Monthly Budget Review

April 6, 2009

Today CBO released the latest Monthly Budget Review, reflecting an analysis of budget data through the end of March 2009. CBO estimates that the Treasury Department will report a deficit of about $953 billion for the first six months of fiscal year 2009, $640 billion more than the deficit recorded through March 2008.

Budget accounting issues are clouding the deficit forecasts for this year. The above estimate of thisyear's deficit to date includesoutlays of about $290 billion for the Troubled Asset Relief Program (TARP). Although the Treasury has been recording most spending for the TARP on a cash basis, CBO believes that the budget should record the program's activities on a net present-value basis adjusted for market risk. Using that approach, CBO estimates that outlays of $140 billion should be recorded for the TARP through March. That approachwouldyield an estimated deficit of $803 billion for the first half of the year.

March receipts were estimated to be about30 percentlower than receipts in March2008. More than half of the decline reflects a drop in net corporate income tax receipts, which fell by 90 percentfrom March of last year, in part becausefirms may be applying current-year losses toobtain refunds of taxes paid inprevious years.

Federal outlays were $89 billion (or 39 percent) more than those last March,by CBO's estimates. About half of the increase in spending comes from $46 billion in cash infusions to Fannie Mae and Freddie Mac (now taken over by the government); another $10 billion was lent to credit unions by an arm of the Treasury, and Medicaid spending rose by $10 billion, of which $8.5 billion was due toprovisions in the economic stimulus legislation. Outlays for unemployment benefits increased by $7 billion, defense spending by $5 billion, and Social Security benefitsby $4 billion.

In March, CBOissued new estimatesfor the budget outlook for fiscal year 2009. Weproject that thedeficit for 2009will be $1.7 trillion undercurrent laws and policies and $1.8 trillion if the President's proposals for the current fiscal year are enacted. (Click here to link to A Preliminary Analysis of the President's Budget and an Update of CBO's Budget and Economic Outlook).