Last month, the Treasury Department reported that the federal government incurred a budget deficit of $1.3 trillion for fiscal year 2011, almost identical to the deficit it incurred in 2010. As a share of the nation’s gross domestic product (GDP), the deficit declined slightly—from 9.0 percent in 2010 to 8.7 percent in 2011—but nonetheless it was the third-highest deficit as a share of GDP since 1945.
As discussed in CBO’s latest Monthly Budget Review, the deficit in 2011 would have been about $140 billion less than that in 2010 except for three unusual factors: (1) Certain payments that would have been made on October 1, 2011 (that is, in fiscal year 2012) were made in September 2011 because October 1 fell on a weekend; (2) net outlays for deposit insurance were reduced in fiscal year 2010 and increased in 2011 because banks were required prepay about three years’ worth of deposit insurance premiums in December 2009; and (3) the estimated costs of certain credit transactions made in earlier years were revised downward by a large amount in 2010 and by a much smaller amount in 2011. Excluding those factors, the deficit would have declined because outlays would have been almost unchanged from 2010 to 2011, while receipts rose by $141 billion.
In 2011, the government’s receipts increased for the second consecutive year, reaching $2.3 trillion, which was 6.5 percent more than in 2010 but still 10 percent below their peak in 2007. Specifically:
At 15.4 percent of GDP, receipts in 2011 were greater, as a share of the economy, than those in 2009 and 2010 (15.1 percent of GDP in both years) but remained well below both the 2007 peak of 18.5 percent and the 40-year average of 18 percent of GDP.
Expenditures increased by $145 billion (or 4.2 percent) from 2010 to 2011, totaling $3.6 trillion. Excluding the shift to September 2011 of certain payments that ordinarily would have been made in October and the effect of prepayments of deposit insurance premiums in 2010, outlays in 2011 would have risen by less than 2 percent; and if changes in the estimated cost of earlier credit transactions were excluded, total spending would have been virtually unchanged from 2010 to 2011. Some increases between 2010 and 2011 include:
Treasury payments to Fannie Mae and Freddie Mac were $35 billion lower, and unemployment benefits fell by nearly a quarter ($36 billion). Spending for the broad category that CBO labels “Other Activities” decreased by 2.2 percent (after an adjustment for payment shifts), in part because of adjustments to the estimated costs of student loans made in previous years.
Spending by the government was 24.1 percent of GDP in 2011, lower than the 25.2 percent figure in 2009 and about the same share as in 2010, but well above the 40-year average of 20.8 percent.
The Monthly Budget Review is prepared by Elizabeth Cove Delisle, Barbara Edwards, Daniel Hoople, David Rafferty, and Joshua Shakin.