The federal budget deficit was about $1.2 trillion in the first ten months of fiscal year 2010, CBO estimates in its latest Monthly Budget Review—about $90 billion less than the roughly $1.3 trillion deficit incurred through July 2009.
By CBO’s estimate, spending during the first 10 months of the fiscal year was about $81 billion (or 2.7 percent) less than outlays at the same point in 2009. That decline includes a net reduction of close to $370 billion in major components of spending related to the recent financial crisis: the Troubled Asset Relief Program (down $277 billion), federal deposit insurance (down $50 billion), and Treasury payments to Fannie Mae and Freddie Mac (down $42 billion).
Adjusted for calendar-related shifts in the timing of certain payments, spending through July for all other federal activities was about $284 billion, or 10 percent, higher than it was in 2009. Spending resulting from enactment of the American Recovery and Reinvestment Act (ARRA) accounted for about one-third of that increase. In addition, payments for Social Security and Medicare grew by $32 billion (or 6 percent) and $13 billion (or 4 percent), respectively. Excluding spending resulting from ARRA, expenditures for unemployment benefits were $33 billion higher and federal spending for Medicaid was $10 billion higher than a year earlier. Outlays for net interest on the public debt were $29 billion (or 18 percent) higher than during the same period last year, reflecting adjustments to the value of inflation-indexed securities.
Receipts for the first ten months of fiscal year 2010 were slightly greater—about $13 billion (or 0.7 percent) more—than the amounts collected during the same period last year. Increases in net corporate income taxes and receipts from the Federal Reserve were partially offset by declines in individual income and payroll taxes. Corporate income taxes rose by about $35 billion (or 33 percent), primarily because of higher taxable profits stemming from improved economic conditions and lower depreciation charges. Receipts from the Federal Reserve were more than double the amount received in the comparable period in 2009—an increase of $37 billion. The Federal Reserve’s higher remittances stem from a much larger portfolio and a shift to riskier and thus higher-yielding investments.
In contrast, combined receipts from individual income and payroll taxes were about $58 billion (or 4 percent) lower than collections in the same 10-month period last year. Withheld income and payroll tax receipts fell by about $29 billion (or 2 percent), and nonwithheld receipts fell by about $37 billion (or 12 percent). In both instances, the declines occurred earlier in this fiscal year and are largely attributable to lower collections of tax liabilities incurred in 2009. Collections during the past three months were higher than those during the same months last year.
The Monthly Budget Review was prepared by Elizabeth Cove Delisle and Daniel Hoople of CBO's Budget Analysis Division, and by Barbara Edwards and Joshua Shakin of our Tax Analysis Division.