The congressional budget process is the yearly system the federal government uses to decide how public money will be raised and spent. It matters because budget choices affect national defense, health care, education, infrastructure, scientific research, and the national debt. The process involves both the president and Congress, but Congress has the constitutional power to tax and spend.
Understanding the process helps citizens follow debates about priorities, tradeoffs, and accountability.
Key Facts
- Deficit = total outlays - total revenues when outlays are greater than revenues.
- Surplus = total revenues - total outlays when revenues are greater than outlays.
- Debt increase for the year is closely related to the annual deficit, though timing and accounting rules can affect the exact amount.
- The president usually sends a budget request to Congress early in the year, but it is a proposal, not a law.
- A budget resolution sets broad spending and revenue targets, but it does not directly provide money to agencies.
- Appropriations bills provide legal authority for many federal agencies to spend money for specific purposes.
Vocabulary
- President's Budget Request
- A detailed proposal from the president that recommends federal spending, revenue, and policy priorities for the next fiscal year.
- Budget Resolution
- A congressional plan that sets broad targets for spending, revenue, deficits, and debt but does not become law.
- Appropriations
- Laws passed by Congress that provide funding for federal agencies, programs, and activities.
- Congressional Budget Office
- A nonpartisan agency that provides Congress with budget estimates, economic analysis, and cost estimates for proposed laws.
- Fiscal Year
- A 12 month accounting period used for budgeting, with the federal fiscal year running from October 1 to September 30.
Common Mistakes to Avoid
- Confusing the president's budget request with the final federal budget. The request starts the debate, but Congress must pass laws before most spending can occur.
- Thinking the budget resolution directly funds government programs. It sets a framework for Congress, while appropriations bills provide actual spending authority.
- Ignoring the difference between mandatory and discretionary spending. Mandatory spending follows existing laws such as benefit formulas, while discretionary spending is decided through annual appropriations.
- Assuming the CBO makes budget policy decisions. The CBO provides nonpartisan analysis and cost estimates, but elected lawmakers decide what to pass.
Practice Questions
- 1 A proposed federal budget has 4.6 trillion in revenues. Calculate the deficit or surplus and state which one it is.
- 2 Congress must pass 12 regular appropriations bills. If 8 have passed before the fiscal year begins, what fraction and what percentage of the regular appropriations bills have passed?
- 3 Explain why a government shutdown can happen even if Congress has already passed a budget resolution.