Congressional Budget Act of 1974
- Established the congressional budgeting process by laying out a plan for Congressional action on the annual budget resolution, appropriations, reconciliation, and other revenue bills
- Established CBO
- Established levels of spending for the federal government during the next fiscal year
Congressional Budget Office
A nonpartisan agency to help members make accurate estimations of revenues and expenditures and to lay a plan for congressional action on the annual budget resolution
Provides non-partisan economic analysis, cost estimates, and budget projections that inform legislative decisions and ensure fiscal accountability
Reconciliation
A procedure that allows consideration of controversial issues affecting the budget by limiting debate to 20 hrs, ending threat of a filibuster
Pork
Legislation that allows representatives to bring money and jobs to their districts in the form of public works programs, military bases, etc.
- Formally called earmarks
- Helps reelection but largely criticized
Programmatic requests
Federal funds designated for special projects within a district
Federal Budget Cycle
- Early February - Pres. submits detailed budget proposal to Congress
- Spring - Congressional Budget Committees in both chambers draft concurrent budget resolutions that establish overall spending targets, revenue goals, and deficit levels
- Summer - Appropriations Committees divide discretionary spending into 12 separate bills - each covering specific agencies
- October 1 - Start of the new fiscal year - final appropriations must pass House and Senate and receive presidential signature to fund government operations
Constitutional Roots of the Power of the Purse
Article 1, Section 8 - Grants Congress the power to lay and collect taxes, pay debts, borrow money, and spend money for the general welfare
Article 1, Section 9 - Establishes the “Appropriations Clause” - no money can be drawn from the Treasury except through specific appropriations authorized by Congress
Budget Committees
- House and Senate
- Establish overall fiscal framework, setting aggregate spending and revenue targets
Revenue Committees
- House Ways and Means and Senate Finance Committee
- Control all tax policy and revenue legislation - determining how government collects funds
Appropriations Committees
- House and Senate
- Allocate discretionary spending annually through 12 subcommittees, each responsible for different government spending
Mandatory Spending
- 61%
- Gov is required to pay for (funded automatically by permanent laws)
- Medicare/Medicaid, Social Security
Interest on Debt
- 13%
- Required payments on money the government has borrowed
- Sets limits through debt ceiling legislations
Discretionary
- 26%
- Funded through annual appropriations bills that Congress debates and votes on each year
- Defense, education, transportation
Appropriations Process
- 12 subcommittees that each handle specific areas
- Detailed bills specify exact funding levels and conditions for every federal agency program
- Both chambers must pass identical versions
- The President must sign by October 1
Budget Enforments Rules/Controls
- Pay-as-you-go - requires new mandatory spending increases or tax cuts be offset by equivalent spending cuts/revenue increases elsewhere in the budget, preventing deficit growth
- Statutory Spending Caps
- Debt ceiling
Budget Timeline
- President submits budget
- CBO issues economic outlook
- Congress passes budget resolution
- House drafts appropriations bill
- Reconciliation handles if needed
- Fiscal year begins October 1
- Failure - government shutdown or temporary budgets
Pay-As-You-Go
Rules that require new mandatory spending increases or tax cuts be offset by equivalent spending cuts or revenue increases elsewhere in the budget, preventing deficit growth
Statutory spending caps
Legal limits on discretionary spending established by budget agreements. If exceeded, across the board spending cuts (sequestration) are triggered to enforce limits
Debt ceiling
Congress must periodically vote to raise the legal limit on federal borrowing.
