WASHINGTON, D.C. — The Congressional Budget Office estimated that the federal deficit in May was $424 billion, substantially lower than April’s $738 billion but still the second-largest monthly shortfall since records have been kept.
The deficit for the first eight months of fiscal 2020 was about $1.9 trillion, the CBO said, or $1.2 trillion greater than during the same period the previous year.
The Treasury Department will release official figures later this week, but the CBO’s preliminary estimates are typically very close to the official numbers. The budget office’s deficit estimate for April was within $1 billion of the final Treasury figures, for example.
The agency’s monthly report shows the continuing impact of the plunge in economic activity due to the coronavirus pandemic and unprecedented increase in federal spending measured in the trillions of dollars to provide aid to hospitals, businesses, state and local governments, individuals and others.
In one telling calculation, the CBO compared the growth of spending during the first six months of fiscal 2020 preceding the pandemic to spending in the two months since the pandemic hit in March.
Between October and March, spending totaled $2.3 trillion, representing a growth of $149 billion, or 7% compared with the first six months of fiscal 2019. By contrast, over the past two months of April and May, spending totaled $1.6 trillion, an increase of $763 billion, or almost double the amount spent during the same two months last year.
Comparing May 2020 to May 2019, revenue dropped by $58 billion, or 25 percent, to $175 billion, compared with the same month last year. Most of the drop resulted from a $51 billion decrease in individual income and payroll taxes resulting from a decline in worker wages, temporary changes in the law including allowing employers to defer payment of payroll taxes, and income tax refunds.
Spending in May grew by $159 billion, or 36 percent, to $598 billion compared with last year. If not for the shift of some federal payments from June to May in 2019, spending would have been 53% higher in May 2020 than in May 2019.
Major changes in May spending include:
Unemployment compensation rose to $93 billion in May 2020 from $2 billion in May 2019, with more than half of the rise attributable to a temporary, $600 increase in the weekly benefit enacted in March.
Refundable tax credits increased to $53 billion from $3 billion last May. The increase is primarily due to “recovery rebates” of up to $1,200 per individual, also included in the March aid package.
Small Business Administration spending rose to $35 billion from $98 million during the same month a year ago because of loans and loan guarantees to small businesses, aimed at keeping workers employed.
The CBO estimates that the deficit for the fiscal year ending Sept. 30 will hit a record $3.7 trillion. That is nearly quadruple the roughly $1 trillion deficit that CBO had projected in March before the pandemic spread.
