Monthly Budget Review for February 2017
The federal budget deficit was $348 billion for the first five months of fiscal year 2017, CBO estimates—$5 billion less than the shortfall recorded during the same span last year.
Summary
The federal budget deficit was $348 billion for the first five months of fiscal year 2017, CBO estimates—$5 billion less than the shortfall recorded during the same span last year. But that result was affected by shifts in the timing of certain payments that otherwise would have been due on a weekend. If not for those shifts, the deficit for the first five months of fiscal year 2017 would have been $37 billion larger than that recorded in the same period last year.
Total Receipts: Up Slightly in the First Five Months of Fiscal Year 2017
Receipts through February totaled $1,256 billion, CBO estimates—$7 billion (or 0.6 percent) more than the amount for the same period last year. That slight increase is the net effect of the following largely offsetting changes:
- Individual income and payroll (social insurance) taxes together rose by $36 billion (or 3 percent).
- Amounts withheld from workers’ paychecks rose by $37 billion (or 4 percent). That change largely reflects increases in wages and salaries.
- Individual income tax refunds declined by $4 billion. That reduction was probably caused by a delay this year in the Internal Revenue Service’s (IRS’s) processing of refunds from returns that claimed the earned income tax credit and the additional child tax credit. That delay resulted from changes in processing procedures stemming from provisions of the Consolidated Appropriations Act, 2016 (Public Law 114-113).
- Nonwithheld payments of income and payroll taxes fell by $4 billion (or 3 percent).
- Receipts from unemployment insurance taxes (one kind of payroll tax) declined by $2 billion (or 11 percent).
- Remittances from the Federal Reserve to the Treasury, which are included in “Other Receipts” in the table below, fell by $26 billion, largely because the Fixing America’s Surface Transportation Act (P.L. 114-94) required the Federal Reserve to remit most of its surplus account to the Treasury in fiscal year 2016. The central bank remitted the required amount, $19 billion, in a onetime payment in late December 2015.
- Corporate income taxes fell by about $2 billion (or 2 percent). Lower gross payments of taxes, especially of quarterly estimated payments made in December 2016, were largely offset by smaller refunds in February.
Total Outlays: Up Slightly in the First Five Months of Fiscal Year 2017
Outlays for the first five months of fiscal year 2017 totaled $1,604 billion, CBO estimates—$3 billion (or 0.2 percent) more than they were during the same period last year. If not for shifts in the timing of certain payments from October 2016 to September 2016 because October 1 fell on a weekend, outlays would have been $44 billion (or 3 percent) higher. The discussion below reflects adjustments to remove the effects of those timing shifts.
The largest increases in outlays were the following:
- Outlays for the three largest mandatory spending programs increased by a total of $26 billion (or 3 percent):
- Social Security benefits increased by $11 billion (or 3 percent), reflecting typical recent growth in the number of beneficiaries and in the average benefit payment.
- Outlays for Medicaid rose by $8 billion (or 5 percent), largely because of new enrollees added through expansions of coverage authorized by the Affordable Care Act.
- Medicare spending grew by $7 billion (or 3 percent) because of an increase in the number of beneficiaries and growth in the amount and cost of services for those beneficiaries.
- Outlays for net interest on the public debt increased by $20 billion (or 20 percent), largely because of differences in the rate of inflation. To account for inflation, the Treasury Department adjusts the principal of its inflation-protected securities each month. (It uses the change in the consumer price index for all urban consumers that was recorded two months earlier to make that adjustment.) The adjustments made in the first five months of fiscal year 2016 were negative, but those made in early 2017 were positive.
- Spending by the Department of Homeland Security, which is included in the “Other” category in the table below, rose by $3 billion (or 17 percent), primarily because of increased spending for flood insurance resulting from damage caused by floods in Louisiana, Texas, and West Virginia this past summer.
- Outlays for subsidies for health insurance purchased through the marketplaces established under the Affordable Care Act, which are included in “Other” in the table below, rose by about $3 billion (or 25 percent). Spending climbed largely because more people purchased insurance through the marketplaces, and the premiums for those plans were higher than last year.
- Spending for the Department of Veterans Affairs, which is included in “Other” in the table below, increased by $3 billion (or 4 percent).
Outlays in some areas of the budget declined:
- Payments for the earned income tax credit and the additional child tax credit were a total of $7 billion (or 12 percent) lower than those last year. That decline was most likely caused by a delay in the IRS’s processing of refunds from tax returns that claimed those credits.
- The government received $3 billion more in payments from Fannie Mae and Freddie Mac than it did last year, resulting in lower net outlays. The two entities make quarterly payments to the Treasury each December. Those payments are recorded as offsets to spending.
- Outlays for the Postal Service and for student loans, which are included in “Other” in the table below, fell by $3 billion each.
Spending for other programs and activities increased or decreased by smaller amounts.
Estimated Deficit in February 2017: $192 Billion
In CBO’s estimation, the federal government realized a deficit of $192 billion in February 2017—$1 billion less than the deficit in February 2016.
Receipts in February 2017 totaled $171 billion, CBO estimates—$2 billion (or 1 percent) more than those in the same month last year. Individual income tax refunds declined by $8 billion (or 11 percent), in part because of the delay in processing certain tax returns. Net collections of corporate income taxes increased by $6 billion as a result of a reduction in refunds. Partially offsetting those increases in net receipts, withholding of individual income and payroll taxes decreased by $5 billion (or 2 percent). That decline occurred in part because there was one fewer Monday this February, and a disproportionately large share of withheld tax payments are made on Mondays. Receipts from other sources, including unemployment insurance receipts and remittances from the Federal Reserve, also decreased.
Total spending in February 2017 was $362 billion, CBO estimates—$1 billion more than spending in February 2016. Among the larger changes in outlays were these:
- Payments for the earned income tax credit and the additional child tax credit combined were $6 billion (or 12 percent) lower than those last year.
- Outlays for net interest on the public debt increased by $5 billion (or 26 percent).
- Spending for the government’s three largest mandatory spending programs rose by a total of $4 billion (or 3 percent). Outlays for Medicare were about the same, but outlays for Social Security benefits and Medicaid rose by $2 billion each (or 3 percent and 6 percent, respectively).
Spending for other programs and activities increased or decreased by smaller amounts.
Actual Surplus in January 2017: $51 Billion
The Treasury Department reported a surplus of $51 billion for January—$2 billion more than CBO estimated last month, on the basis of the Daily Treasury Statements, in the Monthly Budget Review for January 2017.