Legislation News & Report (TM) 

TheWeekInCongress.com (TM)

Monthly Budget Review

TheWeekInCongress.com

The Monthly Budget Review

June 2009

The federal budget deficit is estimated by CBO as $984 billion for the first 8 months of FY 2009. The amount is $664 billion more than during the same period last year. CBO notes that the estimate includes outlays for TARP of about $130 billion to date. The amount is the result of the Emergency Economic Stabilization Act that created TARP requirements that the amount be recorded on a net-present-value basis.

WHAT HAPPENED?

Revenues have fallen by about 18% compared with this period in FY 2008 and outlays have increased by more than 18%.

Treasury reported a $21 billion deficit for April 2009. CBO estimates the May deficit to be $181 billion, $15 billion more than in May 2008.

May receipts were $3 billion lower. Withheld income and payroll taxes fell by $16 billion due to recent legislation and the recession.

CBO concludes that more than one third of the decline came from ARRA, the American Recovery and Reinvestment Act of 2009, specifically the Making Work Pay tax credit for many earners. Non-withheld income and payroll taxes declined by 38%, refunds decreased by $25 billion but would have risen by $7 billion but for last year’s rebates.

Not usually a significant source of revenue in May, says CBO, corporate receipts continued to decline (by $8 billion) in May. Net corporate receipts were negative and refunds were larger than gross receipts.

TARP outlays for May are estimated at $12 billion. Outlays for Social Security and unemployment rose but some increases were offset by lower spending by the Treasury which paid $15 billion last May to taxpayers whose rebates under the Economic Stimulus Act of 2008 exceeded their federal income tax liability.

Budget Totals through May

WHERE THE MONEY CAME FROM
 

Receipts through May

"Receipts in the first eight months of this fiscal year were about $1.4 trillion, almost $300  billion (or 18 percent) lower than in the same period last year. Corporate receipts fell by $108 billion (or 61 percent) during the period. Continued weakness in corporate profits, recently enacted legislation (most notably bonus depreciation), and the ability of firms to use current-year losses to reduce tax liabilities from previous years all contributed to lower corporate receipts.

"Declines in individual income and payroll taxes of $175 billion account for almost 60 percent of the overall decrease. The decline probably stems in part from a substantial drop in non-wage income in 2008.

"The decline probably stems in part from a substantial drop in non-wage income in

2008.

"Withholding of income and payroll taxes fell by about $68 billion (or 6 percent), largely because of the ongoing effects of the recession on wages and salaries."

WHERE THE MONEY WENT

Outlays through May have reached nearly $2.4 trillion, CBO estimates, $367 billion more than those in the first eight months of 2008. More than half of the increase results from the TARP ($130 billion) and from payments to Fannie Mae and Freddie Mac ($60 billion as reported on a cash basis by the Treasury Department). No outlays

occurred for those purposes in 2008.

Net interest on the public debt has decreased by 26 percent ($45 billion) compared with outlays at this time last year, primarily because of lower costs for inflation-indexed securities and a decline in short-term interest rates.

Spending for the rest of the federal government increased by about $222 billion (or nearly 14 percent).

Outlays through May

*Government Sponsored Enterprises such as Fannie Me and Freddie Mac.

The fastest-growing categories of spending through May were Medicaid and a variety of “other activities.” Medicaid spending is up by 21 percent (or $29 billion) through May. Around $19 billion of that increase stems from a provision in ARRA that increased the federal government’s share of Medicaid payments.

In addition, outlays for unemployment benefits are 140 percent ($41 billion) higher than they were at this time last year.

Increased lending to credit unions, lower earnings credited to certain government funds, and increased payments for food and nutrition programs also contributed to growth in “other activities.” The net growth in that category also reflects the $13 billion paid to Social Security recipients under ARRA in May 2009 as well as the $19 billion disbursed through May in 2008 to individuals whose tax rebates exceeded their federal income tax liability.

Social Security benefit payments unrelated to the stimulus legislation were up by 8 percent (or $32 billion), partly because of a large cost-of-living increase in January.

Adjusting for shifts in the timing of certain payments, defense spending rose by 7 percent ($29 billion) and Medicare spending grew by 9 percent (or $23 billion).

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

## All Rights Reserved. © 2009 TheWeekInCongress.com.(TM)

No reproduction, language translation or distribution without written permission from TheWeekInCongress.com.(TM)