CBO's Monthly Budget Review: Higher Deficit than Last Year but with Signs of Hope

The Congressional Budget Office (CBO) issued its Monthly Budget Review late last week. CBO reports that the federal government incurred a deficit of $800 billion for the first seven months of fiscal year 2010, about the same level as the deficit recorded for this same period last year. 

Expenditures through April were at about $56 billion (or 3 percent) higher for the same timeframe last year. Outlays for unemployment benefits were about $41 billion (or 69 percent) higher and Medicaid outlays were about $15 billion higher (or 10 percent.).

Revenues were about 4 percent lower than in the 2009 timeframe, primarily due to lower wages and the effects of the Making Work Pay tax changes.  This decline was about twice what CBO had projected in its baseline. 

But the report also hints that receipts changes might be a sign of hope.  CBO indicates that receipts in March and April indicate that tax revenues may be on the upswing over the coming months. CBO estimates that the growth in the receipts from withheld income and payroll taxes over last year’s levels may hint at a “rebound in wages and salaries.”  And net corporate receipts (which were below last year’s levels through February) are now $6 billion above last year’s receipts during the same timeframe.

In addition, CBO estimates that the April deficit was, at $85 billion, $64 billion higher than it was last April (about $25 billion of which can be attributed to calendar timing shifts in certain payments.)