Federal Budget Process

Libertyville High School

What is the Federal Budget? The Budget of the United States

Government is the President's proposal to the U.S. Congress which recommends funding levels for the next fiscal year,

beginning October 1

Step One: Picking the “Bottom Line Number”

• Office of Management and Budget (OMB) develops a budget for the next year– Based on national

economic situation– Also based on

executive agency estimates and projections

Picking the Bottom Line Number• President presents

budget to Congress in Joint Session address

• Congressional Budget Office (CBO) analyzes president’s budget

• CBO then reports to House Ways & Means, Senate Finance committees re. revenues

Picking the Bottom Line Number• House, Senate budget

committees report Budget Resolutions to floor

• Budget resolution, if agreed to by both chambers, binds Congress to a total expenditure level

• Thus, budget resolution = the bottom line

Step Two: Appropriations, or Dividing up the Bottom Line

• Appropriations process begins in House

• Thirteen appropriations bills, in Appropriations Committee– Committee divides budget

number into 13 spending bills, 1 for each subcom.

– Each subcommittee holds hearings, testimony from federal agencies re budget requests

Step Two: Appropriations, or Dividing up the Bottom Line

• SEE HOW A BILL BECOMES A LAW to see how each of the 13 appropriations bills become law

FY 2013 Federal BudgetTotal Amount Spent = 3.45 Trillion

Step Three: Reconciliation, or Making the Budget Work

• Reconciliation legislation is the non-numbers part of the budget

• Reconciliation includes tax increases or reductions, other changes in law to make budget work

Step Three: Reconciliation, or Making the Budget Work

• Continuing Resolutions may be passed– CR are passed after

October 1, to keep federal agencies funded at current levels until budget adopted

• How does Reconciliation and CRs get passed? “How a bill becomes a law” process

Parts of the Budget• Discretionary Spending

– Programs that don’t relate to entitlements

– It is here that most spending cuts occur

– Example• Education• Transportation• EPA• Judicial, Legislative,

Executive branches

Parts of the Budget• Military Spending

– Discretionary spending– BUT politically

difficult to cut, especially when troops are deployed overseas

– Most military spending is on personal services (salary, benefits)

Parts of the Budget• Non-Discretionary

Spending – Entitlements: government

payments that are guaranteed to a (usually large) segment of the population

– Entitlements• Social Security• Medicare• Medicaid• Interest on Debt

Parts of the Budget (Non-Discretionary)

– Interest payments• Annual deficit is

the amount that spending exceeds revenue each year

• National debt is the total amount of money owed by the government to its lenders

US Deficit, 2013

Current deficit

NATIONAL DEBT

Percentage of National Debt owed, as of 3/12