Monthly Budget Review for January 2018

The federal budget deficit was $174 billion for the first four months of fiscal year 2018, the Congressional Budget Office estimates, $16 billion more than the shortfall recorded during the same period last year. Revenues and outlays were higher, by 4 percent and 5 percent, respectively, than during the first four months of fiscal year 2017.

As was the case last year, this year’s outlays were affected by shifts in the timing of certain payments that otherwise would have been due on a weekend. If not for those shifts, outlays and the deficit through January would have been slightly larger, both this year and last year—but the year-to-year changes would not have been very different.

Total Receipts: Up by 4 Percent in the First Four Months of Fiscal Year 2018

Receipts totaled $1,131 billion during the first four months of fiscal year 2018, CBO estimates—$46 billion more than during the same period last year. That increase resulted from changes in receipts from the following sources:

• Individual income and payroll (social insurance) taxes together rose by $68 billion (or 8 percent).
  • Amounts withheld from workers’ paychecks rose by $65 billion (or 8 percent). That change largely reflects increases in wages and salaries. Payments of withheld taxes also may have been boosted, on net, by the anticipation of or by responses to the tax legislation that was enacted in December.
  • Nonwithheld payments of income and payroll taxes rose by $4 billion (or 3 percent). The first quarterly payment of estimated individual income taxes in the current fiscal year was due by January 15.
  • Income tax refunds were up by $1 billion (or 4 percent), reducing net receipts. Most tax refunds will be paid from February through May.
• Corporate income taxes fell by about $13 billion (or 15 percent). Most of that decline occurred in December, when most corporations made their final quarterly estimated payments for tax year 2017.
• Revenues from other sources fell by $9 billion (or 11 percent), largely as a result of reduced income from fees and fines.

Total Outlays: Up by 5 Percent in the First Four Months of Fiscal Year 2018

Outlays for the first four months of fiscal year 2018 were $1,306 billion, $62 billion higher than they were during the same period last year, CBO estimates. If not for the shift of certain payments from October to September (which also occurred last year) because the first of the month fell on a weekend, outlays so far this year would have been $65 billion (or 5 percent) larger. The discussion below reflects adjustments to account for those timing shifts.

The largest increases in outlays were in the following categories:

• Outlays for net interest on the public debt increased by $13 billion (or 14 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 by using the change in the consumer price index for all urban consumers that was recorded two months earlier. That adjustment was $6 billion in the first four months of fiscal year 2017 but nearly $16 billion early in the current fiscal year.
• Spending for military programs of the Department of Defense rose by $12 billion (or 6 percent).
• Outlays recorded for the Department of Homeland Security, which are included in the “Other” category below, increased by $12 billion (or 67 percent), largely because of activities related to disaster relief.
• Social Security benefits rose by $11 billion (or 4 percent) because of increases both in the number of beneficiaries and in the average benefit payment.

Medicaid spending has slowed slightly this year, perhaps related to declining unemployment and a number of other factors. For other programs and activities, spending increased or decreased by smaller amounts.

Estimated Surplus in January 2018: $51 Billion

The federal government realized a surplus of $51 billion in January 2018, CBO estimates—$1 billion smaller than the surplus in January 2017. Surpluses in January are boosted by the shift of certain payments, ordinarily made on the first of the month, from January to December because January 1 is a holiday.

CBO estimates that receipts in January 2018 totaled $362 billion—$18 billion (or 5 percent) more than those in the same month last year. Withholding of individual income and payroll taxes rose by $20 billion (or 9 percent); that percentage increase was larger than is typical, in part because January included one more business day this year than last. Although the Internal Revenue Service issued new withholding tables on January 11 to reflect the new tax law, many employers had not begun to use them in January (all employers must begin using the new tables by February 15).

Collections of fees and fines declined by $8 billion, largely because 2017 was the final year for collections from health insurers through the transitional reinsurance program of the Affordable Care Act. (Corresponding outlays for the program are expected largely to end this year.) Revenues from all other sources were up by $6 billion, mostly reflecting higher nonwithheld payments of income taxes by individuals.

Total spending in January 2018 was $311 billion, CBO estimates—$18 billion more than the sum in January 2017. If not for timing shifts, outlays in January would have been $19 billion (or 6 percent) more than they were in the same month last year. (The changes discussed below reflect adjustments to remove the effects of those shifts.)

The largest changes in outlays were as follows:

• Social Security benefits rose by $4 billion (or 5 percent).
• Net interest on the public debt rose by $4 billion (or 18 percent).
• Medicare benefits rose by $3 billion (or 7 percent).
• Spending for military programs of the Department of Defense rose by $2 billion (or 5 percent).
• Outlays recorded for the Department of Homeland Security rose by $2 billion (or 37 percent), largely for disaster relief.

Spending for other programs and activities increased or decreased by smaller amounts.

Actual Deficit in December 2017: $23 Billion

The Treasury Department reported a deficit of $23 billion for December—$3 billion less than CBO estimated last month, on the basis of the Daily Treasury Statements, in the Monthly Budget Review for December 2017.