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Monthly Budget Review

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The Monthly Budget Review

August 2008

The budget deficit was about $371 billion for the first ten months of the fiscal year beginning October 1, 2007. The amount is $213 billion more than during the same period last fiscal year. CBO estimates that the federal government will hold a budget deficit in the range of $400 billion by September 30, 2008, the end of the fiscal year. Receipts were about $5 billion lower in July 2008 than in the previous year.

WHAT HAPPENED?

Revenues were about 1% lower than during the same period last year while outlays grew by almost 9%. The July deficit stood at $102 billion or about $65 billion more than the deficit during the same period in 2007. CBO concludes that about $14 billion of the increase was due to the Economic Stimulus Act tax rebates. (Those rebates are recorded by the Treasury as either a revenue reduction of outlay increase).

Despite the rebate mathematics, payroll taxes revenues increased by about $2 billion plus a $1 billion increase in non-withheld taxes. Net corporate taxes increased by $1 billion showing the first increase in over a year.

Budget Totals through July

WHERE THE MONEY CAME FROM

Receipts through July

CBO concludes that individual income tax receipts were lower than last year because of higher refunds paid to individuals, largely due to the rebate program. Corporate tax revenue fell by 14% while social insurance receipts went up by 4%. Without the rebate, receipts would be about $40 billion higher.

Of the components of non-withheld receipts, final payments with tax returns have increased by about 6 percent this year, CBO estimates. That increase, recorded mainly in April, largely reflects 2007 tax liabilities. Quarterly estimated payments of tax, the other main component, increased by about 4 percent. Those payments mainly reflect taxpayers’ estimates of 2008 tax liabilities.

WHERE THE MONEY WENT

Outlays through July

Adjusted outlays through July were about 8% higher that last year and the rate of growth is slightly faster than the 7% annual gain over the 2002-2007 period. The growth in ‘Other’ outlays is attributed to the roughly $37 billion from rebate payments and $15 billion from covering insured deposits at failed financial institutions. Aside from that, outlays rose by about 6%.

Defense spending also grew by 11% relative to growth last year due to higher procurement and operations and maintenance costs. Other non-military defense spending rose by 8%.

Medicare and Medicaid grew by 5 and 6 percent respectively. Medicare was slightly lower due to reductions in payments to prescription drug providers for correct for an overpayment in 2006. Aside from that spending Medicare grew by 6% through July in contrast to an 8% growth in the same period last year.

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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