–FY2012 YTD Federal Govt Deficit Now At -$721 Billion

WASHINGTON (MNI) – The following are excerpts from the
Congressional Budget Office monthly budget review published Friday:

The federal government incurred a budget deficit of $721 billion in
the first seven months of fiscal year 2012, CBO estimates — $149
billion less than the shortfall reported during the same period last
year. Without shifts in the timing of certain payments, however, the
deficit so far this year would have been only $92 billion smaller.
Revenues were 6 percent higher and outlays slightly lower than they were
at this point in 2011.

The Treasury reported a deficit of $198 billion for March, about $2
billion more than CBO’s estimate, which was based on the Daily Treasury
Statements.

The Treasury realized a surplus of $58 billion in April 2012, CBO
estimates, in contrast with the $40 billion deficit reported for the
same month last year. The results in both years were influenced by
shifts in the timing of certain payments; adjusted for those shifts, the
surplus in April 2012 would have been $27 billion, compared with a
deficit of $13 billion in April 2011.

Receipts this April were $30 billion (or 10 percent) higher than
collections last April, CBO estimates. The largest boost to net receipts
came from a $14 billion decline in the amount of refunds issued. Refunds
were lower, in large part, because some that ordinarily would have been
recorded in April were made in prior months. Withheld income and payroll
taxes rose by $10 billion (or 7 percent), while nonwithheld receipts
from those sources, largely from filings of income tax returns for tax
year 2011, rose by just $2 billion (or 1 percent). In addition, net
corporate income tax receipts were $3 billion higher, and all other
receipts $1 billion higher, on net, in April 2012 than in April 2011.

Outlays were $69 billion lower this April than they were in the
same month last year, by CBO’s estimate. But that difference is
distorted by shifts in the timing of payments that would ordinarily
occur in March or May. Absent those shifts, outlays would have been $11
billion lower in April 2012 than they were in April 2011.

Part of the decline in outlays occurred because last April the
government recorded a $5 billion upward revision to its estimate of
costs related to the Treasury’s purchase of mortgage-backed securities;
this year, a downward revision was made in March. Adjusted for timing
shifts, defense spending fell by $4 billion. Outlays also declined for
Medicaid (by $2 billion) and for education, family assistance, the
Postal Service, and unemployment compensation (by $1 billion each). In
contrast, outlays for Social Security benefits grew by $4 billion

CBO estimates that the Treasury will record a deficit of $721
billion for the first seven months of fiscal year 2012 — $149 billion
less than the deficit reported for the same period last year. Total
receipts through the first seven months of the fiscal year were $74
billion (or 6 percent) higher than receipts recorded during the same
period last year. However, they were roughly $20 billion below the
amounts CBO anticipated when it prepared its most recent budget
projections in March.

Through April, total receipts from individual income taxes were up
by $32 billion (or about 5 percent) compared with collections during the
same period last year. Withheld individual income taxes rose by $21
billion (or 4 percent), reflecting growth in wages. Nonwithheld payments
rose by $9 billion (or 4 percent), and refunds declined by about $2
billion, further boosting net receipts. Nonwithheld payments during the
tax-filing season (February through April)–largely representing final
payments for the 2011 tax year– increased by $3 billion (or 2 percent)
over the prior year’s payments, less than CBO had expected in its March
baseline projections.

Social insurance receipts for the first seven months of the fiscal
year grew by $10 billion, mostly because collections of unemployment
taxes rose by $7 billion as states replenished their recession-depleted
trust funds. Withheld payroll taxes grew by only $4 billion (or 1
percent), less than the increase in wages, in large part because the 2
percentage-point reduction in the Social Security payroll tax, which
took effect on January 1, 2011, was not in effect during the first three
months of fiscal year 2011 (October to December 2010). Had the payroll
tax cut had been in effect in comparable months in both years, withheld
collections would have grown by an additional $25 billion this year.

Corporate taxes paid so far this fiscal year, largely reflecting
corporations’ activity in 2011, increased by $32 billion (or 40
percent). Those receipts are running below CBO’s March baseline estimate
because final payments made in March for tax year 2011 and estimated
payments made in April for 2012 were lower than expected. Receipts from
other sources of revenue were about the same as last year, on net.

Spending for the first seven months of fiscal year 2012 was about
the same as it was during the same period last year, after the shifts in
the timing of certain payments are taken into account. (The
year-over-year changes discussed below reflect adjustments for those
shifts.) Outlays for some programs declined. Spending for Medicaid fell
by $26 billion (or 15 percent) because legislated increases in the
federal government’s share of the program’s costs expired in July 2011.
Outlays for unemployment benefits dropped by $16 billion (or 21 percent)
because fewer claims were filed in recent months. Defense spending
decreased by about $11 billion (or 3 percent), CBO estimates.

In contrast, outlays for Social Security benefits increased by $22
billion (or 5 percent). As compared with spending during the first seven
months of fiscal year 2011, net spending for Medicare was up by $7
billion (or 2.5 percent), by CBO’s estimate.

Expenditures in the broad category “Other Activities” increased by
$5 billion (or 1 percent) compared with such spending in the first seven
months of fiscal year 2011. Outlays for the Troubled Asset Relief
Program rose by $18 billion, mostly because of a change in the estimated
cost of earlier transactions. Net payments to Fannie Mae and Freddie Mac
increased by $12 billion. In contrast, education spending dropped by $20
billion (or 35 percent), CBO estimates, largely because of a decline in
spending from funding provided in the American Recovery and Reinvestment
Act.

** MNI Washington Bureau: 202-371-2121 **

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