Monthly Budget Review

February 5, 2009

This evening, CBO released its Monthly Budget Review, reflecting an analysis of budget data through the end of January. CBO estimates that the Treasury Department will report a deficit of $563 billion for the first four months of fiscal year 2009, $474 billion higher than the deficit incurred through January 2008. This years deficit to date includes estimated outlays of $284 billion for the Troubled Asset Relief Program (TARP). Although the Treasury is recording most spending for the TARP on a cash basis, CBO believes that the budget should record all of the programs activities, including equity investments, on a net present-value basis adjusted for market risk, as specified in the Emergency Economic Stabilization Act of 2008. Using that approach, CBO estimates that outlays of $76 billion should be recorded for the TARP through January, which would yield an estimated deficit of $355 billion through January.

Receipts for the first four months of fiscal year 2009 were about $88 billion (or 10 percent) lower than receipts during the comparable period last year. Almost half of the decline, or $43 billion, resulted from lower net corporate receipts, which fell by 43 percent. Declines in those receipts reflect the continued weakness in corporate profits stemming from the recession.

Outlays through January totaled $1,337 billion, CBO estimates$387 billion more than in the same period last year. That amount includes expenditures of $284 billion for activities by the TARP (under the cash treatment used by the Treasury) and $14 billion of equity injections for Freddie Mac. Spending for other federal programs was $123 billion higher than in the first four months of 2008; adjusted for calendar-related shifts in the timing of certain payments, program outlays rose by 12 percent (about $101 billion). In contrast, outlays for net interest on the public debt fell by 39 percent, or $35 billion, over that period because of lower costs for inflation-indexed securities and a decline in short-term interest rates.