Monthly Budget Review

Yesterday CBO released its Monthly Budget Review for May. The federal government incurred a deficit of close to $800 billion for the first seven months of fiscal year 2009, CBO estimates$646 billion more than the deficit recorded through April 2008. Notably, receipts in April were about $140 billion (or 35 percent) lower than receipts in April 2008, CBO estimates. The sharpest drop was in corporate receipts; net corporate receipts, largely representing corporations first quarterly tax payment for 2009, declined by about $29 billion (or 69 percent). Nonwithheld receipts for individual income and payroll taxesmainly amounts paid with income tax returns filed in April fell $84 billion (or 36 percent). Refunds of individual income taxes increased by $11 billion (or 24 percent). That change in net receipts associated with income tax filings was roughly in line with CBOs expectations.

Compared with receipts in April 2008, withholding for income and payroll taxes fell about $14 billion (or 10 percent). CBO estimates that more than one-third of that decline is attributable to provisions of the recently enacted American Recovery and Reinvestment Act of 2009 (ARRA), most notably the Making Work Pay credit.

Receipts in the first seven months of this fiscal year were about $296 billion (or 19 percent) lower than in the same period last year. Although individual income and payroll tax receipts through April have been roughly in line with the amount CBO anticipated when it prepared its most recent baseline projection in March, corporate receipts have continued to lag and are running $25 billion to $30 billion less than anticipated.

Outlays were $38 billion higher than last April, CBO estimates. Medicaid spending increased by $8 billion; over half of that increase was due to provisions in ARRA that temporarily increase the share of Medicaid costs paid by the federal government. Unemployment benefits rose by $8 billion compared with such spending last April. Together those programs accounted for over 40 percent of the total increase in spending.

Outlays through April totaled nearly $2.1 trillion, CBO estimates$350 billion more than in the first seven months of 2008. CBO estimates that outlays for the TARP totaled $116 billion (on a net-present-value basis). Payments to Fannie Mae and Freddie Mac totaled $60 billion; spending for other programs, excluding net interest, grew by 14 percent (or $218 billion).