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TheWeekInCongress.com

The Monthly Budget Review

January 8, 2007

In the first quarter of fiscal year 2007 that began October 1, 2006 the federal budget deficit was close to $85 billion or about $35 billion than in the same period last year. Revenues have risen by 8% compared to the same time period last year.

WHAT HAPPENED?

December 2007 estimates show an 18% estimated increase in receipts and an estimated 11% reduction in outlays to produce a 29% increase in the surplus. November data showed that receipts were about flat at $146 billion and outlays increased from $219 billion to $221 billion. The November totals, then, produces a $76 billion deficit for that month. The November adjustment was due to the Treasury Department erring in it’s report of outlays for the Pension Benefit Guarantee Corporation.

The December 2006 surplus was $40 billion or about $29 billion more that December 2005. 2006 December revenues were 7% higher than 2005.

BUDGET TOTALS THROUGH DECEMBER 2006

	Actual FY 2006	Preliminary 2007	Estimated Change
Receipts	$530 billion	$573 billion	+$43 billion
Outlays	$650 billion	$658 billion	+$8 billion
Deficit (for the month)	-$119 billion	-$85 billion	+$35 billion

WHERE THE MONEY CAME FROM

Receipts are generally higher in December because of quarterly corporate taxes, year-end bonuses and seasonal employment taxes.

Major Source	Actual FY 2006	Preliminary FY2007	% Change
Individual tax	$230 billion	$251 billion	+8.8%
Corporate tax	$81 billion	$99 billion	+22.2%
Social Insurance	$180 billion	$186 billion	+3.1%
Other	$39 billion	$38 billion	-1.9%
Total	$530 billion	$573 billion	+8.1%

One half of the revenue gain came from withheld income taxes reflecting a growth in wages and salaries. Corporate tax revenue rose 22% to $18 billion what with companies making their last estimated tax payment in December and reflecting profit increases.

WHERE THE MONEY WENT

Outlays were $11 billion lower this December than last with the largest factor being the receipt of $12.7 billion from the auction to use the electromagnetic spectrum. Homeland Security spending was down by $4 billion compared to 2005 due to less spending this year for hurricane relief. $3 billion in payments to Israel and Egypt were down $3 billion because the payment was not made in the first FY 2007 quarter.

OUTLAYS FOR MONTH OF DECEMBER FY 2006 AND FY 2007

Major Category	Actual FY 2006	Prelim FY2007	Actual Change	Adjusted Chng.
Defense	$129 billion	$143 billion	+10.9%	+10.7%
Social Security	$131 billion	$139 billion	+6.2%	+6.6%
Medicare	$82 billion	$109 billion	+33.5%	+22.1%
Medicaid	$47 billion	$45 billion	-2.8%	-2.8%
Other Programs	$203 billion	$166 billion	-18.1%	-17.4%
Subtotal	$591 billion	$603 billion	+1.9%	+.07%
Net Interest on the Public Debt	$58 billion	$55 billion	-5.3%	-5.3%
Total	$650 billion	$658 billion	+1.3%	+.02%

December outlays were flat. Debt payments were about 5% lower than last year because of lower inflation reducing interest costs for inflation-indexed securities. Defense spent about 11% more for procurement and research and development. Medicare grew rapidly in December with 2/3rds of the increase coming from outlays to the prescription drug plan. Those outlays by Medicare reduced Medicaid spending that used to cover prescription costs by about 3%.

Other reduced spending was due to lower output for flood insurance and disaster assistance ($15 billion less than last year.) The above-mentioned $12.7 billion for electromagnetic spectrum added to revenues but is a one-time charge not to be revisited next year.

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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