The federal budget deficit is $929 billion for the first eight months of fiscal year 2011, CBO estimates in its latest Monthly Budget Review—$6 billion less than the shortfall recorded over the same period last year. For the first two-thirds of the year, outlays are about 6 percent higher and revenues are about 10 percent higher than they were last year at this time.
The deficit in May was $59 billion, CBO estimates—$77 billion less than the shortfall recorded in the same month last year. About $43 billion of that reduction resulted from shifts in the timing of certain payments and revisions to the estimated costs of certain credit programs, mostly the Troubled Asset Relief Program (TARP). The lower monthly deficit is also the result of increased receipts in May—they were $28 billion (or 19 percent) higher than receipts in May 2010, CBO estimates.
In total, receipts through the first eight months were about $1.5 trillion, $139 billion (or 10 percent) higher than receipts recorded in the same period last year. Individual income tax receipts rose by $156 billion, or 29 percent—the result of increased amounts withheld from paychecks and strong growth in payments accompanying 2010 tax returns. Withholding for individual income and payroll taxes rose by $59 billion (or 5 percent), while nonwithheld taxes increased by $41 billion (or 18 percent). The nonwithheld taxes primarily reflect collections during the recent tax-filing season of calendar year 2010 liabilities. Net receipts also rose because individual income tax refunds were $15 billion lower than during the same period last year; refunds during the tax-filing season this year were 4 percent less than refunds during the comparable period a year ago. Receipts from unemployment insurance taxes rose by about $10 billion.
In contrast, social insurance taxes fell during the period, as did estate and gift taxes, because of legislation that temporarily reduced those taxes. A temporary reduction in the Social Security payroll tax is in effect during the current calendar year. The temporary repeal of the estate tax in 2010 primarily affects 2011 receipts because of the delay permitted in filing estate tax returns.
Outlays through May were about $2.4 trillion, almost 6 percent higher than in the same period last year, CBO estimates. Excluding some large adjustments to the estimated cost of credit programs—mainly the TARP—and last year’s prepayments of premiums to the FDIC (which were recorded as negative outlays), spending through May was up by about 1 percent compared with outlays in the same period last year.
Outlays for net interest on the public debt grew faster than the other major categories of spending, rising by $24 billion, or 16 percent. Outlays for the three largest entitlement programs also grew during the first eight months of fiscal year 2011. Spending for Medicaid increased by $10 billion (or 5 percent), while outlays for Medicare and Social Security grew by 4 percent each.
In contrast, smaller cash infusions and slightly larger dividend receipts reduced net payments to Fannie Mae and Freddie Mac by $27 billion. Spending for unemployment benefits decreased by $25 billion (or 23 percent) because of a decline in the number of claims and because average benefits were lower than they had been a year earlier.
The Monthly Budget Review was prepared by Elizabeth Cove Delisle, Barbara Edwards, Daniel Hoople, David Rafferty, and Joshua Shakin.