Monthly Budget Review for January 2013

The federal budget deficit was $295 billion for the first four months of fiscal year 2013, $54 billion less than the shortfall recorded for the same period last year, CBO estimates. Without shifts in the timing of certain payments in both years, however, the deficit for the four-month period would have been about $84 billion lower this year than the amount in fiscal year 2012.

If lawmakers enacted no further legislation affecting spending or revenues, the federal government would end fiscal year 2013 with a deficit of $845 billion, or 5.3 percent of gross domestic product (GDP), CBO estimates—compared with $1.1 trillion, or 7.0 percent of GDP, in 2012. For more details about CBO’s most recent budget projections, see The Budget and Economic Outlook: Fiscal Years 2013 to 2023.

Total Receipts Were Up by 12 Percent in the First Four Months of Fiscal Year 2013

Receipts in the first four months of fiscal year 2013 totaled $886 billion, CBO estimates, $96 billion more than those in the same period last year. Compared with receipts in the first four months of last year:

• Individual income and payroll (social insurance) taxes together rose by $76 billion (or 11 percent)—accounting for nearly 80 percent of the gain in revenues. Taxes withheld from workers’ paychecks rose by $58 billion (or 10 percent); most of the gains came from a combination of higher wages and salaries and the expiration of the payroll tax cut in January. Nonwithheld tax receipts for the first four months of the fiscal year rose by $15 billion (or 18 percent), mostly owing to the January boost brought about by taxpayers’ shifting of income from calendar year 2013 into late 2012 in anticipation of higher tax rates. Individual income tax refunds fell by $5 billion (or 21 percent), primarily because of the IRS’s delay in processing 2012 income tax returns. Offsetting those gains was a $2 billion drop in receipts from unemployment taxes.
• Corporate income taxes increased by $10 billion (or 16 percent); tax payments rose by $8 billion, and refunds were $2 billion lower than during the same period last year.
• Other revenues rose by $10 billion. Most of the gains came from higher receipts from the Federal Reserve (up $5 billion) and excise taxes (up $3 billion).

Spending Was About 1 Percent Higher When Adjusted for Timing Shifts

By CBO’s estimate, federal outlays—totaling nearly $1.2 trillion—would have been about 1 percent higher in the first four months of 2013 than they were during that period in 2012, if not for shifts in the timing of certain payments. (The year-over-year changes discussed below reflect adjustments to account for those shifts.)

For some major programs and activities, spending increased:

• Social Security, Medicare, and Medicaid—Expenditures for each of the three largest entitlement programs were greater than those in the same period last year. Outlays for Social Security benefits increased by the largest amount—by $16 billion (or 6 percent). Spending for Medicare rose by $14 billion (or 9 percent), and outlays for Medicaid rose by $8 billion (or 11 percent).
• Agriculture—Spending increased by $12 billion, primarily because of higher crop insurance payments owing to drought.
• Disaster Assistance—Spending for the Federal Emergency Management Agency increased by $4 billion, mostly because of Hurricane Sandy.

In contrast, outlays decreased for some major categories of spending:

• Unemployment benefits—Spending declined by $8 billion (or 22 percent), mostly because fewer people have been receiving benefits in recent months.
• Defense—Outlays fell by $9 billion (or 4 percent).
• Fannie Mae and Freddie Mac—Net payments to the government-sponsored enterprises were $14 billion less than those made at the same time last year.

The Monthly Budget Review was prepared by Elizabeth Cove Delisle, Barbara Edwards, David Rafferty, Dawn Sauter Regan, and Joshua Shakin.