Pub Econ Lecture 04 Budget Analysis

8/3/2019 Pub Econ Lecture 04 Budget Analysis

http://slidepdf.com/reader/full/pub-econ-lecture-04-budget-analysis 1/32

Public Finance

Dr. Katie Sauer

Budget Analysis



Figure 4-1: Federal Taxes, Spending, and the Deficit

I. US Budget Data



Figure 4-2: Actual, Standardized, and Cyclically Adjusted

US Budget Deficits



Figure 4-3: CBO¶s Projected vs Actual Surplus/Deficit



II. A little history«

1921: Budget and Accounting Act

- President has overall responsibility for budget planning

- created Bureau of the Budget which expanded

the President¶s control over budgetary information- renamed Office of Management and

Budget in 1971



Congress lacked authority to

- establish and enforce budgetary priorities

- coordinate actions on spending and revenuelegislation

- develop budgetary and economic information

independently of the executive branch



1974: conflict between the legislative and executive

branches reaches a high point

- fundamental disagreement between the President

and the Congress over control of budgetary and

spending priorities



President Richard Nixon used ³impoundments´ to stop

Congress from funding programs that Nixon didn¶t like.

Many in Congress also didn¶t like the executive

branch¶s control of budgetary information.

- questioned the objectivity



The dispute led to enactment of the Congressional

Budget and Impoundment Control Act of 1974.

During the past half century, the Congress has witnessed

a steady erosion of its control over the budget. In contrast, we

have seen a consistent escalation of executive influence over

budget and fiscal policies. The Congressional Budget and

Impoundment Control Act of 1974 will give us the means to

reverse that erosion.... [It] calls for the establishment

of a Congressional Budget Office²CBO²as an agency of the

Congress. The CBO... will provide Congress with the kind of information and analysis it needs to work on an equal footing

with the executive branch.

²Senator Edmund Muskie, June 21, 1974



The law established

- procedures for controlling presidential

impoundments of funds

- formal process through which the Congress could

develop, coordinate, and enforce its own budgetary

priorities

- the House and Senate Budget Committees to

oversee execution of the budget process

- the Congressional Budget Office to provide the

budget committees and the Congress with an

independent, nonpartisan source of information



III. The Role of the Congressional Budget Office

CBO¶s chief responsibility is to help the budget

committees with the Congressional budget resolution

and its enforcement.

The budget resolution sets

- total levels of spending

- total levels of revenues- broad spending priorities



The budget resolution is a concurrent resolution- approved by the House and Senate

- not signed by the President

- does not have the force of law

- provides no taxing or spending authority

It is more like a ³blueprint´ to guide Congressional

action on spending and revenue legislation within the jurisdiction of other committees.



Other duties of the CBO are:

1. It provides budgetary information for Congress.

- the Appropriations, Ways and Means, and

Finance Committees

- other Congressional committees

- individual members of Congress



2. It must issue annual reports.

- helps Congress identify authorizing legislationthat should be in place before it considers the 12

regular appropriation bills

3. It must identify federal mandates contained inlegislation and to estimate the cost that they would

impose.

4. It must produce reports at Congressional request thatanalyze specific policy and program issues that are

significant for the budget.



The CBO is transparent and non-partisan.

- disclose assumptions

- disclose methods

- analyses do not present policy recommendations

It has a decent reputation for professionalism and

credibility.- critics say too Keynesian



IV. Details of CBO Products

A. Baseline Budget and Economic Projections

- annual report on the budget and economic

outlook for the next 10 years

- issued in January and updated in the summer

- gives Congress a baseline against which to

measure the effects of proposed changes in

spending and tax laws

- constructed according to rules set forth in law



B. Economic Forecasts

Used for:- constructing the baseline budget projections

- Congressional budget resolution

Forecasts cover:- 18 months to 24 months

- major economic variables

The CBO does not attempt to forecast fluctuations in theeconomy more than 2 years ahead.

- longer-term projections are based on trends in the

labor force, productivity, and saving



C. Analysis of the President¶s Budget

CBO estimates the budgetary impact of the President¶s proposals using its own methodology.

- independent ³re-estimate´



D. Cost Estimates for Bills

CBO must produce a cost estimate for every bill

approved by a Congressional committee.

- committees also ask for cost estimates at various

points in the legislative process

The estimates show how the legislation would affect

spending or revenues over the next five years or more.

For most tax legislation, CBO uses estimates provided by

the Joint Committee on Taxation.



E. Scorekeeping

The CBO keeps track of all spending and revenue

legislation considered each year.

- Congress needs to act within the levels set bythe budget resolution

The scorekeeping system keeps track of all bills

affecting the budget from the time they are reported outof committee to the time they are enacted into law.



F. Federal Mandates

The Unfunded Mandates Reform Act of 1995

- requires CBO to provide committees with a statement

regarding the costs of federal mandates in reported

legislation

- assess the impact of federal laws on state and local

governments and the private sector

- impose an enforceable duty

- reduce or eliminate the amount of funding to

cover the costs of existing mandates



G. Budget Options

CBO periodically releases reports discussing options

for the budget.

- cut spending or lower revenues

- implications of certain policy choicese.g. paying down federal debt

slowing growth of Social Security

The report does not make recommendations.- discuss pros and cons of each option



H. Monthly Budget Review

CBO issues an analysis of federal spending and revenue

totals for the

- previous month

- current month

- fiscal year to date



I. Unauthorized or Expiring Authorizations

CBO issues a report that shows the total amount that the

Congress has provided in appropriation acts for programs

whose authorization has expired or is about to expire.

- January



J. Reports Under the Troubled Asset Relief Act of 2008

Emergency Economic Stabilization Act of 2008

- requires CBO to provide semiannual reports thatassessthe status of TARP



V. US Federal Government Budgets

FY 2012 Budget whitehouse.gov/omb/budget



FY 2012Proposed

Budget

From Table S.4

(billions $)

whitehouse.gov/omb/budget



Budget Actual Budget Actual

Pensions 746 749.6 Income Taxes 1,230.4 1,090.0

Health Care 846.8 820.7 Social Insurance Taxes 940.4 864.8

Education 149.5 140.4 Ad-valorem Taxes 134.4 132.1

Defense 871.9 847.2 Business and Other Revenue 27.5 75.8Welfare 427.7 502.3

Protection 55.7 53.4 Total Revenue 2,332.6 2,162.7

Transportation 106.9 92.0

General Government 25.6 24.7

Other Spending 225.2 29.7

Interest 135.9 196.2

Total Spending 3,591.1 3,456.2 Federal Deficit -1,258.4 -1,293.5

Gross Public Debt 14,456.3 13,528.8

source: usgovernmentspending.com

US Federal Government Spending US Federal Government Revenue

Fiscal Year 2010: Budgeted vs. Actual (bill ions $)

A budget doesn¶t reflect actual spending exactly.



Current budgets contain projections for future budgets.



The Budget and Economic Outlook: Update August 2011







Date post:	06-Apr-2018
Category:	Documents
Upload:	katherine-sauer
View:	219 times
Download:	0 times

Pub Econ Lecture 04 Budget Analysis

Documents