Monthly Budget Review for January 2020
The federal budget deficit was $388 billion for the first four months of fiscal year 2020, CBO estimates, $78 billion more than the deficit recorded during the same period last year.
The federal budget deficit was $388 billion for the first four months of fiscal year 2020, CBO estimates, $78 billion more than the deficit recorded during the same period last year. Revenues and outlays alike were higher this year—by 6 percent and 10 percent, respectively—than during the first four months of fiscal year 2019.
However, outlays during the first four months of this year were boosted by shifts in the timing of certain payments that otherwise would have been due at the beginning of February, which fell on a weekend. Those shifts increased outlays through January by $55 billion; without them, the outlay increase would have been 6 percent and the deficit for the first four months of 2020 would have been $333 billion, roughly $23 billion larger, rather than $78 billion larger, than the amount for the same period last year.
Total Receipts: Up by 6 Percent in the First Four Months of Fiscal Year 2020
Receipts totaled $1,178 billion during the first four months of fiscal year 2020, CBO estimates—$67 billion more than during the same period last year. The changes from last year to this year were as follows:
- Individual income and payroll (social insurance) taxes together rose by $53 billion (or 5 percent).
- Amounts withheld from workers’ paychecks rose by $44 billion (or 5 percent), reflecting increases in wages and salaries.
- Nonwithheld payments of income and payroll taxes rose by $8 billion (or 5 percent) and individual income tax refunds fell by $1 billion (or 4 percent), increasing net receipts. The first quarterly payment of estimated individual income taxes in the current fiscal year was due by January 15.
- Corporate income taxes rose, on net, by $16 billion (or 27 percent). Much of that increase occurred in December, when most corporations made their final quarterly estimated payments for tax year 2019.
- Receipts from other sources, on net, declined by $2 billion (or 2 percent).
- Excise taxes fell by $9 billion (or 24 percent), mostly because payments of the tax on health insurance providers were received in October 2018; in 2019, that tax was subject to a one-year moratorium. (Although that tax was repealed in December 2019 by Public Law 116-94, a final payment is due on September 30, 2020.)
- Customs duties increased by $3 billion (or 13 percent), in part because of additional tariffs imposed by the Administration during the past year, primarily on imports from China.
- Federal Reserve remittances increased by $3 billion (or 14 percent), in part because of lower short-term interest rates, which reduce the Federal Reserve’s interest expenses and therefore increase remittances.
Total Outlays: Up by 10 Percent in the First Four Months of Fiscal Year 2020
Outlays for the first four months of fiscal year 2020 were $1,567 billion, $145 billion higher than they were during the same period last year, CBO estimates. If not for the shift of certain payments from February to January, outlays so far this year would have been $1,512 billion, about $90 billion more than outlays in the same period last year. The discussion below reflects adjustments to exclude the effects of those timing shifts.
The largest increases in outlays were in the following categories:
- Outlays for the largest mandatory spending programs increased by 6 percent:
- Social Security benefits rose by $19 billion (or 6 percent), because of increases both in the number of beneficiaries and in the average benefit payment.
- Medicare outlays grew by $15 billion (or 8 percent) because of increases in both the number of beneficiaries and health care costs per capita.
- Medicaid outlays increased by $7 billion (or 5 percent) because of increases in health care costs per capita.
- Spending for military programs of the Department of Defense rose by $14 billion (or 7 percent) mostly for procurement and research and development.
- The Treasury received $7 billion less in net payments from Fannie Mae and Freddie Mac, resulting in higher net outlays (included in the “Other” category below). Those entities’ quarterly payments to the Treasury in December 2019 were $1 billion; in December 2018 they remitted about $8 billion to the government. Such receipts decrease net outlays, so those lower receipts this December caused an increase in federal outlays. (In keeping with directives from the Treasury and the Federal Housing Finance Agency—Fannie Mae and Freddie Mac’s regulator—starting in September 2019, the housing entities began making smaller payments so they can replenish their capital reserves by retaining their earnings.)
For other programs and activities, spending increased or decreased by smaller amounts.
Estimated Deficit in January 2020: $32 Billion
The federal government incurred a deficit of $32 billion in January 2020, CBO estimates, compared with a surplus of $9 billion in January 2019—a difference of $40 billion. But outlays in January of this year were increased by a shift of certain federal payments that otherwise would have been due on February 1 (which fell on a weekend). Outlays in January of both years were decreased by a shift into December of payments that otherwise would have been due on January 1, a holiday. On net, those shifts increased outlays by $32 billion in January 2020 and decreased outlays by $21 billion in January 2019. If not for the shifts, the federal government would have realized a surplus of $1 billion in January 2020, compared with a deficit of $12 billion in January 2019.
CBO estimates that receipts in January 2020 totaled $372 billion—$32 billion (or 9 percent) more than those in the same month last year. An increase of $19 billion (or 9 percent) in withholding of individual income and payroll taxes explains most of that difference. In addition, nonwithheld payments of those taxes increased by $7 billion (or 7 percent) and corporate income taxes increased by $4 billion (or 58 percent); payments of those taxes are generally small in January.
Total spending in January 2020 was $403 billion—$72 billion more than the sum in January 2019. If not for the shifts in the timing of payments, outlays in January 2020 would have been $19 billion (or 5 percent) higher, rather than $72 billion higher, than in the same month in 2019.
The largest changes in outlays were as follows (the amounts reflect adjustments to exclude the effects of the timing shifts):
- Net interest on the public debt rose by $5 billion (or 17 percent).
- Spending for Social Security benefits rose by $4 billion (or 5 percent).
- Medicare spending increased by $3 billion (or 6 percent).
Spending for other programs and activities increased or decreased by smaller amounts.
Actual Deficit in December 2019: $13 Billion
The Treasury Department reported a deficit of $13 billion for December—$2 billion less than CBO estimated last month, on the basis of the Daily Treasury Statements, in the Monthly Budget Review for December 2019.