March 7, 2012
CBO Estimates That the Federal Budget Deficit Totaled $578 Billion for the First Five Months of Fiscal Year 2012
The federal government incurred a budget deficit of $578 billion in the first five months of fiscal year 2012 (that is, October 2011 through February 2012), CBO estimates in its latest Monthly Budget Review—$63 billion less than the shortfall recorded for the same period last year. Without shifts in the timing of certain payments and in the recording of tax refunds, however, the deficit would have been close to $600 billion.
Next week, CBO will issue new budget projections for 2012 and the following 10 years.
Higher Corporate Tax Receipts Explain Most of the 3 Percent Increase in Revenues
Receipts for the first five months of fiscal year 2012 totaled $895 billion—$26 billion or 3 percent more than the amount for the same span last year, CBO estimates. Increases in corporate income taxes—up by $21 billion, or 56 percent—explain most of the overall increase.
The increase in corporate tax receipts resulted from payments that were $5 billion higher and refunds that were $16 billion lower than the amounts for the same period last year. Corporate refunds were unusually high in the first quarter of fiscal year 2011, whereas this year, they have returned to a level more consistent with the amounts paid in prior years.
Receipts of individual income taxes were up by only $5 billion (about 1 percent) because of two opposing factors. Withheld and nonwithheld individual income taxes rose by $19 billion and $7 billion, respectively, suggesting higher wage and nonwage incomes, but the amount of refunds increased by $21 billion, much of which is attributable to the earlier recording of payments normally reported in March.
Receipts from social insurance taxes declined by $4 billion. The two percentage-point reduction in the Social Security payroll tax rate (which has been in effect for all of this fiscal year but only for part of last year) reduced receipts by about $25 billion more this year than it did last year through February. Largely offsetting that reduction was an increase in receipts because of growth in wages and salaries and the effects of adjustments to the allocation of receipts in previous years between social insurance and individual income taxes.
Outlays Were About the Same As Spending At The Same Point Last Year When Adjusted for Timing Shifts
Spending totaled $1.47 trillion, about $37 billion or 2.5 percent lower in the first five months of this year than it was in the same span last year; but adjusted for shifts in the timing of certain payments, outlays were about the same in both periods.
Outlays declined for several major categories of spending:
- Outlays for Medicaid fell by $20 billion (or 17 percent) because legislated increases in the federal government’s share of the program’s costs expired in July 2011.
- Spending for unemployment benefits fell by $12 billion (or 21 percent) because fewer claims were filed in recent months.
- Education spending dropped by $15 billion (or 34 percent), largely because of a decline in spending from funding provided in the American Recovery and Reinvestment Act.
- Adjusted for timing shifts, defense spending declined by $7 billion (or about 3 percent).
For some categories, spending was greater:
- Net payments to the government-sponsored enterprises Fannie Mae and Freddie Mac increased by $11 billion.
- Adjusted for timing shifts, outlays for Social Security benefits and Medicare also were higher, by $14 billion (or 5 percent)and $6 billion (or 3 percent), respectively.
- Net outlays to stabilize corporate credit unions rose by $13 billion, mostly because outlays in 2011 were reduced by loan repayments from credit unions.
- Spending by the Department of Homeland Security increased by $4 billion (or 19 percent).
The Monthly Budget Review presents CBO’s estimates based on the Daily Treasury Statements issued by the Treasury Department. It was prepared by Elizabeth Cove Delisle, Barbara Edwards, Daniel Hoople, David Rafferty, and Joshua Shakin.