–Estimates Federal Budget Deficit $1.265T For 1st 11 Months Of FY’10

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

The federal government incurred a deficit of nearly $1.3 trillion
in the first 11 months of fiscal year 2010, CBO estimatesa total that
is about $100 billion less than the shortfall recorded through August of
last year. Outlays are about 2 percent less than they were in the first
11 months of 2009, whereas revenues have increased by 1 percent.

CBO currently estimates that the deficit for 2010 will be about $70
billion below last year’s total but will still exceed $1.3 trillion.
Relative to the size of the economy, this year’s deficit is expected to
be the second-largest shortfall in the past 65 years: At 9.1 percent of
gross domestic product (GDP), that deficit will be exceeded only by last
year’s deficit of 9.9 percent of GDP.

The Treasury reported a deficit of $165 billion for July, about $4
billion less than CBO had projected on the basis of the Daily Treasury
Statements. That difference occurred largely because spending for
defense and Medicare was lower than expected.

The deficit in August was $95 billion, CBO estimates, $8 billion
less than the shortfall recorded a year ago.

CBO estimates that receipts were $17 billion (or 11 percent) higher
in August 2010 than they were in August 2009, representing the fourth
consecutive month of higher receipts. Withholding for income and payroll
taxes rose by $9 billion (or 7 percent) compared with August 2009; about
$2 billion of that increase occurred because August this year had one
more business day. Receipts of unemployment insurance taxes rose by $3
billion, resulting primarily from the efforts of states to replenish
their unemployment trust funds. Changes in the size and composition of
the Federal Reserve’s portfolio of assets continue to boost receipts;
remittances from the central bank were up by $3 billion relative to last
August.

Outlays were $8 billion (or 3 percent) higher in August than in the
same month last year, CBO estimates. After adjusting for shifts in
payment dates, expenditures for Medicare increased by $6 billion and
outlays for defense programs increased by $4 billion. The estimated net
cost of the Troubled Asset Relief Program (TARP) was $3 billion higher
this August than in August 2009.

Spending for Social Security benefits and Medicaid also increased
by $3 billion each. Those increases, and a number of other smaller ones,
were partially offset by decreases of $8 billion in spending by the
Federal Deposit Insurance Corporation and $5 billion for net interest on
the public debt. Spending for the Department of Education was down by $7
billion from last August because of adjustments made to the estimated
subsidy costs of loans and loan guarantees made in previous years.

CBO estimates that the government recorded a deficit of $1,265
billion for the first 11 months of fiscal year 2010, $106 billion less
than the deficit recorded during the same period last year. Outlays fell
by $77 billion, whereas revenues increased by $29 billion.

Total receipts for the first 11 months of fiscal year 2010 were
about 1 percent higher than in the same period last year. Higher net
corporate income taxes and receipts from the Federal Reserve have been
partially offset by declines in individual income and payroll taxes.

Corporate income taxes rose by $32 billion (or 30 percent) during
the first 11 months of the year; improved economic conditions and the
expiration of legislation that allowed taxpayers to take higher
depreciation charges in 2009 have resulted in higher taxable profits in
2010. With an increase of $41 billion, receipts from the Federal Reserve
were more than double the amount received in the comparable period in
2009. The larger remittances stemmed from higher profits earned by the
Federal Reserve, which primarily reflect the central bank’s much larger
portfolio and its shift to riskier and thus higher-yielding investments
in support of the housing market and the broader economy.

Combined receipts from individual income and payroll taxes declined
by about $47 billion (or 3 percent) compared with receipts in the same
period last year. Withheld income and payroll taxes fell by about $19
billion (or 1 percent), and nonwithheld receipts fell by about $37
billion (or 12 percent). In both instances, the declines occurred
earlier in this fiscal year and were largely attributable to lower
collections from tax liabilities incurred in 2009.

Collections of withheld and nonwithheld taxes for the past four
months, which are largely based on income for 2010, rose by 4 percent
relative to the same period last year. The overall drop in withheld and
nonwithheld receipts was partially offset by a $2 billion reduction in
individual income tax refunds, mainly reflecting 2009 tax liabilities,
and by a $6 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 (or 3
percent) on net, compared with last year.

Spending through August was about 2 percent lower than during the
same period last year. That decline includes a net reduction in outlays
of about $373 billion for three items related to the financial crisis:
the costs of the TARP (a reduction of $274 billion from 2009), payments
to Fannie Mae and Freddie Mac (a drop of $42 billion), and federal
deposit insurance (a decline of $57 billion).

Excluding those three programs, outlays through August increased by
$296 billion (or 10 percent) relative to the same period last year.
Slightly more than one-third of that increase stemmed from provisions in
the American Recovery and Reinvestment Act (ARRA), the majority of which
was for the State Fiscal Stabilization Fund and other Department of
Education programs, additional unemployment benefits, refundable tax
credits, and the federal share of Medicaid assistance.

Several major entitlement programs accounted for another one-third
of the overall increase in spending. Social Security benefits increased
by $34 billion (or 6 percent) and Medicare expenditures rose by $19
billion (or 5 percent). Excluding spending under ARRA, outlays for
unemployment benefits were $35 billion higher and Medicaid spending was
$12 billion higher than in the previous year.

Outlays for net interest on the public debt were $24 billion (or 13
percent) higher than during the same period last year. Most of that
growth reflects adjustments to the value of inflation-indexed
securities.

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

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