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Monthly Budget Review

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The Monthly Budget Review

April 2007

In the first seven months of FY 2007 the government ran a deficit of $83 billion which is $101 billion less than the same period last year. Revenues have risen about 11% over the same period last year and outlays have grown only 3%. The CBO calculates that 2007 will end with a deficit between $150 billion and $200 billion.

WHAT HAPPENED?

The March deficit was $96 billion and outlays were almost flat in March. In April estimated revenues were $70 billion greater than the previous year and outlays were about #13 billion more leaving a potential surplus of $176 billion. Mainly the revenues in April were bolstered by the influx of individual tax returns. This years windfall exceeded last year by $57 billion.

BUDGET TOTALS THROUGH APRIL 2007

Withholding in April increased by $17 billion or 14% compared with last year. Part of the growth is due to an extra business day this April. Net corporate receipts were modest but gained around 6%.

Outlays were about $13 billion or 7%over last year. Net interest on the debt was up $5 billion over last year.

WHERE THE MONEY CAME FROM

BUDGET TOTALS THROUGH APRIL

Receipts were 11% higher than last year but nonwithheld receipts were recorded earlier than last year too. If the receipts were recorded later the growth now would measure about 9%. 85% of the growth came from individual income and payroll taxes. Income taxes were up 17.5% and payroll taxes up 5.5%. Nonwithheld taxes were up 25%.

Corporate receipts grew by $27 billion or 15.2% but the amount represents a significant slowing when compared to the past three years, says the CBO.

WHERE THE MONEY WENT

OUTLAYS THROUGH APRIL

Outlays through April were about 3 percent higher than in the first seven months of 2006. In total, spending for the government’s two largest health care programs, Medicare and  Medicaid, has risen at a 12 percent rate so far this year. Spending growth for both

programs has been affected by the new prescription drug benefit, which began in the second quarter of 2006. Medicare outlays rose much faster than spending for other non-defense programs through April—up by 14 percent on an adjusted basis; excluding the Part D prescription drug benefits, Medicare outlays increased by about 7 percent

relative to their level in the first seven months of 2006. Medicaid spending has accelerated this year, rising by more than 7 percent after growing by a total of only 2.5

percent over the past two years. The growth in Medicaid spending would have been even greater, except for the fact that some costs previously borne by Medicaid are now covered by Medicare’s prescription drug program.

Much of the growth in outlays for the major entitlement programs and net interest on the public debt (up by nearly 8 percent through April) was offset by lower spending for

flood insurance, disaster relief, and agriculture programs, as well as higher receipts from Medicare premiums and from auctions of licenses for use of the electromagnetic

spectrum.

This Report is adapted from the original CBO report compiled by CBO’s Mark Booth, Chad Chirico, Barbara Edwards, and Kathy Gramp.

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