–Federal Budget Deficit $1.29T For FY’2010, -$51b Vs August Projection
WASHINGTON (MNI) – The following are excerpts from the U.S.
Congressional Budget Office’s October Budget Review with it’s estimate
for last month’s deficit. The U.S. Treasury Department is scheduled to
release its monthly statement October 13:
The deficit in September 2010 was $32 billion, CBO estimates, $14
billion less than the shortfall recorded a year ago. Quarterly payments
of estimated individual and corporate income taxes typically result in a
surplus for September; however, revenues remain relatively low and
spending was relatively high, resulting in the 24th consecutive month of
budget deficits.
CBO estimates that receipts in September were about $26 billion (or
12 percent) higher than receipts in September 2009. Corporate income tax
receipts, which rose by about $20 billion, account for most of the
increase; gross corporate income tax receipts grew by $17 billion (or 45
percent), and corporate refunds fell by $4 billion (or 44 percent).
Withholding for income and payroll taxes increased by $6 billion (or 5
percent). Nonwithheld individual income and payroll taxes, mainly from
quarterly estimated payments of 2010 income taxes, rose by $2 billion
(or 3 percent). Other receipts fell by $2 billion, on net.
Outlays were $13 billion (or 5 percent) higher in September than in
the same month last year, CBO estimates. The estimated net cost of the
Troubled Asset Relief Program (TARP) was about $13 billion higher this
September than last September; that difference occurred almost entirely
because a reduction in the previously estimated subsidy costs for the
program was recorded in September 2009. Spending for the Department of
Education was up by $8 billion from last September. Expenditures for the
Federal Deposit Insurance Corporation and net interest on the public
debt rose by $3 billion each, and spending for Social Security and
Medicaid increased by $2 billion each. Those increases were partially
offset by a $9 billion reduction in net payments to Fannie Mae and
Freddie Mac and by an increase of $9 billion in the Treasury’s interest
earnings from credit programs.
CBO estimates that the federal deficit was slightly less than $1.3
trillion in 2010, down from slightly more than $1.4 trillion in 2009.
Outlays declined by $67 billion, and revenues increased by $57 billion.
The estimated deficit is about $51 billion lower than CBO projected in
August. Outlays were lower and revenues were higher than previously
expected.
CBO estimates that total receipts rose by 3 percent in 2010,
following declines in each of the prior two years. Growth in receipts of
corporate income taxes and remittances from the Federal Reserve more
than offset reduced collections of individual income and payroll taxes
in 2010.
Corporate income tax receipts rose by $53 billion (or 39 percent)
in 2010; improved economic conditions and the expiration of legislation
that allowed taxpayers to take higher depreciation charges in 2009 has
resulted in higher taxable profits in 2010. (The Small Business Jobs Act
of 2010, which became law in late September, extended through tax year
2010 the allowance for higher depreciation charges; that retroactive
change will reduce revenues in fiscal year 2011.) Receipts from the
Federal Reserve increased by $42 billion this year, to more than double
the amount received in 2009.
The central bank’s increased profits resulted from an enlarged
portfolio and a shift to riskier and thus higher-yielding investments in
support of the housing market and the broader economy. Those increases
were partially offset by a drop in the total of individual income and
payroll taxes, which were about $43 billion (or 2 percent) lower than
those receipts in 2009. Withheld income and payroll taxes declined by
about $13 billion (or 1 percent), and nonwithheld receipts fell by about
$35 billion (or 10 percent). In both instances, the declines occurred
early in the fiscal year and were largely attributable to lower
collections of tax liabilities incurred in 2009. In the past five
months, collections of withheld and nonwithheld taxes, which were based
on income in 2010, were 4 percent higher than in the same period last
year. The overall reduction in withheld and nonwithheld receipts was
partially offset by a $7 billion increase in collections of unemployment
insurance taxes, resulting primarily from the efforts of states to
replenish their unemployment trust funds. Other tax receipts rose by $4
billion, on net, compared with such revenues last year.
Outlays ended the year about 2 percent below those in 2009, CBO
estimates. That decline resulted primarily from a net reduction in
outlays for three items related to the financial crisis: the costs of
the TARP ($262 billion lower than in 2009), payments to Fannie Mae and
Freddie Mac ($51 billion lower), and federal deposit insurance ($55
billion lower). Excluding those three programs, spending rose by about 9
percent in 2010, somewhat faster than in recent years.
Payments for unemployment benefits rose by 34 percent in 2010
because of high unemployment and increased benefits provided by various
laws, including the American Recovery and Reinvestment Act (ARRA).
Other ARRA provisions led to double-digit growth in spending for
programs in the “Other Activities” categoryparticularly the State
Fiscal Stabilization Fund, refundable tax credits, and certain education
programs. Apart from deposit insurance, outlays for that broad category
were 13 percent higher than in 2009. In contrast, defense spending grew
more slowly than in recent years, increasing by about 5 percent in 2010
after rising by an average of 8 percent annually from 2005 through 2009.
Medicare and Social Security outlays rose by about 5 percent this year,
somewhat less than in most recent years. The 9 percent increase in
Medicaid outlays partly reflects a temporary increase in the federal
share of Medicaid assistance authorized in ARRA; excluding ARRA-related
expenditures, Medicaid outlays rose by about 6 percent.
** Market News International Washington Bureau: 202-371-2121 **
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