In 1974, Congress created the budget process that gives it all the power it needs to control spending. The 1974 Budget Control Act gave Congress three additional powers:
- It allowed the House and the Senate to have their own standing budget committees. This gives them the ability to create their own budgets to use in negotiations.
- It created the Congressional Budget Office (CBO), It provides non-partisan analysis to Congress to facilitate its review of the budget. This includes a detailed review of the President's budget for each fiscal year.
- It moved the beginning of the fiscal year from July 1 to October 1 to give newly elected officials more time to review each year's budget.
Before that, Congress's only tool was the debt ceiling, which was created in 1917. This gave it a very limited yes-no power. If the budget process is better, why is the debt ceiling still being used at all?
In 2010, Republicans won a majority in the House of Representatives thanks to the tea party movement. However, Democrats control the Senate and the Presidency. Therefore, Republicans cannot support for their budgets, and have abandoned the budget process. Instead, they either don't approve a new budget, don't pass continuing resolutions to fund the government at current levels, don't raise the debt ceiling, thereby risking America's first-ever debt default.
Some people argue that the budget process is inherently unworkable. Professor Iwan Morgan says that, first, it shifted the burden of budgetary leadership to Congress, which isn't designed to be a leadership body. Second, it demands a level of coordination that Congress is not set up to meet. Third, it creates unrealistic deadlines. (Source University of California Berkeley, 1974 Budget Control Act)
The Federal Budget Process
To follow the Federal budget process, you need to know that the fiscal year starts on October 1, the year before the calendar year starts. For example, FY 2013 began on October 1 2012, and ran through September 30 2013.
The budget process actually starts a year before the fiscal year does. That means the process for the FY 2013 budget began in 2011.
In the early fall, all Federal agencies submit their budget requests to the Executive Office of Management and Budget (OMB), which prepares and manages the budget for the President.
In November, OMB sends its budget review comments back to the agencies. They submit their final budget requests in December. OMB then assembles the final budget for the following fiscal year, and sends it to the President.
In January, the President outlines his budget priorities in the State of the Union Address. The Council of Economic Advisors also submit the "Economic Report of the President," which analyzes upcoming economic trends.
By the first Monday in February the President submits his budget to Congress .It puts his priorities into dollars and cents for three areas:
- Funding levels for Federal agencies.
- Changes to Mandatory programs already enacted by Congress. These include Medicare, Social Security, Medicaid,TARP and the Affordable Care Act.
- Changes to the tax code. The budget must show the impact on Federal revenue.
Congress uses the President's budget as a base to prepare a Budget Resolution by April 15th. Each house of Congress develops their own budget proposals separately. They base this on hearings held with agency officials, who explain why they need the funds requested. They then meet in a Conference Committee to work out their differences. The final Budget Resolution must approved by majority votes in the House and Senate.
Congress creates spending Appropriation Bills by June 10th. The bills appropriate funds for each agency in the Discretionary budget.They base these bills on more hearings held with the agency officials and outside public testimonies. First, the House Appropriations Subcommittees prepare their bills and pass their bills internally. These bills go to the Senate, which revises and must approve them before they go to the President.
The House must approve all the bills by June 30. However, often the President doesn't get them until September.
The President treats this bill like any other submitted by Congress. The Constitution dictates that he must either approve these bills, veto them (starting the process all over again) or allow them to go forward without his approval within the next 10 days.
All the bills must be signed into law before October 1st, the beginning of the new fiscal year. If this doesn't happen, Congress passes a Continuing Resolution (CR) to keep Federal agencies running at their current funding levels until a budget can be passed. If a CR isn't passed, then a government shutdown occurs. That means all non-essential Discretionary programs close, and workers are furloughed without pay.
In addition, the President usually submits a Mid-Session Review of the budget to Congress by July 15.(Source: About.com U.S. Government Info, Budget Process; Washington Post, Federal Budget Process; About.com Guide to the U.S. Economy, The Federal Budget Process in a Perfect World; enter on Budget and Pollicy Priorities, The Federal Budget Process; American Mathematical Society, Timeline of Federal Budget Process)
What Is the Role of the U.S.Treasury?
The Treasury Department's Financial Management Services executes the budget. This is the agency that makes payments, collects revenues and delinquent debt and issues reports including the Treasury statements. Article updated October 23, 2013
Understand the Current Federal Budget:
- Economic Report of the President
- Current Federal Budget Breakdown
- Revenue and Taxes
- Current Deficit