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Monthly Budget Review

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The Monthly Budget Review

February, 6 2008

The Federal Government ran a $90 billion deficit in the first four months of FY 2008 beginning on October 1, 2007. The increase is $48 billion more than the same time last year.

WHAT HAPPENED?

CBO reports that about one-third of the increase came from shifts in the timing of some payments to the Treasury.

December results showed $277 billion in receipts and $229 billion in outlays for a $48 billion surplus that month. January preliminary receipts are $256 billion and preliminary outlays of $240 billion produced preliminary surpluses of $15 billion. The $15 billion surplus is less than half the surplus recorded a year ago due to receipts being down over last year due to the weaker withholding of income and payroll taxes (less by $7 billion) and lower corporate taxes paid (down by $5 billion.

The decline is partially due to the shifting of withholding from January back to December. Combining the two months, however showed increases in withholding increased about 3% over the same time periods last year. A $6 billion gain in non-withheld receipts offset some of the declines.

Budget totals through January showed estimated receipts of $862 billion against preliminary outlays of $952 billion for a preliminary deficit number of $90 billion.

WHERE THE MONEY CAME FROM

January Receipts (Preliminary)

January receipts were $423 billion from individual income taxes, $99 billion from corporate taxes, $283 billion from social insurance premiums and $57 billion from other sources for a total of $862 billion, a 3.3% increase over the same time last year. The growth rate is 3% lower than the 7% rate of last year.

WHERE THE MONEY WENT

January Outlays (Preliminary)

Defense spent $199 billion or about 9.7% over last January. Social Security benefits paid $198 billion a 5.8% increase. Medicare spending dropped 3.1% to spend $121 billion and Medicaid spending rose 8.4% to $67 billion. Other programs spending increased 12.5% to $279 billion.

The net interest on the public debt rose 20.7% from $73 billion in January 2007 to $88 billion this year.

Total outlays for January 2008 are $952 billion, an 8.7% increase over the $872 billion spent last year at this time.

The CBO explained that, after adjusting for shifts in the timing of certain payments, outlays through January were about 8% higher than in the same period last year. The cost of the net interest of the public debt is due, in large part, to higher payments for inflation-indexed securities. CBO expects that the growth of net interest will moderate over the next few months as debts are refinanced at lower interest rates.

Defense spending is estimated to increase by 9.5% at the end of the fiscal year.

Medicare spending slowed due to a net reduction of about $4 billion in payments to prescription drug plans to correct overpayments made in 2006.

The higher outlays for other spending categories are attributed the differences in timing of payments from auctions licensing the airwaves and payments to Israel and Egypt.

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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