–Estimates Treasury To Record -$1.23 Trln Defct 1st 11 Months FY’2011

WASHINGTON (MNI) – The following is a summary of the U.S.
Congressional Budget Office’s September Budget Review published Thursday
with it’s estimate for last month’s deficit. The U.S. Treasury
Department is scheduled to release its monthly statement September 13:

The federal budget deficit totaled $1.23 trillion through the first
11 months of fiscal year 2011, CBO estimates — $28 billion less than
the deficit incurred in the same period last year. Revenues were about
7.6 percent higher through August than they were at the same point last
year, and outlays were 3.7 percent higher. In its most recent budget
projections, published in August in The Budget and Economic Outlook: An
Update, CBO estimated that the deficit for fiscal year 2011 (which will
end on September 30, 2011) will total $1.28 trillion, about $10 billion
less than last year’s shortfall.

The deficit in August amounted to $132 billion, CBO estimates, $41
billion more than the shortfall recorded for the same month a year ago.
Much of that increase occurred because August 1, 2010, fell on a weekend
and certain payments ordinarily made on the first of the month were
instead made in July of that year. Adjusted for that shift, the deficit
was $13 billion larger in August 2011 than it was in August 2010.

Receipts were about $6 billion (or 4 percent) higher in August 2011
than they were in the same month last year, CBO estimates. Receipts from
withheld individual income and payroll taxes rose by $7 billion (or 5
percent), despite a temporary reduction in the payroll tax rate that
took effect in January 2011. However, much of that rise in withheld
taxes occurred because August 2011 included one more business day than
August 2010. In all, revenues from other sources were about $1 billion
lower in August 2011 than they were a year earlier, mostly because of a
$2 billion decline in receipts from the Federal Reserve.

Outlays were $47 billion higher in August than in the same month
last year, CBO estimates, but that increase would have been only $19
billion (or 7 percent) without the shift in the timing of 2010 payments
mentioned above. Spending by the Department of Education was $8 billion
higher than in August 2010, when downward adjustments were made to the
estimated subsidy costs of loans and loan guarantees provided in
previous years. Smaller changes in spending for many other programs last
month boosted outlays by another $15 billion, on net. In contrast,
outlays for unemployment benefits were $4 billion lower last month than
they were in August 2010.

CBO estimates that the government recorded a deficit of $1.23
trillion for the first 11 months of fiscal year 2011, $28 billion less
than the deficit for the same period last year. Revenues grew by $146
billion (or 7.6 percent), and outlays rose by $118 billion (or 3.7
percent).

The growth in revenues over the first 11 months of the fiscal year
reflects a significant increase in receipts from individual income
taxes, which was partially offset by a net reduction in other receipts.
Withheld income and social insurance (payroll) taxes rose by $59 billion
(or almost 4 percent). That gain would have been even larger had payroll
taxes paid by employees not been reduced starting in January 2011.
Nonwithheld income and payroll taxes also rose (by $48 billion, or 17
percent); the bulk of that increase resulted from higher final payments
made with 2010 individual income tax returns that were filed earlier
this year.

The gains in withheld and nonwithheld individual income taxes can
be attributed, at least in part, to increases in both wages and nonwage
income. Receipts from unemployment insurance taxes grew by $11 billion
through August as states replenished trust funds that had been
substantially depleted because of high unemployment. Revenues also rose
because refunds of individual income taxes were down by about $22
billion (or 9 percent) during the past 11 months.

Receipts from corporate income taxes were about the same through
August as they were in the first 11 months of fiscal year 2010. Revenue
increases stemming from higher profits offset revenue reductions
resulting from tax legislation enacted in 2010, particularly provisions
that accelerated businesses’ deductions for depreciation.

Revenues from other sources increased by a total of about $6
billion (or 3 percent) in the first 11 months of the year. Receipts to
the Treasury from the Federal Reserve grew by $9 billion, primarily
because of the larger portfolio of Treasury securities held by the
Federal Reserve. Customs duties and excise taxes each rose by about $4
billion. Gains from those sources were partly offset by a decline of
about $11 billion in estate and gift taxes, which stemmed from the
temporary repeal of the estate tax for calendar year 2010.

Outlays totaled $3.3 trillion in the first 11 months of the fiscal
year, CBO estimates, $118 billion more than in the same period last
year. About $46 billion of that rise stemmed from last year’s
prepayments of premiums to the Federal Deposit Insurance Corporation
(FDIC), which were recorded as negative outlays. Another $55 billion of
the increase occurred because downward adjustments to the estimated net
cost of credit programs (mainly the Troubled Asset Relief Program) have
been smaller in 2011 than in 2010. Otherwise, total spending has risen
only slightly.

Outlays for net interest on federal debt held by the public grew
faster than any other category of spendingby nearly 18 percent (or $37
billion) — mainly because of substantial growth in that debt over the
past 11 months. Outlays for the largest entitlement programs rose more
slowly: Medicare, by 4.0 percent; Social Security, by 3.5 percent; and
Medicaid, by 2.1 percent. Defense spending increased by only 1.5
percent.

Those increases were partially offset by declines in two large
categories of spending: Net payments to Fannie Mae and Freddie Mac were
$38 billion lower than at the same point last year, and spending for
unemployment benefits was $35 billion lower. Outlays for the category
“Other Activities” also fell: by 1.4 percent, with last year’s
prepayments of premiums to the FDIC excluded. Lower spending for deposit
insurance and a variety of other programs more than offset higher
spending for veterans’ programs and food and nutrition assistance.

** Market News International Washington Bureau: 202-371-2121 **

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