MONTHLY BUDGET REVIEW …

                                 MONTHLY BUDGET REVIEW
                                            Fiscal Year 2008
                                    A Congressional Budget Office Analysis
Based on the Monthly Treasury Statement for April
and the Daily Treasury Statements for May                                                                               June 5, 2008

The federal government incurred a deficit of about $317 billion during the first eight months of fiscal year 2008, CBO
estimates, $168 billion more than the shortfall recorded through May of last year. About $50 billion of that change is
due to the distribution to individuals of the tax rebates enacted in the Economic Stimulus Act of 2008. That amount is
just under half of the total rebates expected for this year; most of the remainder will be disbursed during the next two
months.

                     APRIL RESULTS                                  of the decline--$31 billion--resulted from payments to
                     (Billions of dollars)                          individuals of the tax rebates. Also contributing to the
                                                                    decline in total receipts were nonwithheld receipts, which
                      Preliminary                                   fell by about $4 billion (or 34 percent) in May. This year
                       Estimate        Actual      Difference       more of the payments made with income tax returns were
                                                                    recorded in April rather than in early May. In addition, net
Receipts                  403            404           1            corporate income tax receipts declined by about $4 billion
Outlays                   243            244           2            (or 37 percent) relative to their level in May 2007, the 11th
Surplus                   160            159          -1            consecutive monthly decline. Withholding for income and
Sources: Department of the Treasury; CBO.
                                                                    payroll taxes was roughly the same as in May 2007; small
                                                                    increases in the daily payments were offset by the effects
                                                                    of one fewer business day.
The Treasury reported a surplus of $159 billion in April,
about $1 billion less than CBO had projected on the basis
                                                                    The growth in outlays was magnified by rebate payments
of the Daily Treasury Statements. Most of the differences
                                                                    of $17 billion as well as by a shift in payment dates and
in revenues and outlays are attributable to the composition
                                                                    accounting adjustments for certain credit programs.
of tax refunds, and they offset each other. Refunds of
                                                                    Because June 1, 2008, fell on a weekend, about $22 billion
individual income tax payments (which count as revenue
                                                                    in payments that would ordinarily have been made at the
reductions) were about $1 billion lower than CBO had
                                                                    beginning of June were instead made at the end of May. In
anticipated, and refundable tax credits (which count as
                                                                    addition, adjustments to the estimated subsidy costs of
outlays) were correspondingly higher.
                                                                    loans and loan guarantees made in previous years by the
                                                                    Federal Housing Administration and the Department of
                 ESTIMATES FOR MAY
                                                                    Education increased outlays in May by almost $6 billion.
                   (Billions of dollars)
                                                                    In the absence of those three effects, outlays in May would
                        Actual      Preliminary    Estimated        have grown by about 5 percent.
                       FY2007         FY2008        Change
                                                                             BUDGET TOTALS THROUGH MAY
Receipts                  164           125           -39                           (Billions of dollars)
Outlays                   232           290            58                                      Actual     Preliminary    Estimated
Deficit (-)               -68          -165           -97                                     FY2007        FY2008        Change

Sources: Department of the Treasury; CBO.
                                                                    Receipts                    1,669           1,675          6
CBO estimates that the federal government recorded a                Outlays                     1,817           1,991        174
deficit of $165 billion in May, about $97 billion more              Deficit (-)                  -148            -317       -168
than the deficit recorded in May 2007. About half of that           Sources: Department of the Treasury; CBO.
increase was due to rebate payments, which are recorded
as either reductions in revenues or increases in outlays.           CBO estimates that the government recorded a deficit of
(When a rebate exceeds an individual's federal income               $317 billion in the first eight months of fiscal year 2008,
tax payment, the excess is classified as an outlay in the           about $168 billion more than the shortfall for the same
budget.)                                                            period last year. Outlays were $174 billion higher than in
                                                                    the October-May period last year, far outpacing the $6
Receipts in May were about $39 billion (or 24 percent)              billion growth in net revenues.
lower than receipts in May 2007, CBO estimates. Most

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.
             RECEIPTS THROUGH MAY                                               OUTLAYS THROUGH MAY
                 (Billions of dollars)                                              (Billions of dollars)
                        Actual     Preliminary   Percentage                                                  Percentage
Major Source           FY2007        FY2008       Change                               Actual Preliminary     Change
                                                                Major Category        FY2007 FY2008       Actual Adjusteda
Individual Income          766           771          0.7
Corporate Income           211           178        -15.8       Defense--Military         349       392       12.3       10.3
Social Insurance           588           610          3.8       Social Security
Other                      104           116         11.3        Benefits                 381       401         5.4       5.4
   Total                 1,669         1,675          0.3       Medicareb                 249       264         6.2       3.6
                                                                Medicaid                  128       136         5.9       5.9
Sources: Department of the Treasury; CBO.                       Other Programs
                                                                 and Activities           547       629       15.0       12.6
For the fiscal year to date, total receipts were about the
                                                                     Subtotal           1,654     1,822       10.2        8.6
same as they were last year, increasing by about $6
                                                                Net Interest on the
billion, or 0.3 percent. Individual income and payroll tax
                                                                 Public Debt              163       169         3.6       3.6
receipts account for most of the increases seen this fiscal
year. Receipts withheld from paychecks increased by $51                 Total           1,817     1,991         9.6       8.1
billion (or 4 percent). The gain reflects larger percentage
increases earlier in the fiscal year and smaller increases in   Sources: Department of the Treasury; CBO.
recent months, consistent with slowing growth in wages          a. Excludes the effects of payments that were shifted because of
and salaries and in overall economic activity. In addition,        weekends or holidays.
                                                                b. Medicare outlays are net of proprietary receipts.
nonwithheld receipts increased by about $20 billion (or 6
percent); most of those gains occurred in April, when
many taxpayers filed tax returns for 2007. Partially            Outlays through May were 9.6 percent higher than in the
offsetting those gains was an increase of $43 billion in        first eight months of 2007, CBO estimates; adjusted for
refunds, with $32 billion of that sum stemming from             shifts in the timing of certain payments, spending rose by
rebate payments.                                                about 8 percent.

Corporate receipts declined by about $33 billion (or 16         The broad category of other programs and activities
percent) through May. That decline resulted about               accounted for almost half of the increase in outlays
equally from lower receipts of payments from                    through May. Spending for that category was up by 12.6
corporations and higher refunds paid to them. Most of the       percent on an adjusted basis, reflecting an estimated $19
corporate payments made to date are for taxes on calendar       billion in rebate payments as well as double-digit growth
year 2007 earnings; the June payment (due June 16) will         in outlays for refundable tax credits, veterans' health
give some indication of the relative strength of earnings       programs, unemployment benefits, and food and nutrition
for calendar year 2008.                                         services.

Each of the smaller sources of receipts--from the Federal       Defense outlays have also grown rapidly in recent
Reserve, excise taxes, customs duties, estate and gift          months, rising by 10 percent through May, compared with
taxes, and miscellaneous fees and fines--increased in the       7 percent in fiscal year 2007. Much of the growth this
fiscal year through May, totaling gains of about $12            year has been driven by a 14 percent increase in spending
billion. Almost half of that increase stemmed from              for military operations, maintenance, and procurement,
payments to the Treasury from the Federal Reserve,              well above last year's average gain of 8 percent for those
primarily due to increases in the value of its portfolio of     activities.
securities and gains on its holdings of foreign currency as
the dollar has depreciated.                                     Medicare spending has grown more slowly than in
                                                                2007--up by less than 4 percent through May, compared
                                                                with 9.5 percent last year--because lower payments to
                                                                prescription drug plans have offset much of the growth in
                                                                spending for Medicare's traditional programs, which are
                                                                running about 8 percent above last year's levels.
                                                                Medicaid outlays have increased by 6 percent relative to
                                                                the same period last year, close to the average rate of
                                                                increase over the past five years.



                     Prepared by Mark Booth, Chad Chirico, Barbara Edwards, and Kathy Gramp.
                This Monthly Budget Review and other CBO publications are available at www.cbo.gov.