In its latest Monthly Budget Review, CBO estimates that the Treasury Department will report a deficit of $973 billion for the first nine months of fiscal year 2011, $31 billion less than the $1,004 billion deficit incurred through June 2010. Revenues increased by $136 billion (or 8.5 percent) and outlays climbed by $104 billion (or 4 percent) from what they were at the same point last year.
Individual income taxes, the largest tax source, showed a gain of close to $160 billion, or 24 percent. In contrast, social insurance taxes fell by $34 billion, or 5 percent, because the temporary payroll tax reduction more than offset the impact of higher wages and more employment. Revenues from other sources rose by $11 billion.
Combined, individual income and payroll taxes increased by $124 billion, or 9 percent, in the first three quarters of the fiscal year. Of that amount, withheld taxes rose by $52 billion (or 4 percent), reflecting increases in wages and salaries and the net effect of recent legislation: The reduction in withholding because of the temporary payroll tax cut was partially offset by the expiration of the Making Work Pay Credit at the end of calendar year 2010. Other receipts from individual income and payroll taxes rose by $72 billion.
On the spending side, most of the increase from 2010 to 2011 occurred because 2010 spending reflected large downward adjustments to the estimated cost of credit programs (mainly the Troubled Asset Relief Program) and prepayments of premiums to the Federal Deposit Insurance Corporation. Other spending, in total, changed little from last year to this year despite some sizable swings in individual programs and activities.
Net interest on the public debt grew the most, rising by $31 billion (or 18 percent) above the outlays recorded through June 2010, primarily because of the large increase in the public debt. Total outlays for Medicare, Medicaid, and Social Security were up by about $46 billion (or 4 percent).
In contrast, spending related to the financial crisis and the economic downturn declined: Outlays for unemployment compensation dropped by $29 billion, net disbursements for deposit insurance decreased by $32 billion (excluding last year’s receipts from prepayments of premiums), and payments to Fannie Mae and Freddie Mac, the two government-sponsored enterprises now in federal conservatorship, fell by $38 billion.
The Monthly Budget Review was prepared by Barbara Edwards, Daniel Hoople, David Rafferty, and Joshua Shakin.