Does the federal government budget and spend your tax dollars wisely?
On February 13,2012, President Barack Obama sent a $3.8 trillion budget proposal for fiscal year 2013 to Capitol Hill. The nation’s economy was unsteady, but Obama believed that his proposal would help balance the budget over time. “This Budget is a step in the right direction,” he wrote. “And I hope it will help serve as a roadmap for how we can grow the economy, create jobs, and give Americans everywhere the security they deserve.” Republicans in the House of Representatives were not so optimistic. In response to the president’s budget proposal, the chair of the House Budget Committee stated that the budget “is a recipe for a debt crisis.
From the point of view of Congress, the arrival of the president’s budget proposal marks the beginning of the federal budget cycle. From the perspective of the executive branch, however, this is the halfway point in a process that spreads over 18 months, from initial planning to the beginning of the next fiscal year.
Constructing a federal budget is about more than just money. It reflects the broader vision of the president and Congress about the purpose and activities of the national government. “Budgets are about setting priorities,” explains economist Brian Reidl. “A rational budget process should help lawmakers set priorities and separate vital needs from unaffordable luxuries.
The task of separating “vital needs” from “unaffordable luxuries” begins in the federal bureaucracy. Months before the president submits a budget to Congress, each department and agency begins work on its own budget request for the following fiscal year.
By June, these budget requests are submitted to the Office of Management and Budget for review. The main job of the OMB, an agency within the Executive Office, is to craft a budget that reflects the policy goals and political agenda of the president.
During the summer and fall, OMB staffers review the various budget requests. They consider what is vital and affordable based on projected revenue. They also work with the president and his advisers to see how well the various requests reflect the president’s priorities. Based on all of this information, the OMB prepares a budget proposal for the president to review and revise. By law, the president must submit this proposal to Congress by the first Monday in February.
Once the president’s budget proposal reaches Congress, the House and Senate budget committees take over. Their job is to analyze the proposed budget and to recommend changes that reflect Congress’s spending priorities.
The two budget committees are assisted by the Congressional Budget Office. The CBO’s main job is to compare how well the president’s budget matches its own estimates of future revenues and expenses. As a nonpartisan agency, the CBO does not make policy recommendations to Congress.
During March and April, House and Senate budget committees hold hearings on the president’s proposed budget. They hear testimony from OMB staffers about their analysis. They quiz agency officials about funding needs. They consult with other committees to hear their views and estimates about next year’s budget.
Based on this information, each budget committee prepares its own budget resolution. A budget resolution sets guidelines for how much money Congress should spend in 20 broad categories. These categories include national defense, agriculture, and health. A budget resolution is not a detailed spending plan like the president’s budget proposal. Nor does it have the force of law. But it does guide Congress over the next few months.
After each chamber passes its own budget resolution, the two versions go to a conference committee to be reconciled. The final version is supposed to be approved by the full House and Senate by April 15. That deadline is not always met, however, and some years no budget resolution has been approved.
Beginning as early as March, the Senate and the House Appropriations Committees start work on Congress’s 13 appropriation bills. Each bill deals with one of the spending categories laid out in the budget resolution. These bills, taken together, make up the government’s final budget.
Work on appropriation bills continues through the spring and summer. During this time, the president pays close attention to the budget process. If all goes well, most of the work on the 13 bills will be completed before Congress goes on vacation in August.
When Congress returns in September, it works out any differences between the appropriation bills passed by the House and Senate. The bills then go to the president for approval. The president may sign or veto some or all of the bills. In the latter case, Congress can either seek to override the veto or revise the bill to gain the president’s approval. Ideally, all 13 appropriation bills are law and the budget is in place before the new fiscal year begins on October 1.
It sometimes happens that the president and Congress are not able to reach agreement on the budget by October 1. Usually in this situation, Congress enacts and the president signs a continuing resolution to keep the government working. A continuing resolution allows government programs to operate at current funding levels for a fixed period. During this time, both sides try to work out their differences on the budget.
If Congress and the president cannot reach an agreement by the time the continuing resolution ends and another one is not enacted, the result is a budget crisis. In extreme cases, a budget crisis can lead to a shutdown of “nonessential” government activities. Such shutdowns have occurred many times over the years, sometimes for a few hours, sometimes for several days.
One of the most serious budget crises began in 1995, when budget negotiations between President Bill Clinton and Congress broke down. A continuing resolution was passed to keep the government going for a few weeks. When that time ran out, Congress and the president could not agree on another resolution, much less a final budget. As a result, the many agencies of the federal government were shut down for weeks.
The crisis ended the following January, when the president and Congress agreed to another continuing resolution. As he Signed the resolution, Clinton expressed his hope that “no Congress will ever again shut the federal government down in this way.