The federal budget deficit was about $390 billion in the first quarter of fiscal year 2010, CBO estimates in its latest Monthly Budget Review$56 billion more than for the same period in fiscal year 2009 despite reduced spending related to turmoil in the financial markets. Outlays were slightly lower than they were last year at this time, but revenues have fallen by about 11 percent. Later this month, CBO will issue new budget projections for 2010 and the following 10 years.
December 2009 marks the second consecutive December that the federal budget will record a deficit, CBO estimates. Typically, December yields a budget surplus because most corporations make quarterly income tax payments and withholding for individuals is relatively high because of year-end bonuses and seasonal employment. The deficit in December was $92 billion, CBO estimates, about $40 billion more than the deficit recorded in December 2008. Adjusted to eliminate variation attributable to shifts in the timing of certain payments, the deficit was about $11 billion greater than it was the same month last year.
Outlays
Spending in the first quarter was slightly less this year than it was last year, but after adjustments for shifts in the timing of certain payments, the decline was greaterabout $32 billion (or 4 percent). Spending for the Troubled Asset Relief Program decreased by $85 billion, and net spending by the Federal Deposit Insurance Corporation (FDIC) was $45 billion lower because of greater net receipts. (In order to replenish the Deposit Insurance Fund, the FDIC required banks and thrift institutions to prepay insurance premiums that would otherwise be due over the next three years.) Without the timing shifts and the large reductions in spending in those two areas, first quarter spending would be up by $98 billion (or 13 percent) compared with outlays a year ago.
Spending for unemployment benefits more than doubled from the first quarter last year, rising by $22 billion, because of high unemployment and extensions in the duration of benefits. Medicaid spending in the first quarter was up $14 billion (or 25 percent), nearly $10 billion of which is attributable to a provision in the economic stimulus legislation that temporarily increased federal payments to states under Medicaid. Spending for other stimulus programs also contributed to increased spending in December. In addition, adjusted for timing shifts, Social Security benefits were up by $16 billion (or 10 percent) and Medicare spending was up by $8 billion (or 8 percent).
Revenues
CBO estimates that, in the first quarter of the fiscal year, revenues were about $59 billion (or 11 percent) lower than receipts in the same period a year ago. Individual income and payroll taxes combined fell by about $53 billion (or 12 percent): Withholding was $40 billion (or 9 percent) lower, refunds were $10 billion higher, and nonwithheld receipts were $3 billion (or 11 percent) lower. The weakness in withholding stems from the effects of recent legislation and weakness in wages and salaries.
Net corporate income taxes declined by about $15 billion (or 30 percent) compared with receipts during the same period last year because of a combination of higher refunds and lower payments of estimated taxes. The decline in net corporate receipts can be attributed to weak corporate profits and the effects of recent legislation that extended the period over which corporations could apply current-year losses to offset income in previous years.