Monthly Budget Review for November 2018

The federal budget deficit was $303 billion for the first two months of fiscal year 2019, CBO estimates, $102 billion more than the deficit recorded during the same period last year. Revenues and outlays were higher—by 3 percent and 18 percent, respectively—than in October and November 2017.

Because December 1, 2018, fell on a weekend, however, this year’s outlays were boosted by the shift of certain payments from December to November. Last year’s outlays for the same period were reduced by a similar amount because of payment shifts from October 2017 into fiscal year 2016. (October 1, 2017, the first day of fiscal year 2017, also fell on a weekend.) If not for those timing shifts, outlays and the deficit through November would have been larger last year and smaller this year. Outlays so far this year would have been $27 billion, or 4 percent larger than those in the same period last year, and the deficit would have risen by $13 billion.

Total Receipts: Up by 3 Percent in the First Two Months of Fiscal Year 2019

Receipts totaled $458 billion during the first two months of fiscal year 2019, CBO estimates—$14 billion more than during the same period last year. The changes between last year and this year were as follows:

• Individual income and payroll (social insurance) taxes together rose by less than $1 billion (or less than 1 percent).
  • Amounts withheld from workers’ paychecks dropped by $4 billion (or 1 percent). That change largely reflects a decline in the share of income withheld for taxes, a consequence of changes made by last year’s major tax legislation (Public Law 115-97), which took effect at the beginning of the current calendar year.
  • Nonwithheld payments of income and payroll taxes rose by $6 billion (or 18 percent) but individual income tax refunds rose by $2 billion (or 8 percent), offsetting some of that increase. Those two sources of payments generally are small at this point in the fiscal year.
• Corporate income taxes rose by $5 billion (from $1 billion in the first two months of fiscal year 2018 to about $6 billion so far this year), primarily because refunds declined by $8 billion; that decrease in refunds increased net receipts. Because corporate income tax receipts in October and November generally represent a small percentage of the year’s total, the results for those two months are not a significant indicator of receipts for the whole fiscal year. The first quarterly estimated payment of those taxes in the current fiscal year, for most corporations, is not due until December 17.
• Receipts from other sources, on net, rose by $9 billion (or 21 percent).
  • Excise taxes increased by $8 billion (or 52 percent). That increase reflects payments for a tax on health insurance providers, some of which were made in October. That tax was subject to a one-year moratorium in 2017 and will again be subject to a one-year moratorium in 2019.
  • Customs duties increased by $5 billion (or 77 percent), in part because of new tariffs imposed by the Administration, the first of which went into effect in February 2018.
  • Those increases were partially offset by a reduction in remittances from the Federal Reserve. They declined by $4 billion (or 31 percent), largely because short-term interest rates were higher, leading the central bank to pay depository institutions more interest on reserves. Those larger Federal Reserve payments led to smaller remittances to the Treasury.

Total Outlays: Up by 18 Percent in the First Two Months of Fiscal Year 2019

Outlays for the first two months of fiscal year 2019 were $761 billion, $115 billion higher than they were during the same period last year, CBO estimates. If not for the shift of certain payments from October to September 2018 (which reduced outlays in the first two months of fiscal year 2017) and from December to November 2018 (which increased outlays for the same period in fiscal year 2018), that year-to-year increase would be much smaller—$27 billion rather than $115 billion. The discussion below reflects adjustments to exclude the effects of those timing shifts.

The largest increases in outlays were in the following categories:

• Outlays for the largest mandatory spending programs increased by 2 percent:
  • Social Security benefits rose by $8 billion (or 5 percent), because of increases both in the number of beneficiaries and in the average benefit payment.
  • Medicare and Medicaid outlays were about the same as last year.
• Outlays for net interest on the public debt increased by $5 billion (or 8 percent), largely because interest rates are substantially higher in 2019 than they were during the same period in 2018 and the amount of federal debt is larger than it was a year ago.
• Spending for military programs of the Department of Defense rose by $9 billion (or 9 percent), mostly in the area of operation and maintenance.
• Outlays for the Department of Veterans Affairs (included in the “Other” category below) increased by $5 billion (or 17 percent) because of a rise in the number of disability compensation beneficiaries and an increase in the average benefit payment.

The largest decreases in outlays were in the following categories, included in “Other” below:

• Outlays recorded for the Department of Homeland Security decreased by $7 billion (or 41 percent), largely because spending for disaster relief was greater than usual in the fall of 2017.
• Spending by the Department of Agriculture decreased by $4 billion (or 10 percent), largely because of lower payments to farmers by the Commodity Credit Corporation.

For other programs and activities, spending increased or decreased by smaller amounts.

Estimated Deficit in November 2018: $203 Billion

The federal government incurred a deficit of $203 billion in November 2018, CBO estimates—$64 billion more than the deficit in November 2017. Outlays in November were affected by shifts in the timing of certain federal payments that otherwise would have been due on a weekend; those shifts increased outlays by $45 billion. If not for those shifts, the deficit would have been $158 billion—$19 billion more than the deficit in November 2017.

CBO estimates that receipts in November 2018 totaled $205 billion—$3 billion (or 2 percent) less than those in the same month last year. A decline of $4 billion (or 2 percent) in withholding of individual income and payroll taxes was partially offset by a decline in corporate income tax refunds of $2 billion.

Total spending in November 2018 was $408 billion, CBO estimates. Excluding the $45 billion in payments that were shifted into November because December 1 fell on a weekend, outlays in November this year were $16 billion more than the sum in November 2017.

The largest changes in outlays were as follows (the discussion reflects adjustments to exclude the effects of the timing shifts):

• Outlays for military programs of the Department of Defense increased by $8 billion (or 17 percent), in part because the month included three payment dates for salaries of civilian employees.
• Outlays recorded for the Department of Homeland Security decreased by $4 billion (or 46 percent), largely because spending for disaster relief was unusually high last year.
• Social Security benefits rose by $4 billion (or 5 percent).
• Spending by the Department of Veterans’ Affairs increased by $3 billion (or 20 percent).
• Medicare spending fell by $3 billion (or 6 percent). Spending for other programs and activities increased or decreased by smaller amounts.

Actual Deficit in October 2018: $100 Billion

The Treasury Department reported a deficit of $100 billion for October—$2 billion more than CBO estimated last month, on the basis of the Daily Treasury Statements, in the Monthly Budget Review: Summary for Fiscal Year 2018.