The U.S. government ran a budget surplus last month of $17.8B. The news did not, however, represent real improvement in the government's budget condition. The surplus shrank and was roughly half that during January of 2007 when a surplus of $38.2B. Typically a surplus is run during the month of January.

The shrinkage of the January surplus highlights a worsening of the budget condition. For the first four months of FY08 the government's budget deficit of $87.7B was roughly double the $42.2B during the first four months of FY07. The deterioration in the dollar value of the deficit highlights the projected deterioration as a percentage of the nominal value of GDP.

For the fiscal year to date, growth in federal receipts slowed to 3.3% which was one third the growth during the first four months of FY07. The weaker economy with its slower employment growth brought slower growth in individual income tax receipts (44% of total receipts); to 4.2% from 12.6%. Withheld income taxes grew 4.4%, a sharp slowdown from 11.2% last fiscal year, but the weaker stock market brought a more dramatic drop in the growth in non-withheld taxes; to 4.8% from 21.9% during the four months of FY07.

Corporate income taxes (13% of total receipts) fell 2.5% as a result of the weakness in corporate profits. During FY07 they rose 16.4% during the first four months. Growth in employment & general retirement contributions actually rose slightly to 5.8% from 4.0% but unemployment insurance receipts fell 6.0%, nearly twice the rate of decline in early FY07.

U.S. net outlays grew 8.3%, well up from FY07 but steady with prior years. Growth in defense spending (19% of total outlays) of 9.6% was roughly steady and Medicare expenditures (12% of outlays) fell 3.0%. Growth in social security spending (21% of outlays) held about steady at 5.7% but interest expense grew 20.3% with the rise in interest rates.

The Government's financial data is available in Haver's USECON database.

The Federal Reserve's Tools for Responding to Financial Disruptions is Friday's speech made by Federal Reserve Board Governor Frederic S. Mishkin and it can be found here .