The federal budget deficit was close to $240 billion for the first two months of fiscal year
2012, more than $50 billion below the deficit recorded through November of last year, CBO estimates in its latest Monthly Budget Review. Much of that difference occurred because roughly $30 billion in payments that ordinarily would have been made on October 1, 2011 (that is, in fiscal year 2012), were made instead in September (that is, in fiscal year 2011) because October 1 fell on a weekend. Without those shifts in the timing of payments, the decline in the deficit for the two-month period would have been about $20 billion.
Revenues Increased by 7 Percent
Revenues in October and November of this year were $21 billion more than receipts in the same two months last year, CBO estimates. An increase in net receipts from corporate and individual income taxes was partly offset by a decline in receipts from social insurance (payroll) taxes. Specifically:
- Corporate receipts rose by $11 billion because tax payments were $2 billion higher and refunds were $9 billion lower than in the same months last year.
- Receipts of individual income and social insurance taxes, other than those from withholding, rose by $8 billion because nonwithheld payments of those taxes increased by $3 billion and refunds of individual income taxes fell by $4 billion.
- Withheld income and payroll taxes rose slightly (by $1 billion). Two changes in tax system influenced that outcome: the expiration of the Making work Pay tax credit at the end of 2010, and the 2 percentage-point reduction in the payroll tax rate that took effect in 2011. If not for those changes, withheld income and payroll taxes would have increased by roughly $10 billion, or about 4 percent, CBO estimates.
- Other receipts, in total, were about $1 billion higher.
Spending Was Virtually Unchanged When Adjusted for Timing Shifts
Outlays in the first two months of fiscal year 2012 were about $33 billion less than they were during the same period last year. That decline is almost entirely attributable to a shift of certain payments from October to September because October 1 fell on a weekend. (The figures discussed below are all adjusted to eliminate the effect of that timing shift.)
Outlays declined for some categories of spending:
- Defense spending was $9 billion (or 7 percent) lower than in the same period last year.
- Spending for unemployment benefits also declined—by $6 billion (or 26 percent)—because fewer claims were filed and, to a lesser extent, because a provision that boosted recipients’ benefits by $25 per week expired.
- Spending for education programs fell, by $4 billion (or 27 percent), in part because the American Recovery and Reinvestment Act boosted education outlays in October and November 2010.
Total expenditures for the three largest entitlement programs were about the same as they were in the same period last year:
- Outlays for Social Security benefits and Medicare rose by $4 billion each (or 3 percent and 5 percent, respectively).
- In contrast, spending for Medicaid fell by $8 billion (or 16 percent).
For some categories, spending was greater than that in the first two months of fiscal year
- Expenditures in the broad category “Other Activities” increased by $8 billion
(or 5 percent). Spending increased for the Departments of Homeland Security and Agriculture, for veterans’ benefits, and for a number of other programs.
- Outlays for net interest on the public debt were $5 billion (or 12 percent)higher, reflecting the growing federal debt.
The Monthly Budget Review was prepared by Elizabeth Cove Delisle, Barbara Edwards,
Daniel Hoople, David Rafferty, and Joshua Shakin.