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BUDGET PROCESS Traditional (“3 Ring Circus”) Budget Process

BUDGET PROCESS Traditional (“3 Ring Circus”) Budget Process. 1.) Authorizations and Reauthorizations: from standing committees, variable length 2.) Appropriations Bills: from H & S Appropriations Committees, annual

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BUDGET PROCESS Traditional (“3 Ring Circus”) Budget Process

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  1. BUDGET PROCESSTraditional (“3 Ring Circus”) Budget Process 1.) Authorizations and Reauthorizations: from standing committees, variable length2.) Appropriations Bills: from H & S Appropriations Committees, annual 3.) Revenue Bills: from Ways and Means (H) and Finance Committees (S), no fixed length

  2. BUDGET PROCESSBreakdown of the Traditional Process • 1.) Making policy in appropriations bills (limitation riders---e.g. Hyde Amendment) • 2.) Appropriating money for unauthorized programs • 3.) Directing specific types of tax revenue to “trust funds” • 4.) ENTITLEMENT PROGRAMS: mandate spending without appropriations (e.g. Social Security, Medicare, unemployment insurance)

  3. BUDGET PROCESSBreakdown of Traditional Process Cont’d • Entitlements are often called “uncontrollable spending”: are they truly uncontrollable? • TRULY UNCONTROLLABLE SPENDING • 1.) Interest on national debt • 2.) Multi-year contractual obligations • In 1932, 90% of Federal spending went thru the appropriations process; now, only 30% does

  4. BUDGET PROCESSThe 1974 Reforms • REASON FOR DEMANDS FOR REFORM • 1.) Growing entitlement spending (with COLAs) • 2.) Use of impoundments for policy reasons • 3.) Nixon’s “politicization” of the OMB

  5. BUDGET PROCESS1974 Reforms Cont’d • New House and Senate Budget Committees • New CBO • Annual Budget Resolutions, that would provide targets for authorizing and appopriations committees • “Reconciliation” process to make entitlement cuts/tax changes easier

  6. BUDGET PROCESSIDEAL TIMELINE UNDER 1974 ICBA • Intended Timeline • --January—Pres’ budget delivered • --Early Spring: --H & S Budget Committees report Congressional Budget Resolutions • --Late Spring: H & S agree on single budget: Conference Committee performs “crosswalk” calculations • --Summer: Authorization and appropriations committees do their thing, within targets set by Budget Committees • --Fall: Reconciliation bill passed • NEW FISCAL YEAR STARTS OCTOBER 1 • (continuing and supplemental resolutions if necessary)

  7. The Rise, Fall, and Rise of Budget Deficits • WHY BIG DEFICITS IN THE 1970s and 1980s? • A.) Sluggish economic growthB.) Guns and butter during Johnson, Nixon, and Reagan years • C.) Raising taxes=political suicide (e.g. Mondale); “tax revolt” mentalityD.) “Indexation” of both spending and taxes (eliminated “bracket creep”) • E.) Big rise in health care costs • F.) Divided government (Republican president, Democratic Congress)

  8. Rise, Fall and Rise of Budget Deficits Cont’d • WHY BALANCED BUDGET IN LATE 1990s? • A.) Unprecedented economic growthB.) Changes in Medicaid and Medicare (incl. HMOs) • C.) 1990 OBRA agreement between Bush (41) and Congress: multiyear budgeting, “pay-as-you-go” rules (now expired) • D.) post-Cold War cuts in defense budget • E.) Divided Government (Democratic president, Republican Congress) • WHY THE RETURN OF BIG DEFICITS • (reversal of A thru E above, due to War on Terrorism, expiration of OBRA, new Medicare entitlement)

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