The Budgetary Process

1. The Budgetary Process By: Rani Rachavelpula, Catherine Xie, & Rita Young

2. The Budget Cycle • 1/5 of GDP is budgeted • Budget-making is repetitive and sequential • The budget cycle begins in the executive branch 19 months before the fiscal year begins

3. Stakes and Strategies • Every political actor has a stake in budget • Agencies within the government work to protect their interests • Individual members of Congress act as policy entrepreneurs for new ideas and support constituent benefits • Presidents try to use budgets to manage the economy and leave their imprint on Congress’ policy agenda

4. The Actors in Budget-Making • The interest groups. • Lobbying takes place in the agencies, with presidents, and before congressional committees • The agencies. • Almost always push for higher budget requests from the OMB and congressional committees • The Office of Management and Budget (OMB). • Main actors in the annual budget process since they have considerable independence from the President • The president. • Makes final decisions on what to propose to Congress • The Tax Committees in Congress. • House Ways and Means Committee and Senate Finance Committee write tax codes, subject to the approval of Congress as a whole. • The Budget Committees and the Congressional Budget Office (CBO). • Set the parameters of the congressional budget process • The subject-matter committees. • Write new laws that require new expenditures • The Appropriations Committees and their subcommittees. • Decides who gets what • The Congress as a whole. • Approve taxes and appropriations • The Government Accountability Office (GAO). • Audit, monitor, and evaluate what agencies are doing with their budgets  

5. The President and the OMB • Budget and Accounting Act (1921) • Presidents previously had little role in budget making • Passed due to concern about national debt • Required presidents to propose an executive budget to Congress • Created Bureau of Budget to help them, now called the Office of Management and Budget (OMB) • Office of Management and Budget • Supervises the preparation of federal budget • Advises president on budgetary matters • Budget process begins with the president

6. The President and the Budget • The president must submit the budget by first Monday in February • However, the process begins up to a year before submission: • OMB communicates with each agency • President establishes general targets for the budget which are communicated with agencies • Agencies submit formal estimates which are considered by budget analysts • Budget document is readied for final presidential approval • President sends document to Capitol Hill, and Congress takes over

7. Congress and the Budget • Congress must authorize all federal appropriations • Uses the power of the purse. • Appropriates $2 trillion a year • Both houses must agree on a budget resolution (a resolution binding Congress to a total expenditure level, supposedly the bottom line of all federal spending for all programs) in April • Congress can then begin acting on individual appropriations • Laws can be changed to meet the budget resolution through: • reconciliation-a congressional process through which program authorizations are revised to achieve required savings. It usually also includes tax or other revenue adjustments • authorization bill-establishes, continues, or changes a discretionary gov’t program or an entitlement. It specifies program goals and maximum expenditures for discretionary programs. • appropriations bill-funds programs within limits established by authorization bills. Appropriations usually cover one year.

8. Congressional Budget Process Above is a diagram of the budget making process. This diagram is quite simple, but it is a good generalization of how the budget making process operates. As you can see, the process begins and ends with the President.

9. The 1974 Reforms • Congressional Budget and Impoundment Control Act of 1974was designed to reform the congressional budgetary process • Hoped to make Congress less dependent on the president’s budget and more able to set and meet its own budgetary goals • The act established: • A fixed budget calendar. • Congress sometimes failed to appropriate money to agencies until after the fiscal year was over • A budget committee in each house. • Recommend target figures to Congress for total budget size • A Congressional Budget Office. • Congressional Budget Office (CBO) advises Congress on its budget decisions • Tried to force Congress to think of the budget as a whole • Ultimately a failure due to lack of consensus • President has also submitted budget proposals containing large deficits • Congress has failed to meet its own budgetary timetable • Congress had resorted to continuing resolutionsallowing agencies to spend at the level of the previous year when it can’t reach an agreement and pass appropriations bills • Appropriations bills have also been lumped together into one huge bill, forcing the President to accept unwanted provisions or veto funding for the entire government • However, the 1974 reforms have allowed Congress to view the entire budget early in the process

10. More Reforms • Balanced Budget and Emergency Deficit Control Act (1985) • Better known as Gramm-Rudman-Hollings after its cosponsors • Amended in 1987, it mandated annual maximum allowable deficit levels until 1993, when the budget was supposed to be in balance • If Congress failed to meet the deficit goals, sequestrations, or automatic across-the-board spending cuts, were to be ordered by the president • Arbitrary automatic budget cuts were unpopular • Abandoned by Congress in late 1990s • Shifted focus to controlling increases in spending • Discretionary spending divided into domestic, defense, and international • Increases in these categories were to be paid for by cuts elsewhere • Budget deficit continues as a source of conflict • Significant decrease in deficit during Clinton administration • Republicans fought for cuts in entitlement programs, but Democrats strongly opposed it, leading to divided government

11. Political Cartoon This cartoon is depicting how much the federal deficit has gotten out of control. Also, it emphasizes how the officials are not efficiently attacking the problem.

12. Budget and the Government • Government grows because of: • policymakers using pork barrel and constituency services to gain voters • the equality of suffrage (one person, one vote) • corporation support for contracts, subsidies, and other benefits • government response to groups and their demands • Some politicians compete for votes by promising not to spend money • Democracy may encourage government spending, but does not compel it • One of the most common criticisms of government is its failure to balance the budget • Lack of consensus policy prevents solution to budget deficits • The bigger the budget, the bigger the government • Budget can also limit government in policymaking due to lack of funds

13. Government Spending This graph illustrates how much the government spends in various areas. The top areas of expenses include Social Security, the Department of Defense, and Unemployment/Welfare/Other mandatory spending followed by Medicare and Medicaid.

14. The Federal Deficit As you can see, the federal deficit has skyrocketed in the past 60 years. According to this graph, it may be caused by the increase in the defense budget and how our nation is frequently militarily involved.

15. The growing federal deficit makes the puppy sad.  Also, if you want to explore the logistics of spending in the federal government more, go to http://www.deathandtaxesposter.com/.