Monthly Budget Review

July 9, 2012


CBO estimates in its latest Monthly Budget Review that the Treasury Department will report a deficit of $905 billion for the first nine months of fiscal year 2012, $66 billion less than the $971 billion deficit incurred through June 2011. Outlays are about 1 percent higher and revenues are about 5 percent higher than they were at the same point last year.

Without adjustments to the estimated cost of the Troubled Asset Relief Program (TARP) that increased outlays in 2012 by $21 billion and decreased outlays in 2011 by $42 billion, the deficit for the first nine months of fiscal year 2012 would have been around $130 billion less than the deficit incurred during the same period in fiscal year 2011.

Total Receipts Through June Were Up By 5 Percent

Receipts in the first three quarters of this fiscal year totaled $1.8 trillion, $90 billion more than those in the same period last year. Compared with collections during the same period in fiscal year 2011:

  • Net receipts from corporate income taxes grew by $42 billion (or 31 percent); higher gross receipts and lower refunds contributed equally to that net increase. The growth in corporate receipts this year is largely attributable to changes in tax rules in recent years—in particular, the rules governing how quickly firms may deduct the cost of their investments in equipment.
  • Receipts of individual income taxes grew by $26 billion (or 3 percent). Growth in wages boosted withholding by $18 billion (or 2 percent). Nonwithheld payments also increased by $11 billion (or 4 percent). Those gains were partially offset by an increase of $3 billion (or 1 percent) in refunds.
  • Receipts from social insurance taxes rose by $17 billion (or 3 percent) in the first three quarters of fiscal year 2012. Withholding for payroll taxes grew by about $12 billion (or 2 percent). The current reduction of 2 percentage points in the payroll tax was not in effect for the first quarter of fiscal year 2011 (October through December 2010); if it had been in effect during that time, the year-over-year increase in withholding for payroll taxes would have been $25 billion larger, CBO estimates. Collections of state unemployment taxes rose by $6 billion (or 13 percent) as states replenished their trust funds, depleted by the recent recession.
  • Receipts from other sources increased, on net, by about $6 billion. Estate and gift taxes rose by $4 billion, as did excise taxes; customs duties and miscellaneous fees and fines together increased by $3 billion. Those gains were partially offset by a decline of $5 billion in receipts from the Federal Reserve. That decline stemmed from lower interest rates and a shift to lower-yielding, less risky assets in its portfolio, which resulted in smaller profits and hence smaller remittances to the Treasury.

Outlays Through June Were Up by About 1 Percent

Outlays through June totaled $2.7 trillion, $24 billion more than spending in the same period last year. However, if adjustments recorded in the budget for the estimated cost of credit programs (mainly the TARP) are excluded, the government’s outlays decreased by almost 2 percent compared with spending during the first nine months of 2011.

By CBO's estimates, outlays decreased for several major categories of spending: 

  • Medicaid: Outlays fell by $28 billion (or 13 percent) because legislated increases in the federal share of the program’s costs expired in July 2011.
  • Unemployment benefits: Spending dropped by $20 billion (or 21 percent), mostly because fewer people have been receiving benefits in recent months.
  • Defense: Spending decreased by about $16 billion (or 3 percent); payments to military personnel were close to last year’s amount, but other defense outlays fell by about 4 percent.
  • Education programs: Outlays dropped by $27 billion (or 36 percent), largely because of a decline in spending from the American Recovery and Reinvestment Act. (Most of that spending occurred before 2012.)

For some programs, spending increased:

  • TARP: Outlays rose by $62 billion, mainly because adjustments to the estimated costs of earlier transactions reduced outlays by $42 billion in 2011 and increased them by $21 billion in 2012.
  • Social Security: Payments for benefits increased by $30 billion (or 6 percent).
  • Medicare: Net spending was up by $14 billion (or 4 percent).
  • Veterans’ programs: Outlays increased by $6 billion (or 7 percent).


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