CBO Estimates $223 Billion Deficit for February

                        ESTIMATES FOR FEBRUARY

Receipts in February were about $3 billion (or 2 percent) higher than receipts in February 2010, CBO estimates, marking the 10th consecutive month of year-over-year increases. Receipts of individual income and payroll taxes were $10 billion higher this February as a result of higher withheld taxes and lower refunds. Receipts from excise taxes were also up, but corporate income tax receipts were lower.

Compared with collections in February 2010, withheld income and payroll taxes rose by about $5 billion (or 4 percent) as a result of higher wages and salaries. Those receipts rose despite the effects of the legislation enacted last December that lowered Social Security taxes paid by individuals this year. Individual income tax refunds were down by about $5 billion compared with refunds last February. The lower refunds reflect a delay in the filing and processing of some individual income tax returns that were affected by the same legislation.

Excise taxes collected in February were about $3 billion higher than the amount collected in February 2010. That increase primarily reflects the unusually low excise tax receipts last February, which resulted from the Treasury's reallocation between corporate receipts and excise tax receipts to correct an earlier misallocation of certain refunds.

A decline of $10 billion in net corporate income tax receipts partially offset the gains in the other tax receipts. The decline stemmed largely from unusually high receipts in February 2010 (in part because of the reallocation from excise taxes). In addition, some of the decline may have resulted from legislation enacted last year that allowed more rapid depreciation of investment in equipment. In CBO's estimation, neither of those factors indicates that corporate profits are weakening.

Outlays were $5 billion (or about 1 percent) higher than in February 2010. Net interest on the federal debt was about $4 billion higher than it was a year ago, primarily because of greater federal borrowing during the past year. Outlays were also higher in February 2011 than they were in February 2010 for Medicare (up by $4 billion), the National Credit Union Administration ($3 billion), Social Security ($2 billion), and Veterans Affairs ($2 billion). Those increases were partially offset by lower spending for unemployment compensation and certain other mandatory programs. Notably, outlays for the Small Business Administration were $5 billion lower than they were in February 2010, when adjustments to the estimated subsidy costs of loans and loan guarantees increased outlays by nearly $5 billion. CBO expects an adjustment of similar magnitude to occur in March 2011.

                    BUDGET TOTALS THROUGH FEBRUARY

                       REVENUES THROUGH FEBRUARY

Withholding for income and payroll taxes increased by $50 billion (or 7 percent), which reflects higher wages and salaries; the increase would have been greater but for the temporary payroll tax reduction that took effect in January 2011.

Receipts from other individual and social insurance taxes rose by $23 billion compared with amounts in the same five -month period last fiscal year. Nonwithheld individual income and payroll tax receipts rose by about $3 billion (or 4 percent); most of the increase resulted from higher estimated payments in January for calendar year 2010 liabilities. Refunds of individual income taxes were about $14 billion lower than refunds in the first five months of last year; $7 billion of that decline occurred in January and February. CBO expects that most of that decline in the past two months can be explained by the delayed processing of some individual tax returns. Receipts of unemployment insurance taxes rose by $5 billion, as states replenished their trust funds.

Net corporate income taxes fell by about $7 billion, primarily because of the lower receipts in February. An $8 billion increase in combined receipts from the Federal Reserve, excise taxes, and customs duties was largely offset by a $6 billion decline in estate and gift taxes.

                       OUTLAYS THROUGH FEBRUARY

The slow growth can be attributed to lower net spending for payments to Fannie Mae and Freddie Mac (down by $14 billion) and for the Troubled Asset Relief Program (down by $4 billion). Additionally, outlays for unemployment benefits decreased by $14 billion (or 20 percent) because of fewer claims and lower average benefits.

In contrast, net interest on the public debt rose by $11 billion (or 13 percent) as a result of substantial growth in the national debt over the past year. Outlays for Medicaid increased by $7 billion (or 6 percent). Spending for Social Security and defense grew by 4 percent and 3 percent, respectively. Medicare spending was up by only 3 percent, an unusually low rate of growth.

In the category "Other Activities," increases in several areas, including veterans' programs and food and nutrition assistance, were offset by reduced spending in other areas, including education programs, refundable tax credits, and international assistance.

Prepared by Barbara Edwards, Daniel Hoople, David Rafferty, and Joshua Shakin. This Monthly Budget Review and other CBO publications are available at www.cbo.gov.

Note: Unless otherwise indicated, the figures in this report include the Social Security trust funds and the Postal Service fund, which are off-budget. Numbers may not add up to totals because of rounding.