A monthly budget update just released from the Congressional Budget Office offers a mixed picture for government finances. While the federal government incurred a budget deficit of $871 billion in the first seven months of the fiscal year, well on its way to a record $1.6 trillion deficit, the deficit for April was $41 billion, or about half as large as the deficit recorded a year ago. And if it wasn’t for shifts in the timing of certain payments to the government, the deficit would actually have been much smaller -- a mere $14 billion last month.
This sudden glimmer of good news is mostly due to a surge in April government tax receipts – a total of $289 billion or 18 percent more than collected the same time last year. Refunds, meanwhile, fell by $5 billion, boosting net receipts.
Despite the temporary payroll tax cut in effect since January, taxes withheld from taxpayers’ paychecks rose by $46 billion, or 5 percent, in the first seven months of the fiscal year, more than CBO anticipated. That gain partially reflects the recent strength of total wages and salaries in the economy. Corporate income tax receipts also were stronger than CBO expected, increasing by $3 billion or 4 percent.
It was this greater-than-expected tax revenue that has extended by about a month the federal government’s ability to pay its bills without breaching the current $14.6 trillion national debt ceiling, according to the Treasury Department. Treasury Secretary Timothy F. Geithner announced on Monday that while federal borrowing is still likely to hit the legal limit May 16, the extra revenue and emergency steps will buy additional time under the current cap – through August 2.
The budget totals through April of this year are as follows: Outlays $1.999 trillion, Receipts $1.199 trillion, Deficit $800 billion. That deficit is $71 billion less than the fiscal year 2011 preliminary estimates.
Spending through April was 9 percent higher than in the same period in fiscal 2010. According to CBO, that increase is almost completely explained by the difference in net costs recorded for the Troubled Asset Relief Program and advance payments of premiums made to the Federal Deposit Insurance Corporation.
One telling sign of the government’s debt problems: net interest on the public debt was the fastest-growing category of spending, up $20 billion, or 16 percent. Outlays for several major entitlement programs also grew during the first seven months of the fiscal year: Medicaid increased by $10 billion or 7 percent; Medicare and Social Security spending grew by 4 percent each, adjusted for shifts in the timing of payments.
By contrast, small cash infusions and slightly larger dividend receipts reduced net payments to Fannie Mae and Freddie Mac by $27 billion, while outlays for unemployment benefits decreased by $22 billion or 23 percent because of a decline in the number of claims and because average benefits were lower than they had been a year earlier.
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