The federal budget deficit was $2.1 trillion in the first eight months of fiscal year 2021, the Congressional Budget Office estimates—$184 billion more than the deficit recorded during the same period last year. Revenues were up by an estimated $587 billion (or 29 percent), but outlays rose more—by an estimated $771 billion (or 20 percent).
Federal revenues were nearly $300 billion more from January through May 2021 than CBO expected when it made its full-year projections earlier this year. That increase stems mainly from larger-than-anticipated payments of individual and corporate income taxes, reflecting economic activity in calendar years 2020 and 2021. Specifically, estimated and final payments for individual and corporate income taxes for 2020 were larger and individual refunds were smaller than anticipated. Withholding for 2021 individual income taxes also has been greater than CBO expected. The reasons for the difference will be better understood as more detailed information becomes available later this year, but may reflect stronger-than-anticipated income growth throughout 2020 and so far in 2021.
Most of the increase in outlays in the first eight months of the fiscal year arose from laws enacted in response to the coronavirus pandemic, notably for refundable tax credits (particularly the recovery rebates), unemployment compensation, and the Small Business Administration’s Paycheck Protection Program. Largely because of that response, the deficits recorded during the first eight months of fiscal years 2020 and 2021 were significantly larger than the $739 billion shortfall recorded during the same period in fiscal year 2019.