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Monthly Budget Review

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The Monthly Budget Review

February 2009

CBO estimates a deficit of $563 billion for the first four months of FY 2009 that began October 1, 2008. The amount is $474 billion more than the deficit through January 2009. CBO notes that spending for TARP is recorded by the Treasury on a cash basis but does not include equity investments as required by the EESA through which TARP is administered.

WHAT HAPPENED?

The Treasury reported a deficit of $84 billion for December.

Figures for January 2008 show $255 billion in receipts against $237 billion in outlays showing a surplus of $18 billion. The estimates for January 2009 are $226 billion in receipts against $304 billion in outlays for a $78 billion deficit for that month.

Largely, the deficit is attributed to lower receipts despite January being the month when the government receives quarterly payments of non-withheld taxes from individuals and spending is shifted to December due to the January first holiday. This year February outlays are shifted back to January due to February first falling on a weekend.

January receipts were about $29 billion less than the same time last year. CBO attributes that to the recession and fewer tax payments because of slow growth or declines in growth. Corporate and individual tax payments decreased and refunds of individual income taxes increased.

TARP payments added $67 billion or 28% to this January outlays. $45 billion more than last year. $6 billion was disbursed for loans and assistance to credit unions, Social Security payments increased by $5 billion due to the cost of living increase, unemployment and Medicare spending rose by $ billion, outlays for refundable tax credits increased by $3 billion and other spending grew by $5 billion.

On the positive side those increases were offset by a $17 billion devrease in net interest on the public debt. CBO attributes that decrease to lower costs for inflation-indexed securities and $7 billion collected for licenses to use the electromagnetic spectrum.

WHERE THE MONEY CAME FROM

Receipts through January

The decline in receipts over last year at this time reflect the drop in corporate taxes by $43 percent, a sign of continuing corporate weakness due to the recession. Withholding payroll taxes was 3% lower that last year. The decline took place mostly in the past two months. Unemployment reduced those taxes as well.

WHERE THE MONEY WENT

Outlays through January

Outlays through January exceeded the same period last year by $387 billion due largely to the $284 billion paid out through TARP and $14 billion of equity injections for Freddie Mac. Federal program outlays rose by 12%.

CBO notes that the near doubling of unemployment benefits, lower earnings credited to certain government funds, rapid growth in outlays for food and nutrition programs, payments for disaster relief and flood insurance and increases in spending for ‘Other’ programs explains the increase in outlays.

Medicare spending increased but the increase, in contrast to 2008 spending, was the result of reduction in 2008 payments to prescription drug providers to adjust overpayments to them in 2006. Still, Medicare spending was about 9% higher than last year at this time. Medicaid payments increased about 6% over outlays for the first four months of FY 2008.

The average 5% increase in Social Security payments over five year were eclipsed by a 6.5% increase through January this year and is explained at due to the 5.8% cost of living increase. CBO notes that that adjustment is the largest since 1982.

This Report is a revised version of  the original CBO report compiled by CBO’s Barbara Edwards, Kathy Gramp, Joshua Shakin, and Camille Woodland

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