The federal budget deficit was $371 billion in the first quarter of fiscal year 2011, CBO estimates in its latest Monthly Budget Review, $18 billion less than the shortfall in the same period of fiscal year 2010. Revenues were 9 percent higher than they were a year ago, whereas outlays were only 3 percent higher. Later this month, CBO will issue new budget projections for fiscal year 2011 and the following 10 years.
Revenues through December totaled about $531 billion, $43 billion more than in the same period last year. Most of that net increase stems from higher withholding of individual income tax and social insurance payroll taxes, which rose by $33 billion (or 8 percent) in the first quarter because of strengthening economic conditions. Revenues also increased because individual tax refunds were lower than the abnormally high amounts for the same period a year before.
Receipts from corporate income taxes, net of refunds, were also higherby $2 billion (or 5 percent)than in the same period a year before, almost entirely because of estimated payments made in December 2010. Many observers had expected a decline in December because legislation enacted in September extended businesses ability to immediately deduct 50 percent of their 2010 investments in business equipment.
CBO estimates that spending for the first quarter of fiscal year 2011 totaled $902 billion, up $26 billion from outlays in the same period last year. Adjusted to exclude shifts in the timing of certain government payments and large 2009 prepayments of deposit insurance premiums, first-quarter outlays would be only slightly more than those in the same period a year before.
Compared with spending in the same period last year, defense spending was 7 percent higher, and net interest on the public debt rose by 10 percent, reflecting the substantial growth in debt in the past year. Outlays for major entitlement programs grew at varying rates during the first quarter of fiscal year 2011. Spending for Medicaid increased by 13 percent. Spending for Social Security and Medicare grew more slowlyby 4 percent and by less than one percent, respectively, adjusted for timing shifts. Expenditures for unemployment benefits decreased by 15 percent because of a decline in the number of claims and because average benefits were lower than they had been a year before.
The Monthly Budget Review presents CBOs estimates based on the Daily Treasury Statements issued by the Treasury Department. It was prepared by Barbara Edwards, Daniel Hoople, David Rafferty, and Joshua Shakin.