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Monthly Budget Review

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The Monthly Budget Review

In the first five months of FY 2007 that began October 1, 2006 the federal government ran up a $165 billion deficit estimated by the CBO at $53 billion less than the shortfall last year at this time. CBO calculates that passage of the President’s supplemental will result in a FY 2007 budget deficit of $214 billion. $214 billion is 1.6% of the GDP.

 FY 2007 ESTIMATES (From the Congressional Budget Office and the Office of Management and Budget [White House] )

WHAT HAPPENED?

The treasury reported a surplus of $38 billion in January 07. February estimates bounce between a $119 billion deficit and a $123 billion deficit (about $4 billion more than last year.) Revenues, on the other hand, rose about $7 billion over last year with income and payroll taxes rising by about $10.5 billion but were taken up by larger than normal individual income tax refunds and new refunds on telephone excise taxes. Corporate income taxes remain about level.

BUDGET TOTALS THROUGH FEBRUARY

WHERE THE MONEY CAME FROM

RECEIPTS THROUGH FEBRUARY

Individual and corporate income taxes are over 14% higher than the same time last year, collections of social insurance payroll taxes are slowing (4%). Increases at this time of year are usually attributed to a variety of sources including taxes on year end bonuses and final estimated quarterly payments by individuals.

In this first five months of FY 2007 corporate taxes rose by $20 billion or 21%. Other receipts, mostly fees charged by the government and extraneous income fell about 4% over last year because excise tax payments have declined.

WHERE THE MONEY WENT

OUTLAYS THROUGH FEBRUARY 2007

February outlays were 2% higher than last year. A steady decline in disaster payments that began in 2005 after the 2004 hurricanes and those that followed represents a reduction in spending by about $24 billion. Another source of funds that offset outlays was the $13 billion paid at auction for access to the nation’s airwaves.

Rapid increases in Medicare outlays is the result of and 18% increase in spending for the President’s prescription drug program. The increase is expected to fall fairly rapidly down to the expected 9% increase that is normal for Medicare. Medicaid remains static as it has since spending for prescription drugs through that program were shifted to Medicare.

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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