The federal budget deficit was about $1.1 trillion in the first 10 months of fiscal year 2011, CBO estimates in its latest Monthly Budget Review$66 billion less than the roughly $1.2 trillion deficit incurred through July 2010. Revenues were about 8 percent higher than they were at the same point last year, whereas outlays rose by less than 3 percent.
Revenues through July increased by $141 billion to nearly $1.9 trillion. That growth in revenues reflects a significant increase in receipts from individual income taxes combined with small changes in other receipts. Withheld income and payroll taxes rose by $53 billion (or 4 percent). Nonwithheld income and payroll taxes also increased (by $47 billion, or 17 percent); the bulk of that gain came from higher final payments made with 2010 individual income tax returns that were filed earlier this year. Receipts from unemployment insurance taxes rose by $10 billion as states replenished their trust funds, which were substantially depleted because of high unemployment. Revenues also rose because refunds of individual income taxes were down by about $21 billion (or 8 percent) during the past 10 months.
The gains in withheld and nonwithheld individual taxes alike can be attributed, at least in part, to increases in the underlying tax bases (wages and nonwage income). The withholding gain would have been even larger except for the temporary reduction in payroll taxes on employees that took effect in January 2011.
Outlays through July totaled just under $3 trillion$75 billion (or less than 3 percent) higher than during the same period last year. With the effects of timing shifts excluded, that increase came to only 1.9 percentand excluding adjustments recorded in the budget for the estimated cost of credit programs (mainly the Troubled Asset Relief Program), the governments other outlays increased by less than one-half of one percent compared with spending during the first 10 months of 2010.
Adjusted for calendar-related timing shifts, outlays for each of the three largest entitlement programsSocial Security, Medicare, and Medicaidwere about 3 percent higher than they were during the same period last year. But net interest on the public debt increased by $35 billion (or 18 percent), primarily because of the growing size of the debt. Spending for defense increased by 1.1 percent, well below the average growth experienced over the past 10 years.
The above increases were largely offset by a $38 billion decrease in net payments to the government-sponsored enterprises, Fannie Mae and Freddie Mac, and by a $31 billion drop in outlays for unemployment benefits.
The Monthly Budget Review was prepared by Elizabeth Cove Delisle, Barbara Edwards, Daniel Hoople, David Rafferty, and Joshua Shakin.