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The Monthly Budget Review May 4, 2006

From October 1, 2005 through April 2006 the Federal Government ran up a $183 billion deficit. The amount is $53 billion less than the same period last year. With that, the CBO predicts that the deficit at the end of fiscal year 2006 will be ‘significantly less’ than the predicted $350 billion and possibly as low as $300 billion.

WHAT HAPPENED?

In March 2006 the government took in $165 billion and laid out $250 billion leaving a deficit of $85 billion. In April 2006 the government took in $316 billion and spent $196 billion leaving a surplus of $120 billion. The April surplus is a result of non-withheld income tax receipts and payroll taxes. Corporate taxes paid were up by about $9 billion and individual income tax returns were down by about $7 billion. Part of the windfall in contrast to last year, however, is due to April 2006 having one less Friday than April 2005 and that extra day is the day on which most refunds are disbursed. The difference was $30 billion less disbursed this year. The other calendar impact was the shifting of April payments back to March because the April payment date in 2006 came on a weekend.

Totals FY 2005

Receipts	$1.217 trillion
Outlays	$1.454 trillion
Deficit	-$237 billion

WHERE THE MONEY CAME FROM

Revenues

Source	FY 2005	FY 2006 Prelim.	% Change
Individual Taxes	$547 billion	$603 billion	+ 10.2%
Corporate Taxes	$134 billion	$174 billion	+29.5%
Social Insurance	$449 billion	$482 billion	+7.2%
Other	$86 billion	$95 billion	+10.8%
Total	$1.217 trillion	$1.353 trillion	+11.2%

CBO calculated that corporate income taxes would increase by $24 billion for all of FY 2006 (about 9%) but it has already increased by $40 billion. The increase in individual income taxes reflects continued growth in wages and salaries in the economy, the CBO concluded. April receipts were at expected levels but early May receipts are showing signs of unexpected revenue, possibly $20 billion to $25 billion higher than predicted. Areas of revenue could include capital gains, non-corporate business income, interest and dividend incomes.

WHERE THE MONEY WENT

Category	FY 2005	FY 2006 Prelim.	% Change
Defense-Military	$273 billion	$286 billion	+5.1%
Social Security Benefits	$297 billion	$314 billion	+5.8%
Medicare	$191 billion	$209 billion	+9.2%
Medicaid	$105 billion	$103 billion	-1.8%
Other Programs	$483 billion	$496 billion	+2.5%
Interest on Debt	$105 billion	$129 billion	+23.2%
Totals	$1.454 trillion	$1.537 trillion	+7.6%

Outlays in general were fairly level with payments continuing for hurricane Katrina and Rita relief such as flood insurance payouts. Medicare spending was about twice the norm due to the prescription drug program while Medicaid spending is less for the same reasons. Taxpayers are shifting the cost of prescription drugs from the federally subsidized Medicaid program to the Medicare program. A variety of off budget and over spending resulted in additions to the public debt and therefore an increase in interest payments of 23 percent.

This Report is revised from the original CBO report compiled by CBO’s Mark Booth, Chad Chirico, Barbara Edwards, and Kathy Gramp.

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