White House cuts 2023 US deficit forecast after court blocks student loan forgiveness

white-house-cuts-2023-us-deficit-forecast-after-court-blocks-student-loan-forgiveness
White House cuts 2023 US deficit forecast after court blocks student loan forgiveness

The White House has revised its fiscal 2023 U.S. budget deficit forecast to $1.543 trillion, which is $26 billion lower than the March budget forecast. This decrease is primarily due to a reduction in outlays after the Supreme Court invalidated President Joe Biden’s student loan forgiveness program in June.

According to the Office of Management and Budget (OMB), the student loan decision will result in a $259 billion reduction in fiscal 2023 outlays. This partially reverses the Biden administration’s upfront charge of $430 billion against fiscal 2022 results to cover the program’s costs.

Although the Supreme Court blocked the student loan forgiveness program, President Biden announced revisions to an income-driven student loan repayment program. These revisions aim to reduce the amount that low-income workers pay by approximately $1,000 per year and shorten their repayment period.

However, these changes, along with other modifications, will lead to an additional $74 billion in costs in 2023. As a result, the overall savings from the court’s decision will be reduced. OMB also projects that these changes will increase outlays by $85 billion through 2033.

The OMB’s Mid-Session Review update estimates a net reduction in 2023 outlays of $242 billion, taking into account the student loan savings, as well as lower unemployment compensation, increased costs for Social Security and Medicare, and clean energy tax credits.

Estimates for credits associated with Biden’s Inflation Reduction Act, such as those for electric vehicle purchases and investments in battery production, are $4 billion higher for 2023 and $120 billion higher over a decade compared to previous forecasts.

The reduction in outlays for 2023 is largely offset by a $215 billion net reduction in receipts. This is primarily due to lower collections to date and technical revisions based on new tax reporting data, according to the budget office.

Changes in economic forecasts have minimal impact on the budget forecast revisions, increasing 2023 receipts by only $4 billion compared to March forecasts. OMB maintains its forecast for 2023 U.S. real GDP growth of 0.4% and lowers its 2024 growth forecast to 1.8% from 2.1%, based on data as of June 1.

However, OMB does forecast lower unemployment rates in 2023 at 3.8% compared to 4.3% in March. The unemployment rate is also projected to be 4.4% in 2024, down from 4.6% in March.

Over the 10-year budget window, OMB estimates that if Biden’s fiscal 2024 budget proposals are enacted, including significant tax increases on the wealthy and corporations, cumulative deficits would be $107 billion higher than the March estimate. Nevertheless, the 10-year deficits would still be approximately $2.6 trillion lower than OMB’s current-law baseline.

About News Team

Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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