The federal government incurred a budget deficit of almost $780 billion in the first half of fiscal year 2012, CBO estimates in its latest—Monthly Budget Review—$53 billion less than the shortfall during the same period last year. A few weeks ago, CBO issued new budget projections for the coming decade; at that time, CBO estimated that the federal deficit will total $1.2 trillion in fiscal year 2012 if no further legislation is enacted that would significantly affect spending or revenues this year.
Higher Corporate Tax Receipts Explain Much of the 4.5 Percent Increase in Revenues
Receipts for the first five months of fiscal year 2012 totaled $1.07 trillion—$46 billion (or 4.5 percent) more than the amount for the same span last year, CBO estimates. Almost two-thirds of the gain stemmed from a $29 billion (or 53 percent) increase in net receipts from corporate income taxes, the result of higher payments (which were up by $11 billion, or 11 percent) and lower refunds (which were down by $18 billion, or 42 percent).
Total receipts from individual income taxes were up by only $10 billion (or about 2 percent) because of two opposing factors. Withheld and nonwithheld individual income taxes rose by $15 billion and $7 billion, respectively, in the first half of fiscal year 2012, reflecting the strengthening of both wage and nonwage incomes. But refunds increased by about $11 billion, partly as a result of accelerated processing and reporting procedures.
Social insurance receipts for the first six months grew by $5 billion, mostly because collections of unemployment taxes rose by $4 billion (as states replenished their trust funds, which were depleted in the recent recession). Withheld payroll taxes grew by only $1 billion, in part because the 2 percentage-point reduction in the Social Security payroll tax that took effect on January 1, 2011, was not in effect during the first three months of fiscal year 2011 (October to December 2010).
Outlays Were Slightly Lower Than Spending At The Same Point Last Year
Spending totaled $1.84 trillion, by CBO's estimate, slightly lower than it was in the first half of last year.
Outlays declined for several major categories of spending:
- Medicaid spending fell by $24 billion (or 16 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 $15 billion (or almost 22 percent) because fewer claims were filed in recent months.
- Education spending dropped by $17 billion (or 32 percent), largely because of a decline in spending from funding provided in the American Recovery and Reinvestment Act.
- Defense spending declined by about $9 billion (or 3 percent).
For some categories and programs, spending was greater:
- Outlays recorded for the Troubled Asset Relief Program rose by $19 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 $18 billion (or 5 percent);
- Net spending for Medicare was up by $6 billion (or 3 percent).
- Net outlays to stabilize corporate credit unions rose by $13 billion, mostly because outlays in 2011 were reduced by loan repayments from credit unions.
- Spending for international assistance increased by $4 billion (or 50 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.