Monthly Budget Review for June 2019

The federal budget deficit was $746 billion for the first nine months of fiscal year 2019, CBO estimates, $139 billion more than the deficit recorded during the same period last year. Revenues were $69 billion higher and outlays were $208 billion higher than during first nine months of 2018.

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

Receipts totaled $2,609 billion during the first nine months of fiscal year 2019, CBO estimates—$69 billion (or 3 percent) more than during the same period last year. That increase was the result of changes in receipts from the following sources:

• Individual income and payroll (social insurance) taxes together rose by $60 billion (or 3 percent).
  • Amounts withheld from workers’ paychecks rose by $37 billion (or 2 percent). That change largely reflects increases in wages and salaries that were partly offset by a decline in the share of income withheld for taxes. The Internal Revenue Service issued new withholding tables in January 2018 to reflect changes made by the 2017 tax act (Public Law 115-97). All employers were required to begin using the new tables by February 15, 2018. Those new withholding rates were in effect during the first nine months of this fiscal year but for only four and a half months of the same period last year.
  • Nonwithheld payments of income and payroll taxes rose by $7 billion (or 1 percent).
  • Income tax refunds were down by $20 billion (or 8 percent), further boosting net receipts.
  • Unemployment insurance receipts (one kind of payroll tax) declined by $4 billion (or 10 percent).
• Corporate income taxes increased by less than $1 billion (or less than 1 percent). Payments received in June—the first month in which receipts consisted predominantly of estimated payments for tax year 2019—were up by $11 billion (or 30 percent).
• Revenues from other sources increased by $8 billion (or 4 percent), mostly as a result of increased collections of customs duties and excise taxes.
  • Customs duties increased by $22 billion (or 77 percent), primarily because of new tariffs imposed by the Administration during the past year.
  • Excise taxes increased by $8 billion (or 13 percent), partly because of payments received in October for the tax on health insurance providers. In 2017, that tax was subject to a one-year moratorium that was lifted for 2018 but reimposed for the current fiscal year.
  • Revenue increases were partially offset by smaller remittances from the Federal Reserve to the Treasury. Remittances declined by $16 billion (or 28 percent), mainly because short-term interest rates were higher, leading the central bank to pay depository institutions more interest on reserves.
  • Estate and gift taxes decreased by $4 billion (or 26 percent) reflecting changes made by the 2017 tax act, which doubled the value of the estate tax exemption.

Total Outlays: Up by 7 Percent in the First Nine Months of Fiscal Year 2019

Outlays for the first nine months of fiscal year 2019 were $3,356 billion, $208 billion more than during the same period last year, CBO estimates. The largest increases were in the following categories:

• Outlays for the largest mandatory spending programs increased by 6 percent:
  • Social Security benefits rose by $42 billion (or 6 percent) because of increases both in the number of beneficiaries and in the average benefit payment.
  • Medicare outlays increased by $30 billion (or 7 percent), because of increases both in the number of beneficiaries and in the amount and cost of services.
  • Medicaid outlays rose by $14 billion (or 5 percent).
• Outlays for net interest on the public debt increased by $44 billion (or 16 percent) because interest rates on short-term debt are substantially higher now than they were during the same period in 2018 and because the federal debt is larger than it was a year ago.
• Spending for military programs of the Department of Defense rose by $37 billion (or 8 percent), with the largest increases occurring in operation and maintenance, procurement, and research and development.
• Outlays for the Department of Education (included in the “Other” category below) rose by $40 billion (or 85 percent), mostly because the department made an upward revision of $28 billion to the estimated net subsidy costs of loans and loan guarantees issued in prior years—a change very different from last year’s $9 billion downward revision. If the effects of those revisions were excluded, outlays for the department for the first nine months of the fiscal year would have risen by $2 billion (or 4 percent). 
• Outlays for the Department of Veterans Affairs (also included in “Other”) increased by $11 billion (or 8 percent) because the number of people receiving disability compensation rose and the average benefit payment increased.
• Outlays for the refundable portion of the earned income and child tax credits (also included in “Other”) rose by $10 billion (or 13 percent). That increase reflects an expansion of the child tax credit, including the refundable portion, made by the 2017 tax act.

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

• Outlays for the Department of Housing and Urban Development decreased by $29 billion (or 63 percent), primarily because the department made a downward revision of $17 billion to the estimated net subsidy costs of loans and loan guarantees issued in prior years—a change very different from last year’s $14 billion upward revision. If the effects of those revisions were excluded, outlays for the department would have been $2 billion higher than they were in 2018.
• The Treasury received $16 billion more in payments this year from Fannie Mae and Freddie Mac, resulting in lower net outlays. Those entities’ quarterly payments to the Treasury in December were $4 billion more than they made in the previous December. In March of this year, they remitted about $6 billion to the government, whereas in March 2018 they received net payments of about $3 billion from the Treasury—a difference of $9 billion. Last March was the only time since 2012 that Fannie Mae and Freddie Mac received such payments from the Treasury. In addition, quarterly payments to Treasury this June were $3 billion more than the payments made last June.   
• Outlays for the Department of Homeland Security decreased by $10 billion (or 19 percent), primarily because spending for disaster relief was higher than usual at the beginning of last fiscal year.  

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

Estimated Deficit in June 2019: $8 Billion

The federal government realized a deficit of $8 billion in June 2019, CBO estimates—$67 billion less than the shortfall in June 2018. Outlays in June of both years were affected by shifts in the timing of certain federal payments that otherwise would have been due on a weekend; those shifts decreased outlays in June 2019 by $49 billion but increased them in June 2018 by $46 billion. If not for those shifts, the deficit in June 2019 would have been $57 billion—$28 billion more than the deficit of $29 billion in June 2018.

CBO estimates that receipts in June 2019 totaled $334 billion—$18 billion (or 6 percent) more than those in the same month last year. Individual income and payroll taxes were $7 billion (or 3 percent) higher, and corporate income taxes were up by $11 billion (or 30 percent).

Total spending in June 2019 was $342 billion, CBO estimates—$49 billion less than the sum in June 2018. If not for timing shifts, outlays this June would have been $46 billion (or 13 percent) more than they were in the same month last year. (The changes discussed below reflect adjustments to remove the effects of those shifts.)

According to CBO’s estimates, the largest changes in outlays were as follows:

• Outlays for the Department of Education grew by $36 billion because of the revisions, discussed above, to the net subsidy costs of loans and loan guarantees issued in prior years. If the effects of those revisions were excluded, outlays for the department in June 2019 would be $1 billion less than outlays in June 2018.
• Outlays for net interest on the public debt increased by $7 billion (or 20 percent), mostly because average interest rates are higher now than they were in June 2018 and also because the federal debt is larger than it was a year ago.
• Social Security and Medicaid benefits rose by $5 billion and $4 billion, respectively.
• Spending for Medicare decreased by $3 billion (or 5 percent).
• Spending for military programs of the Department of Defense fell by $3 billion (or 5 percent).
• The Treasury received $3 billion more in payments this June from Fannie Mae and Freddie Mac, resulting in lower net outlays.

Spending for other programs and activities increased or decreased by smaller amounts.

Actual Deficit in May 2019: $208 Billion

The Treasury Department reported a deficit of $208 billion for May—$1 billion more than CBO estimated last month, on the basis of the Daily Treasury Statements, in the Monthly Budget Review for May 2019.