PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Fact of the Week: 7 Points on the Federal Budget

By at 11 June, 2015, 1:33 pm

77601905cbo-logo-1

On June 5, the Congressional Budget Office released its latest “Monthly Budget Review” for May of this year. That is, it served up the broad federal revenue and spending numbers through eight months – or two-thirds – of fiscal year 2015.

Consider 7 key points on the latest data and the trend in the budget:

1) Total receipts were up by 8.6 percent compared to the same period last year, including a 12.4 percent increase in individual income taxes, a 3.7 percent rise in payroll (social insurance) taxes, and an 11.3 percent increase in corporate income taxes. On the individual side, the increase was due to a combination of some increases in wages and salaries, and payments made during tax season. The CBO pointed to increased profits for the rise in corporate taxes.

2) Federal outlays were up by 6 percent (adjusted for timing shifts). Particularly considering how low inflation is, that’s a dramatic increase in federal spending.

3) As for particular budget areas that boosted spending, Medicaid was up by 20.3 percent, “largely because most of the provisions of the Affordable Care Act that led to increased enrollment in Medicaid went into effect in January 2014.”

4) Medicare spending increased by 8.1 percent.

5) Meanwhile, defense outlays fell by 2.9 percent.

6) What are the takeaways from these numbers? The only unabashed positive is the rise in corporate taxes if they are, in fact, due to increased profits. The increase in individual income tax numbers seem to point more to tax season items, rather than reflecting strong economic and income growth. On the spending side, the substantial increases in outlays reflect out-of-control so-called “entitlement” spending, laying the groundwork for troubling decisions not too far down the road.

7) Also on the spending side, it must be noted that after the massive increases in federal outlays that occurred during the 2008 to 2011 period, spending had actually declined a bit in 2012 and 2013. But growth resumed in 2014, and outlays are projected to rise considerably in 2015 and 2016 … and beyond. That spells continued economic troubles for the U.S., with resources being drained away from the private sector.

Raymond J. Keating, Chief Economist

News and Media Releases