Federal Budget Deficit Totaled $721 Billion for the First Seven Months of 2012, CBO Estimates

May 7, 2012

The federal government incurred a budget deficit of $721 billion in the first seven months of fiscal year 2012, CBO estimates in its latest Monthly Budget Review—$149 billion less than the shortfall reported during the same period last year. Without shifts in the timing of certain payments, however, the deficit so far this year would have been only $92 billion smaller.

Because of the large inflows of tax revenues, the federal government usually runs a budget surplus in April—though that did not occur in 2009, 2010, and 2011. This April, the Treasury realized a surplus of $58 billion, CBO estimates, in contrast with the $40 billion deficit reported for the same month last year. The results in both years were influenced by timing shifts of certain payments; adjusted for those shifts, the surplus in April 2012 would have been $27 billion, compared with a deficit of $13 billion in April 2011.

April Collections Were Up By 10 Percent

Receipts this April were $319 billion—$30 billion, or 10 percent, higher than collections last April, CBO estimates. The largest boost to net receipts came from a $14 billion decline in the amount of refunds issued. Refunds were lower, in large part, because some that ordinarily would have been recorded in April were made in prior months.

Withheld income and payroll taxes rose by $10 billion (or 7 percent), while nonwithheld receipts from those sources, largely from tax filings, rose by just $2 billion (or 1 percent). In addition, net corporate income tax receipts were $3 billion higher, and all other receipts $1 billion higher, on net, in April 2012 than in April 2011.

Total Receipts Through Seven Months Increased by 6 Percent

Including collections associated with the mid-April filing deadline, receipts through the first seven months were about $1.38 trillion—$74 billion higher than receipts recorded in the same period last year, CBO estimates. Total receipts are running a bit lower than what CBO anticipated when it prepared its most recent budget projections in March. Still, through April:

  • Total receipts from individual income taxes were up by $32 billion, or about 5 percent, compared with collections during the same period last year. Withheld individual income taxes rose by $21 billion (or 4 percent), reflecting growth in wages. Nonwithheld payments rose by $9 billion (or 4 percent), and refunds declined by about $2 billion, further boosting net receipts. Nonwithheld payments during the tax-filing season (February through April)—largely representing final payments for the 2011 tax year—increased by $3 billion (or 2 percent) over the prior year's payments, less than CBO had expected in its March baseline projections.
  • Social insurance receipts grew by $10 billion, or about 2 percent, mostly because collections of unemployment taxes rose by $7 billion as states replenished their recession-depleted trust funds.
  • Corporate taxes, largely reflecting corporations' activity in 2011, increased by $32 billion, or 40 percent. Those receipts are running below CBO's March baseline estimate because final payments made in March for tax year 2011 and estimated payments made in April for 2012 were lower than expected.

Outlays Through April Were About the Same When Adjusted for Timing Shifts

Spending for the first seven months totaled $2.1 trillion, about the same as it was during the same period last year, after the shifts in the timing of certain payments are taken into account. (The year-over-year changes discussed below reflect adjustments for those shifts.)

By CBO's estimates, outlays declined for several major categories of spending:

  • Medicaid spending fell by $26 billion (or 15 percent) because legislated increases in the federal government's share of the program's costs expired in July 2011.
  • Payments for unemployment benefits fell by $16 billion (or 21 percent) because fewer claims were filed in recent months.
  • Education spending dropped by $20 billion (or 35 percent), largely because of a decline in spending from funding provided in the American Recovery and Reinvestment Act.
  • Defense spending declined by about $11 billion (or 3 percent).

For some categories and programs, spending was greater:

  • Outlays recorded for the Troubled Asset Relief Program rose by $18 billion, mostly because of a change in the estimated cost of earlier transactions.
  • Net payments to the government-sponsored enterprises Fannie Mae and Freddie Mac increased by $12 billion.
  • Outlays for Social Security benefits were higher by $22 billion (or 5 percent);
  • Net spending for Medicare was up by $7 billion (or 2.5 percent).

The Monthly Budget Review presents CBO's estimates based on the Daily Treasury Statements issued by the Treasury Department. It was prepared by Elizabeth Cove Delisle, Barbara Edwards, Daniel Hoople, David Rafferty, and Joshua Shakin.