the total cost of funding the Defense Department, which has been the largest single ticket item besides the entitlement programs of Social Security and Medicare. The nonpartisan Committee for a Responsible Federal Budget further broke down the interest payment number for the fiscal year, which ends on Sept. 30. At a projected $870 billion, interest will surpass total spending on national defense ($822 billion) in 2024 and grow well beyond the defense budget over time, the CRFB said.
Comparatively, net interest payments on the debt were $223 billion in fiscal year 2015 and $352 billion in fiscal year 2021, which included Bidens first nine months in office. Major new spending that passed under Biden included the $1.9 trillion American Rescue Plan, which had no Republican support in Congress; the $1 trillion infrastructure bill, which garnered some GOP support in the Senate and a handful of members in the House; and the Inflation Reduction Act, which had no GOP backing.
In April 2023, researchers at the University of Pennsylvanias Wharton School of Business, in collaboration with the investment firm Goldman Sachs, updated their estimated cost of the IRAs green initiatives from $385 billion over a 10-year period to more than $1 trillion. The Wall Street Journals editorial board, in a Wednesday opinion piece titled Soaring U.S. Debt Is a Spending Problem, noted that federal revenue as a percentage of Gross Domestic Product (the total size of the economy) has been stable.
Revenue is expected to total 17.2% of GDP this yearroughly the 50-year average before the pandemic, but, they added that spending is expected to hit 24.2 percent of GDP this year. It has only exceeded 24 percent once since World War II, in 2009, during Barack Obamas first year in office where he addressed the financial crisis via a stimulus binge.
Total federal expenditures in FY 2023 were $6.1 trillion, not far behind the $6.6 trillion spent in 2020 during the height of the pandemic. This compares to a pre-pandemic $4.4 trillion with a $984 billion deficit in fiscal 2019 under then-President Donald Trump. If spending as a share of GDP remained at the pre-pandemic average, the deficit would be roughly $890 billion this year, the editorial board noted.
They suggested that if Trump wins in November and wishes to maintain his current tax policies, the best way to finance that is by repealing the Biden spending blowouts in the Inflation Reduction Act, student-loan write-offs and pandemic-era welfare expansions. Failing to take on that challenge means either a monumental tax increase or a debt panic down the road. This piece was originally published on The Western Journal.
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