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Every month the U.S. Treasury releases data on the federal budget, including the current deficit. The following contains budget data for August 2023, the eleventh month of fiscal year (FY) 2023.
The federal government ran a surplus of $89 billion in August 2023, a $309 change from the deficit of $220 billion that was recorded in August 2022. Spending in August 2023 was down by $329 billion relative to the previous year. The significant decrease in spending stems from a $330 billion reduction in outlays for the student loan program related to the budgetary treatment of the program in light of the Supreme Court's decision regarding debt cancellation. Revenues in August 2023 were $21 billion below collections from a year ago, mostly from slightly lower individual income and payroll taxes, as well as smaller remittances from the Federal Reserve.
This year’s cumulative deficit is $578 billion above last year’s level. However, because October 1 fell on a weekend in 2022, certain federal payments were shifted into September (the previous fiscal year), leading to a $63 billion decrease in outlays for this fiscal year. Without those effects, the deficit for FY23 to date would be $641 billion above last year’s corresponding total.
For the first 11 months of FY23, total outlays were $5.5 trillion, $142 billion higher than the same period in the previous year (not adjusting for timing shifts). However, the budgetary treatment of the Administration’s planned cancellation of some student loans--which was never implemented because of the Supreme Court’s recent decision prohibiting it--masks a much larger underlying difference in outlays. In September 2022, in accordance 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 the debt cancellation. In August 2023, though, the Administration recorded a roughly $330 billion reduction in outlays for the student loan program to reflect the Supreme Court’s decision. As a result, outlays were larger in 2022 and smaller in 2023 by amounts that are largely offsetting. If not for the effects of the timing shifts and the student loan adjustment this year, outlays would be up by $535 billion through August.
The largest categories of growth in outlays were for interest payments ($159 billion larger so far in 2023), higher spending for Social Security ($123 billion), a reduction in receipts from the auction of licenses to use the electromagnetic spectrum (which are recorded as offsets to spending and are down by $81 billion), and Medicare ($79 billion). Partially offsetting those increases were the expiration of advance payments for the child tax credit (which were recorded as outlays) and spending on pandemic relief programs for state, local, tribal, and territorial governments and public health.
Through the first 11 months of FY23, total revenues have decreased by $437 billion compared to the previous year. The largest decreases were in individual income taxes, which fell by $449 billion, and remittances from the Federal Reserve, which were down by $105 billion. Partially offsetting those effects was a $127 billion increase in payroll taxes.
Since the financial crisis in 2008, debt held by the public has nearly tripled relative to the size of the economy and is projected to grow even more in the future. The unsustainable upward trajectory of deficits and debt argues for bipartisan solutions to improve the country’s fiscal outlook, including a fiscal commission.