Monthly Budget Review: September 2023

The federal budget deficit was $1.7 trillion in fiscal year 2023, the Congressional Budget Office estimates—$0.3 trillion more than the shortfall recorded during fiscal year 2022. Revenues fell by an estimated $455 billion (or 9 percent). Revenues were smaller than in fiscal year 2022, particularly for nonwitheld income taxes and remittances to the Treasury from the Federal Reserve. Outlays declined by an estimated $141 billion (or 2 percent).

Outlays were boosted at the end of 2022 and 2023 because October 1 (the first day of fiscal years 2023 and 2024, respectively) fell on a weekend. As a result, certain payments were shifted into the prior fiscal year—$63 billion from 2023 into 2022 and $72 billion from 2024 into 2023. Taken together, those timing shifts increased payments in 2023 by $9 billion. If not for those shifts, the deficit in fiscal year 2023 would have been 28 percent larger—instead of 23 percent larger—than it was in 2022.

Actions related to the Administration’s plan to cancel outstanding student loans for many borrowers resulted in largely offsetting changes to the deficit in 2022 and 2023. In September 2022, in keeping with the budgetary procedures used for federal credit programs, the Administration recorded outlays of $379 billion to reflect its estimate of the long-term costs of debt cancellation, which increased the deficit in fiscal year 2022. Because of a June 2023 Supreme Court decision, however, the cancellation plan was never implemented. As a result, in August 2023, the Administration recorded a $333 billion reduction in outlays for the student loan program. That action reduced the fiscal year 2023 deficit.

The outlay savings recorded by the Administration in August 2023 were smaller than the costs recorded in September 2022 primarily because of a new income-driven repayment (IDR) plan that the Administration finalized in June 2023; that plan increased the cost of outstanding student loans. In March 2023, CBO published an estimate for the proposed rule for the IDR plan. Then, in September 2023, CBO posted an estimate for H.J. Res. 88, which would repeal the final rule for that plan.

CBO estimates that if the actions concerning the Administration’s plan for student loan cancellations were excluded from both years, the deficit for 2022 would have been smaller and the deficit for 2023 would have been larger. The deficit for 2022 was $1.3 trillion, after removing the effects of timing shifts. Excluding the cost recorded in 2022 for the student loan cancellation plan, the deficit that year would have been $0.9 trillion. Excluding the savings associated with reversing the effects of that policy, the deficit for 2023 would have been $2.0 trillion, instead of the $1.7 trillion CBO currently projects. Thus, without the effects of debt cancellation (and excluding the effects of timing shifts), the deficit would have grown by nearly $1.1 trillion from 2022 to 2023. That increase results from a combination of lower revenues and higher outlays, mostly for major mandatory programs and for payments of interest on the debt.