US Has $89 Billion Monthly Budget Surplus on Student-Loan Ruling

The US Treasury logged a rare surplus for the month of August as the department accounted for revenue from student-loan payments, reflecting the Supreme Court’s invalidation of the Biden administration’s move to forgive the debt.

(Bloomberg) — The US Treasury logged a rare surplus for the month of August as the department accounted for revenue from student-loan payments, reflecting the Supreme Court’s invalidation of the Biden administration’s move to forgive the debt.

The federal government had an $89.2 billion surplus for August as officials added $319 billion to revenues because of July’s Supreme Court ruling. Last year, the Biden administration’s student-loan plan had added to the budget deficit, and the August move effectively reverses that.

For the first 11 months of the fiscal year, the budget deficit was $1.52 trillion, up more than 60% from the $946 billion deficit recorded in the same period a year before, Treasury data released on Wednesday showed.

Rising debt-servicing costs are one reason for the widening in the deficit this year. The Treasury spent $808 billion on interest costs for the 11 months through August, some 19% more than the same period the year before. 

The Federal Reserve’s most aggressive interest-rate hiking campaign in more than a generation, aimed at quelling inflation, has driven up those interest costs. The weighted average interest rate for total outstanding debt by the end of August was 2.92%, the highest since 2011 and up from 1.97% a year before, Treasury data show.

Spending, Revenue

Total outlays hit $5.5 trillion in the 11 months through August, up 3%. Social Security, defense and health-care costs were among the items boosting spending. 

Revenues have totaled $3.97 trillion for the fiscal year so far, down 10% on the previous period. Part of that drop is due to the Fed no longer transferring much in earnings to the Treasury. It’s now paying out more in interest than it receives on its bond holdings. That’s left a $105 billion hole in Treasury revenues.

The widening budget shortfall may play into Republican lawmakers’ pressure to curtail federal spending. While the GOP, which controls the House, did a deal with the Biden administration to suspend the debt limit earlier this summer, a fresh fight looms over appropriations for the 2024 fiscal year, which starts Oct. 1.

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