The Congressional Budget Office (CBO) estimates that the US federal budget will have a $383 billion deficit in the months of October and November. Despite higher revenues of $108 billion (or 19 percent) this year outlays increased by $155 billion (or 17 percent), $47 billion more than last fiscal year’s deficit.
Also, according to the impartial budget scorekeeper, it was $317 billion, which is $250 billion more than the deficit reported by the Treasury Department in October and $68 billion more than the deficit recorded during the same period last year.
Changes in the schedule of several federal payments that would have been due on October 1, which came on a weekend in both years, resulted in lower expenditures in October 2022 and 2023.
Had those changes not occurred, prices would have increased by $164 billion in this fiscal year compared to the same period in the previous year, and the deficit for the first half of fiscal year 2024 would have been $456 billion, $56 billion more than the deficit at this point in the previous year.
Changes Made in Federal Payments
The following were the variations in receipts between the previous and current year:
Together, payroll (social insurance) and individual income taxes increased by $70 billion, or 14%.
Compared to payments made during the same period in fiscal year 2023, nonwithheld income and payroll tax payments increased by $42 billion, or 65%. The IRS extended several filing deadlines in 2023 for taxpayers in areas impacted by natural catastrophes, as seen by increased payments. The majority of those payments are now scheduled to be made in 2024.
As earnings and salaries increased, the amount deducted from employees’ paychecks rose by $33 billion, or 7%.
Net receipts were decreased because individual income tax refunds were $4 billion (or 12%) more significant than in 2023.
The CBO cited two sectors where their spending projection had “increased substantially.”
In the first, the Federal Deposit Insurance Corporation—a leading bank regulator—saw a $63 billion gain in funding, attributed to “facilitating the resolution of bank failures that occurred in 2023.”
Over the following few years, the CBO stated, “the FDIC expects to recover much of that amount by continuing to liquidate the banks’ assets and by collecting higher premiums from FDIC-insured institutions.”
The agency also emphasized that net outlays for interest on the public debt increased by 65% from the prior year, primarily due to interest rates being “significantly higher than they were” during the same two-month period the year before.
While Medicare and Medicaid spending climbed by 1% and 17%, respectively, more money was spent on Social Security payouts.
Factors Influencing Revenues:
Total receipts during the initial two months of fiscal year 2024 reached $678 billion, showcasing a substantial $108 billion increase from last year. Several factors contributed to this surge:
Postponed Tax Deadlines: The postponement of 2023 tax deadlines for certain taxpayers in federally declared disaster areas until fiscal year 2024 significantly boosted receipts.
Income and Payroll Taxes: Individual income and payroll taxes witnessed a $70 billion increase (14%), reflecting both rising wages and salaries and increased nonwithheld payments.
Corporate Income Taxes: Receipts from corporate income taxes more than tripled, soaring by $38 billion, primarily due to deadline extensions for corporations in disaster-affected areas.
Factors Influencing Outlays:
Outlays in the first two months of fiscal year 2024 amounted to $1,062 billion, a $155 billion increase from last year. Notable areas of expenditure include:
FDIC Resolution of Bank Failures: Outlays of the Federal Deposit Insurance Corporation (FDIC) surged by $63 billion, which is attributed to facilitating the resolution of bank failures in 2023.
Interest on Public Debt: Net outlays for good on the public debt increased substantially by $60 billion (65%), driven by significantly higher interest rates.
Mandatory Spending Programs: The most extensive mandatory spending programs, including Social Security, Medicare, and Medicaid, collectively increased by $48 billion (11%).
Department of Defense (DoD) Expenditure: Spending by the Department of Defense rose by $18 billion (13%), with notable increases in military personnel and operational maintenance.
Deficit and November 2023 Snapshot:
The estimated deficit for November 2023 is $317 billion, reflecting a $68 billion increase from the same month in the previous year. Factors contributing to this discrepancy include increased revenues and outlays, with notable spikes in FDIC outlays, interest on the public debt, and various government programs.
The complex interplay of economic factors, disaster-related adjustments, and government program dynamics contributes to the observed deficits. As the fiscal year progresses, ongoing scrutiny of revenue and expenditure patterns will be crucial in understanding the broader economic implications and potential policy responses.
In summary, ongoing scrutiny of revenue and expenditure patterns will be crucial in understanding the broader economic implications and potential policy responses as we navigate the intricate landscape of the US government’s fiscal health. Stay tuned for further insights as the fiscal year progresses.
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