During February, the federal government recorded a deficit of $222.5 billion, according to the monthly statement [.pdf] released today from the Treasury Department. Expenditures of the federal government totaled $333.2 billion, whereas receipts totaled $110.7 billion, resulting with the highest monthly deficit on record. Despite this historic fact, the highest monthly deficit for each fiscal year is regularly recorded in February.
Compared to February 2010, the deficit was only $1.6 billion more (+0.8%) in February 2011. Even though this shows how the high deficit in February 2011 is not completely unexpected, it still shows how the federal deficit grew more in February 2011 than 2010. Though, the deficit for fiscal year 2011 is still below the deficit at this point in fiscal year 2010, albeit by only $10.3 billion (-1.5%).
This slight decline in the growth rate of the deficit is not a result of reduced expenditures, but is instead a result of increased receipts. At this point in 2010, the federal government received $800.5 billion in taxes, but this has increased to $869 billion in the current fiscal year. This eight percent increase in receipts for the current fiscal year would suggest the deficit is much less in the current fiscal year, but this is not the case because higher expenditures in 2011 have nearly offset the higher receipts.
During February 2011, 18 of the 28 major federal agencies spent more than February 2010. The largest monthly increases occurred in the Health and Human Services Department (+$5.5 billion), the Treasury Department (+$2.8 billion), and the Social Security Administration (+$2.2 billion). These increases are a result of growing entitlement programs, as well as growing interest payments on the federal deficit.
Interest payments alone totaled almost $22 billion in February, which accounted for 7% of all expenditures. In February 2010, interest payments were $17 billion or 5% of all expenditures. In other words, interest payments were 22% higher in February 2011 than 2010. Throughout the current fiscal year, which began in October, interest payments total $191 billion, a 5% increase compared to this time last year.
The agencies with the largest monthly decreases in expenses were the Small Business Administration (-$4.7 billion) and the Labor Department (-$4.2 billion). These two agencies are also among the 10 of the 28 major federal agencies with less spending in the current fiscal year. The Labor Department has had the greatest annual decline in 2011, with $13.7 billion less expenditures compared to the same point in 2010. As discussed in the past, less individuals are eligible for unemployment benefits in 2011, which means unemployment expenses are declining.
Despite the fact of lower unemployment expenses in fiscal year 2011, a majority of federal agencies are increasing their annual expenditures in 2011. The greatest increases for the year include the Health and Human Services Department (+$14 billion), the Social Security Administration (+$11 billion), and the Defense Department (+$8 billion). Expenses for the current fiscal year total $1.5 trillion, which is $58 billion more (+4%) than the same point in 2010.
As mentioned above, the rising costs of federal agencies are nearly offsetting the rising tax revenues. Though, higher tax revenues in 2011 have still prevented the growth rate of the deficit from exceeding the growth rate in 2010. Regardless of the growth rate of the deficit, the total federal deficit now totals $14.2 trillion.
A federal law prohibits the deficit from exceeding $14.29 trillion, which means the deficit may reach the legal limit before the end of March and certainly by the end of April. While many members of both parties have proposed reductions to the federal deficit, all of the reductions focus on minor aspects of the budget that fail to bring any significant changes to the direction of the budget. With a lack of useful proposals, the 112th Congress will eventually raise the debt ceiling, as Congress has done 79 times since 1940.