WASHINGTON (MNI) – The following is a summary of the U.S.
Congressional Budget Office’s September Budget Review published Friday
with it’s estimate for last month’s deficit. The U.S. Treasury
Department is scheduled to release its monthly statement October 13:

CBO estimates that the federal budget deficit was about $1.30
trillion in fiscal year 2011, approximately the same dollar amount as
the shortfall recorded in 2010. The 2011 deficit was equal to 8.6
percent of gross domestic product, CBO estimates, down from 8.9 percent
in 2010 and 10.0 percent in 2009, but greater than in any other year
since 1945. The estimated 2011 total reflects the shift of some payments
from fiscal year 2012 into fiscal year 2011 (that is, from October to
September, because October 1 fell on a weekend); without that shift, the
deficit in 2011 would have been $1.27 trillion. CBO’s deficit estimate
is based on data from the Daily Treasury Statements; the Treasury
Department will report the actual deficit for fiscal year 2011 later
this month.

The deficit in September was $64 billion, CBO estimates, $29
billion greater than the shortfall recorded a year ago. Without the
shift to September of certain payments that would ordinarily be made in
October, the deficit in September would have been $2 billion lower than
it was in the same month in 2010. Receipts in September were about $5
billion (or 2 percent) lower than they were in the same month last year,
CBO estimates. Net receipts from the corporate income tax declined by
$11 billion (or 22 percent). Part of that decline may be the result of
an extension by the Internal Revenue Service of filing and payment
deadlines for certain taxpayers in response to recent natural disasters.
The decline in corporate receipts was partly offset by higher individual
income and payroll taxes. Withheld receipts from those sources rose by
$3 billion (or 2 percent), despite a temporary reduction in the payroll
tax rate that took effect in January 2011. Nonwithheld receipts of
individual income and payroll taxes, mainly quarterly estimated payments
of 2011 taxes, rose by $4 billion (or 9 percent).

Outlays were $24 billion higher in September than in the same month
last year. The timing shift discussed earlier (affecting certain
Medicare payments, military pay and retirement benefits, veterans’
compensation and pensions, and Supplemental Security Income benefits)
increased outlays by $31 billion in September 2011. Without that shift,
outlays would have been $7 billion lower than they were in September
2010. The Department of Education spent $7 billion less in September
2011 than in September 2010, primarily because of lower net subsidy
costs for student loans. Net spending for the Department of Energy was
$3 billion lower, mainly because of receipts from the sale of oil from
the Strategic Petroleum Reserve. Outlays also were lower for
unemployment insurance (by $4 billion) and Medicaid (by $3 billion).

Partially offsetting those decreases, net payments to Fannie Mae
and Freddie Mac were $3 billion higher than in September 2010. Social
Security spending and net interest payments on the public debt were each
$2 billion higher

CBO estimates that the federal deficit was just under $1.3 trillion
in 2011, about the same as the deficit in 2010 but $14 billion more than
CBO projected in August: It appears that outlays were $3 billion higher
and revenues were $11 billion lower than CBO expected.

CBO estimates that receipts rose by $141 billion (or 7 percent) in
2011, with the biggest change coming from significant increases in
individual income tax receipts. Withheld income and social insurance
(payroll) taxes rose by $62 billion (or 4 percent). That gain would have
been larger had payroll taxes paid by employees not been reduced
starting in January 2011. Nonwithheld income and payroll taxes rose by
$53 billion (or 16 percent). That increase largely reflects higher final
payments made with 2010 individual income tax returns filed earlier this
year; quarterly estimated payments of 2011 taxes also rose. The gains in
withheld and nonwithheld individual income taxes can be attributed, at
least in part, to increases in wages and in nonwage income.

Receipts from unemployment insurance taxes grew by $12 billion in
2011 as states replenished the funds that had been substantially
depleted because of high unemployment. (Those amounts are recorded as
federal revenues.) Revenues also rose because refunds of individual
income taxes were down by about $22 billion (or 8 percent) during the
past year. Receipts of corporate income taxes fell by $11 billion (or 6
percent) in 2011; that entire decline occurred in September, and it may
partly reflect delays in certain filing and payment deadlines because of
natural disasters. Throughout the year, revenue increases stemming from
higher profits were offset by revenue reductions resulting from tax
legislation enacted in 2010, particularly provisions that accelerated
businesses’ deductions for depreciation.

Other receipts rose by $3 billion, on net. A $12 billion decline in
estate and gift taxes, which resulted from the temporary repeal of the
estate tax for calendar year 2010, was more than offset by increases in
Federal Reserve earnings, excise taxes, and customs duties.

Outlays ended the year 4.2 percent above 2010 amounts, CBO
estimates. After adjusting for the effects of timing shifts, the rate of
growth was 1.8 percent. Excluding adjustments recorded in the budget for
the estimated cost of credit programs (mainly the Troubled Asset Relief
Program), the government’s other outlays increased by less than one-half
of one percent relative to spending in 2010.

Net interest on the public debt grew the most, rising by almost 17
percent ($38 billion) above the outlays recorded in 2010, primarily
because of the large increase in the government’s debt during the past
year. In the other direction, spending for unemployment benefits fell by
24 percent ($39 billion) in 2011 because fewer claims were filed and, to
a lesser extent, because a provision that boosted recipients’ benefits
by $25 per week expired. Net payments to Fannie Mae and Freddie Mac also
fell, from $40 billion in 2010 to $5 billion in 2011. Spending for
education, commerce, housing, and space programs declined as well.

Defense spending increased by about 1 percent in 2011, after rising
by an average of 7 percent per year over the 20062010 period. Medicaid
outlays increased by just 1 percent this year, in part because the
federal government’s share of the program’s costs declined, as
previously legislated increases in that share expired. (In contrast,
Medicaid spending grew by almost 9 percent in 2010.) Medicare and Social
Security outlays rose by about 4 percent each this year, slightly less
than they rose last year.

** Market News International Washington Bureau: 202-371-2121 **

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