Business situation

Survey of Current Business, April, 1996 by Daniel Larkins, Larry R. Moran, Ralph W. Morris, Claire G. Pitzer, Deborah Sieff

Federal

The Federal Government current deficit decreased $6.7 billion in the fourth quarter after increasing $1.1 billion in the third. At $154.9 billion, the fourth-quarter current deficit was the lowest since the first quarter of 1991.

Receipts. - Receipts increased $8.1 billion in the fourth quarter after increasing $3.4 billion in the third. The acceleration was due to upturns in personal tax and nontax receipts and in indirect business tax and nontax accruals that more than offset a downturn in corporate profits tax accruals and a deceleration in contributions for social insurance.

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Personal tax and nontax receipts increased $6.0 billion after decreasing $7.1 billion. The third-quarter decrease followed a second-quarter boost in tax receipts that reflected the provisions of the Omnibus Budget Reconciliation Act of 1993 that retroactively increased tax rates for high-income taxpayers. Withheld income tax receipts increased $6.1 billion after increasing $9.0 billion.

Indirect business tax and nontax accruals increased $2.9 billion after decreasing $5.1 billion. The upturn was accounted for by nontax accruals, which increased $2.1 billion after decreasing $5.8 billion. In the third quarter, the Federal Government refunded to federally chartered banks overpayments of $6.0 billion (annual rate) that were made to the Bank Insurance Fund (BIF) in June through September. In the fourth quarter, because of new lower assessment rates, premiums to the BIF were $4.0 billion (annual rate) lower than in the second quarter.

Corporate profits tax accruals decreased $4.8 billion after increasing $8.4 billion. The downturn reflected the drop in domestic corporate profits.

Contributions for social insurance increased $4.1 billion after increasing $7.2 billion. The deceleration reflected the slowdown in wages and salaries.

Current expenditures. - Current expenditures increased $1.6 billion in the fourth quarter after increasing $4.4 billion in the third. The deceleration was more than accounted for by transfer payments and net interest paid.

Transfer payments (net) increased $4.0 billion after increasing $11.9 billion. The deceleration was largely due to transfer payments to the rest of the world, which fell $2.2 billion after increasing $4.1 billion. Transfer payments to persons increased $6.3 billion after increasing $7.8 billion; regular payments for unemployment increased more slowly in the fourth quarter than in the third, following the pattern of employment.

Net interest paid increased $1.4 billion after increasing $3.5 billion. The deceleration was more than accounted for by a turnaround in gross interest received from the rest of the world, which increased so.6 billion after decreasing $1.9 billion.

Subsidies less current surplus of government enterprises decreased $1.2 billion after decreasing $0.9 billion.

Grants-in-aid to State and local governments decreased $0.5 billion after decreasing $7.5 billion. Grants for medicaid decreased $0.1 billion after decreasing $4.4 billion, and grants for aerospace and for defense atomic energy activities increased $0.5 billion after decreasing $2.3 billion.