Monthly Budget Review: July 2023

The federal budget deficit was $1.6 trillion in the first 10 months of fiscal year 2023, the Congressional Budget Office estimates—more than twice the shortfall recorded during the same period last year. Revenues were 10 percent lower and outlays were 10 percent higher from October through July than they were during the same period in fiscal year 2022.

Outlays in fiscal year 2023 were reduced by the shifting of certain payments—totaling $63 billion—from October 1, 2022 (the first day of fiscal year 2023), into fiscal year 2022 because October 1 fell on a weekend. If not for those shifts, the deficit through July would have been $1.7 trillion.

CBO’s most recent baseline projections, which were published in May, show revenues totaling $4.8 trillion and outlays totaling $6.4 trillion, for a deficit of $1.5 trillion for 2023. On the basis of its estimate of the deficit through July and preliminary estimates of revenues and outlays in August and September, CBO now expects that the total deficit for 2023 will be $1.7 trillion, or about $200 billion larger than the estimate it published in May. Revenues and outlays alike are now anticipated to be below amounts CBO projected in May, but the reduction in revenues is larger.

Revenue collections have been below the amounts CBO projected in the May 2023 baseline, which was completed before the April tax-filing deadline. The smaller subsequent collections suggest that total revenues for the fiscal year are likely to be about $400 billion less than CBO projected.

Outlays will be about $200 billion less than CBO projected in May, primarily because of a Supreme Court decision in June 2023 prohibiting the planned cancellation of outstanding student loan debt for many borrowers. In accordance with the budgetary procedures used for federal credit programs, the Administration recorded the total estimated cost of those cancellations as an outlay in fiscal year 2022. CBO expects the total reduction in costs stemming from the Court’s decision to be recorded in August or September as outlay savings of about $330 billion. That change is not reflected in the year-to-date numbers reported here.

That reduction in outlays will be partially offset by the recorded cost of the new income-driven repayment plan for student loans that was finalized in June; that cost is included in CBO’s estimate of outlays in July. (Only part of that cost was included in CBO’s May projections.) Higher costs for other government programs and for net interest on the public debt also add to the projected deficit.