By: Jeffrey Winograd
President Joseph Biden, speaking at a Sept. 27 Rose Garden event, inadvertently confirmed this reporter’s analysis of why he and his administration have remained silent these past few weeks regarding the official kick-off date for his $400 billion-plus student loan forgiveness program.
In the midst of a speech addressing Medicare and inflation, the following words passed the president’s lips.
“And even with some student loan forgiveness and [other costs], we’re still – we’re on track to reduce the deficit this year – fiscal year – by more than $1 trillion,” the president stated.
So, in one fell swoop, Biden took credit for a major reduction (compared to the previous fiscal year) in the fiscal year 2022 federal budget deficit and simply lied by omission about the cost of student loan forgiveness
Thanks to a recent Congressional Budget Office report, we learned that through the first 11 months of FY 2022, the federal budget deficit was $944 billion compared to the total FY 2021 budget shortfall of $2.8 trillion.
What Biden left unsaid in the Rose Garden were the reasons for such a dramatic reduction in the deficit. As CBO explained, “spending related to the coronavirus pandemic declined, particularly for the recovery rebates (also known as economic impact payments), unemployment compensation, pandemic relief through the Small Business Administration, and relief to state, local, tribal, and territorial governments.”
Biden also ignored mentioning a Sept. 26 CBO letter to the ranking GOP members of the Senate and House of Representatives education committees which cited an estimated price tag for the loan forgiveness program of $430 billion. As of June 30, 43 million borrowers held $1.6 trillion in federal student loans.
With Election Day nearly upon us and Democratic prospects appearing to be rather shaky, neither Biden nor his party’s Senate and House candidates are ready to acknowledge the unwelcome appearance of another skyrocketing federal budget deficit.
Buried in the minutiae of CBO’s latest monthly budget review was a stark warning for the Democrats.
Without changes to student loans, CBO’s projection of the FY 2022 budget deficit would be about $1 trillion.
However, as described by CBO: “Under the Federal Credit Reform Act, the estimated long-term effects of such changes to the terms of outstanding loans are recorded as an increase in outlays in the month when those terms are changed. If significant numbers of student loans are modified in September, the 2022 deficit could be considerably larger than CBO has estimated.”
At this point in time, it is likely that the Biden administration will not risk recording any such increase in outlays during September.
The key question is whether Biden will try to buy votes by modifying significant number of student loans in October and gamble that an explosion of the federal deficit will remain unreported until after all the votes are counted.