The federal government incurred a budget deficit of $424 billion in the first four months of fiscal year 2011, CBO estimates in its latest Monthly Budget Review, slightly less than the shortfall recorded in the same period last year. If appropriations for the rest of this fiscal year are set at the same annualized amounts as those in effect for the first several months and the Congress were to enact no other legislation affecting spending or revenues, CBO expects that the federal government would end fiscal year 2011 with a deficit of nearly $1.5 trillion, around $200 billion more than the $1.3 trillion deficit recorded in 2010. (CBO recently published projections for the coming decade in The Budget and Economic Outlook: Fiscal Years 2011 to 2021.)
Receipts for the first four months of fiscal year 2011 were about $64 billion (or 9 percent) higher than receipts during the comparable period last year, CBO estimates. Nearly all of that increase was from individual income and social insurance taxes, which together rose by $60 billion (or 10 percent). Withholding from employees’ paychecks for income and payroll taxes increased by $45 billion (or 8 percent), at least partly reflecting higher wages and salaries; the increase would have been slightly larger but for the Making Work Pay tax credit, which was in effect in 2010, and the temporary payroll tax reduction, which started in January 2011.
Nonwithheld individual income and payroll tax receipts rose by about $3 billion (or 4 percent) in the October–January period; most of that increase resulted from higher estimated payments in January for calendar year 2010 tax liabilities. Collections in the first four months of the fiscal year represent only a small portion of nonwithheld receipts for the year, however. A significant amount of those receipts will be collected in April, when the 2010 tax-filing season ends. Unemployment insurance payroll taxes rose by $5 billion because of states’ continuing efforts to replenish their trust funds.
Outlays were $57 billion (or 5 percent) higher during the first four months of fiscal year 2011 than in the same period last year, CBO estimates. But outlays in fiscal year 2010 were reduced because of substantial advance payments of insurance premiums to the Federal Deposit Insurance Corporation. Excluding the effect of those payments, total spending has grown by less than 1 percent in 2011, CBO estimates. The slow rate of growth occurred in part because expenditures for unemployment benefits decreased by $10 billion (or 18 percent), the result of fewer claims and lower average benefits. In addition, net payments to Fannie Mae and Freddie Mac dropped by $14 billion, and net spending for Medicare has risen by only about 1 percent so far this year.
In contrast, expenditures for Medicaid increased by $7 billion (or 8 percent), and net interest on the public debt was $7 billion (or 9 percent) higher, reflecting the substantial growth in the national debt over the past year. Outlays for Social Security and defense grew more slowly—by $8 billion (or 4 percent) and $7 billion (or 3 percent) respectively. Most of the increase in defense spending was for operations and maintenance. Growth in other areas, including veterans’ programs and food and nutrition assistance, was largely offset by reduced spending in areas such as refundable tax credits and international assistance.
The Monthly Budget Review presents CBO’s 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.