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TheWeekInCongress.com

The Monthly Budget Review

February 2007

The Federal Government added $40 billion to the deficit in the first four months of fiscal year 2007 beginning October 2006. The amount is $58 billion less than the shortfall in the same period last year.

WHAT HAPPENED?

Revenues increased by about 10% over January receipts last year growing 4 % faster than outlays. Counting Iraq and Afghanistan spending but no other legislation affecting spending or revenues the CBO calculates a year end deficit around $200 billion.

DECEMBER RESULTS

	Preliminary	Actual	Difference
Receipts	$260 billion	$260 billion	0
Outlays	$220 billion	$215 billion	-4%
Surplus	$40 billion	$45 billion	+4%

December showed a $45 billion surplus because outlays were lower than expected fro the Dept. of Defense and other agencies.

ESTIMATES FOR JANUARY

	Actual 2006	Prelim 2007	Est. Change
Receipts	$230 billion	$260 billion	$31 billion
Outlays	$209 billion	$220 billion	$11 billion
Surplus	$21 billion	$40 billion	$20 billion

The January Surplus was $40 billion or twice that of the same period last year (January brings in most estimated tax payments for individuals and so the number is usually high. The gains in January are mostly from payroll taxes after a $19 billion increase and include year end bonus claims and additional business days.

WHERE THE MONEY CAME FROM

RECEIPTS THROUGH JANUARY

Source	Actual FY 2006	Prelim FY 2007	Percent Change
Individual taxes	$360 billion	$405 billion	12.6%
Corporate taxes	$90 billion	$110 billion	22.6%
Social Insurance	$257 billion	$268 billion	4.0%
Other	$53 billion	$51 billion	-2.9%
Total	$760 billion	$834 billion	9.8 billion

More than half the increase over last year is due to individual income taxes and payroll taxes. Non-withheld payments of individual income and social insurance taxes were higher by about $18 billion, or 23 percent, during the October-January period than in the same months last year. That increase resulted primarily from higher quarterly estimated payments of individual income taxes in January. The sums involved, however, represent only a small portion of nonwithheld payments for the year. Refunds of individual income taxes were about $4 billion, or more than 30 percent, higher in the October-January period than in the same four months of last year. Most refunds in 2007 will be made over the February-May period, after taxpayers file their tax returns.

For the entire fiscal year, CBO projects, revenues will grow by about 5.6 percent: individual income taxes by 9.6 percent; corporate income taxes by 4.1 percent; and social insurance taxes by 4.4 percent. Revenues from other sources combined are expected to be 9 percent lower, mainly due to refunds of telephone excise taxes, which are projected to total $13 billion in fiscal year 2007.

WHERE THE MONEY WENT

OUTLAYS THROUGH JANUARY

Category	Actual FY 2006	Prelim FY 2007	Actual Change	Adjust Change
Defense	$164 billion	$180 billion	9.8%	9.7%
Social Security	$177 billion	$187 billion	5.9%	6.2%
Medicare	$113 billion	$144 billion	27.5%	19.1%
Medicaid	$61 billion	$61 billion	1%	1%
Other	$272 billion	$229 billion	-15.8%	-15.4%
Subtotal	$786 billion	$801 billion	1.9%	1%
Net Interest on Public Debt	$72 billion	$73 billion	.7%	.7%
Total	$859 billion	$874 billion	1.8%	.9%

Outlays through January 2007 were about 1% higher than the same period last year. Two thirds of the Medicare outlays were to the prescription drug program. Medicare is expected to grow by 9% this year. Medicaid basically static since the prescription drug program began is expected to grow 7% this year. The drop in Other programs is due to less disaster payouts. Outlays for the net interest on the public debt were basically equal to last year due to reductions in the interest accrued on inflation-indexed securities offsetting increases due to higher interest rates and growing debt.

This report is a revised version of the Monthly Budget Review produced for the CBO by staff members Mark Booth, Chad Chirico, Barbara Edwards and Kathy Gramp.

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