Monthly Budget Review

June 7, 2012

The federal government incurred a budget deficit of $845 billion in the first eight months of fiscal year 2012, CBO estimates in its latest Monthly Budget Review—about $80 billion less than the shortfall reported during the same period last year. Without shifts in the timing of certain payments the deficit so far this year would have been about $50 billion smaller than the figure at the same point last year.

The Treasury reported a surplus of $59 billion for April, about $1 billion more than CBO’s estimate in last month’s Monthly Budget Review, which was based on the Daily Treasury Statements. 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. April was the first month since September 2008 in which the federal government recorded a surplus.

Total Receipts Through May Were Up By 5 Percent

Receipts through the first eight months were about $1.56 trillion—$79 billion higher than receipts recorded in the same period last year, CBO estimates.

Compared with collections during the same period in fiscal year 2011, through May:

  • Total receipts from individual income taxes were up by $31 billion, or about 4 percent. Withheld individual income taxes rose by $22 billion (or 3 percent), reflecting growth in wages. Nonwithheld payments rose by $10 billion (or 4 percent), while refunds rose by about $1 billion, partially offsetting some of the gain.
  • Receipts from social insurance taxes grew by $11 billion, or 2 percent. Withheld payroll taxes grew by only $7 billion (or 1 percent), less than the increase in wages, in large part because the 2-percentage-point reduction in the Social Security payroll tax, which took effect on January 1, 2011, was not in effect during the first three months of fiscal year 2011 (October to December 2010). Had the payroll tax cut been in effect in comparable months in both years, withheld collections would have grown by an additional $25 billion this year, CBO estimates. In addition, collections of unemployment taxes rose by $5 billion as states replenished their recession-depleted trust funds.
  • Receipts of corporate taxes have increased by $33 billion, or 39 percent, largely reflecting corporations’ activity in 2011. Payments made by firms in April and May, which more closely reflect profits during this calendar year, increased by just 4 percent.
  • Receipts from other sources of revenue rose by about $4 billion, or 3 percent, on net. Increases in receipts from excise taxes, estate and gift taxes, and customs duties were partially offset by a decline in receipts from the Federal Reserve.

Outlays Through May Were About 1 Percent Higher, When Adjusted For Timing Shifts

Spending for the first eight months totaled $2.4 trillion, about 1 percent higher than 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 increased for several major categories of spending:

  • Spending for Social Security benefits increased by $26 billion (or 5.5 percent), and net spending for Medicare was up by $13 billion (or 4 percent), by CBO’s estimate.
  • Outlays recorded for Troubled Asset Relief Program rose by $62 billion, mainly because adjustments to the estimated costs of earlier transactions reduced outlays by $42 billion in 2011 and increased outlays by $21 billion in 2012.
  • Outlays for veterans’ programs increased by $6 billion (or 7 percent).

For some programs, spending declined:

  • Medicaid spending fell by $24 billion (or 13 percent) because legislated increases in the federal share of the program’s costs expired in July 2011.
  • Outlays for unemployment benefits dropped by $18 billion (or 21 percent), mostly because fewer people have been receiving benefits in recent months.
  • Defense spending decreased by about $12 billion (or 3 percent).
  • Education spending also dropped—by $24 billion (or 36 percent)—largely because of a decline in spending funded by the American Recovery and Reinvestment Act. (Most of that spending occurred prior to 2012.)