Why We Have A Budget

February 13, 2012

INTRODUCTION TO THE BUDGET

The airwaves are full of talk about the federal budget. Why all the hype? To the average onlooker, the federal budget process may be confusing. We attempt to explain.

Congressional Budgeting 101

Why Have a Budget
The Different Types of Spending
Why the Budget Needs Reform
Why the Budget Matters
Context Notes

Why Have A Budget

The current Congressional budget process was set forth in the Congressional Budget Act of 19741 . This law establishes the parameters of the federal government with respect to spending, tax revenue, deficit, and debt policies.

The Different Types of Spending

In general, there are two types of spending: mandatory (i.e., entitlement) and discretionary.

Mandatory spending is spending that’s on autopilot because it is required by law and is not subject to the annual Congressional appropriations process. Spending for things like Social Security, Medicare, and Medicaid fall under the mandatory spending category.2

Discretionary spending is spending for programs and agencies that occurs through yearly congressional action (called appropriations acts).3 Items like Department of Defense and Department of Education spending fall under this category.

“In 2010, mandatory spending accounted for over half of total federal spending…4”
The budget submitted by President Obama will outline both mandatory and discretionary 
spending, generally over a five-year period.

Why the Budget Needs Reform

Passing a budget matters. It reveals Congress’s priorities for the upcoming year and sets the parameters for the upcoming appropriations debate. It puts members of Congress on record supporting or opposing various policy proposals such as income tax rate cuts or increases and entitlement program reforms.

However, the actual budget resolution does not have the force of law, which means the budget resolution itself is primarily a messaging tool. Congress’s annual budget is passed as a form of a concurrent resolution. While it is supposed to be voted on yearly by both the House and the Senate, it is not signed by the President and does not have the force of law.5 As discussed below, since the process hasn’t worked for nearly three years, it’s easy to see why some believe the process needs to be reformed.

Why the Budget Matters

A budget sets the overall topline spending cap for discretionary spending.

  • The House and Senate Appropriations Committees divide the total spending cap created 
by the budget among the 12 Appropriation subcommittees.
  • Once the Appropriation Committees have made these allocations, spending caps are 
established for each of the 12 appropriation bills. In practice, this creates a cap on total spending and a cap for each of the 12 bills (i.e., Defense).6

A budget also may have instructions for reconciliation. These instructions can later be used to prohibit Senate filibusters in the future.

  • Reconciliation can be used as a serious deficit reduction tool, but Congress has generally abandoned this practice.
  • According to the Congressional Research Service, “Reconciliation was used in the 1980s and into the 1990s as a deficit-reduction tool. Beginning in the latter part of the 1990s, some reconciliation measures were used principally to reduce revenues” (thereby increasing the deficit).7

Why Caps Matter

If the federal budget resolution doesn’t have the force of law, then why would a cap matter?

Some items in the budget, including the overall discretionary spending cap, are enforceable by points-of-order. Points-of-order are a parliamentary tool that can be raised on the floor by members of Congress after a violation of the budget resolution has occurred,8 which can be used as a tool to prevent overspending.

According to the Congressional Research Service, the budget enforcement process “is not an effective control on the spending that results from existing laws”9 although it generally works for new legislation.

Context Notes:

For a budget to actually go into effect, the House and Senate have to pass the same version of the concurrent resolution, which means they have to pass the same budget (a concurrent resolution is different from a bill; the President does not sign a concurrent resolution). And for nearly three years, Congress hasn’t produced a budget.

  • The last time the House and Senate agreed on a budget was on April 200910. Although the House passed a budget last year by a vote of 295–19311, the Senate voted that particular budget down by a vote of 57–4012.
  • Last year, the budget plan submitted by President Obama was also defeated in the Senate by a vote of 97–0 13.

So what happens when no budget is passed?

Congress can pass a “deeming resolution” that sets the topline discretionary spending 
number or do what they did last year—insert the topline discretionary spending number14 
in a piece of legislation (such as the Budget Control Act that raised the debt ceiling).

The Budget Control Act also sets the topline discretionary spending number in the Senate 
for the current budgetary cycle.15

That is why Senate Majority Leader Harry Reid said on February 3: “We do not 
need to bring a budget to the floor this year.” The Budget Control Act set a $1.047 trillion limit for discretionary spending for fiscal year 201316. Since the number is already set for the Senate appropriators to spend, Senator Reid is very unlikely to go through the budgetary process.

 

To view the .pdf version of this Fact Sheet, please click here

  1. Congressional Budget Act. Pp. 937. http://www.gpo.gov/congress/house/hd106-320/pdf/hrm89.pdf
  2. Congressional Research Service. Introduction to the Federal Budget Process. December 2, 2010. Pp. 19. http://assets.opencrs.com/rpts/ 
98-721_20101202.pdf
  3. Congressional Research Service. Introduction to the Federal Budget Process. December 2, 2010. Pp. 19. http://assets.opencrs.com/rpts/ 98-721_20101202.pdf
  4. Congressional Research Service: Mandatory Spending Since 1962. June 15, 2011. Pp. Summary. http://www.fas.org/sgp/crs/misc/ RL33074.pdf
  5. Congressional Research Service. Introduction to the Federal Budget Process. December 2, 2010. Pp. Summary. http://assets.opencrs.com/rpts/ 98-721_20101202.pdf
  6. Congressional Research Service. Introduction to the Federal Budget Process. December 2, 2010. Pp. 14-15. http://assets.opencrs.com/rpts/ 98-721_20101202.pdf
  7. Congressional Research Service. Introduction to the Federal Budget Process. December 2, 2010. Pp. 24. http://assets.opencrs.com/rpts/ 98-721_20101202.pdf
  8. Congressional Research Service. Introduction to the Federal Budget Process. December 2, 2010. Pp. 7. http://assets.opencrs.com/rpts/ 98-721_20101202.pdf
  9. Congressional Research Service. Introduction to the Federal Budget Process. December 2, 2010. Pp. 7. http://assets.opencrs.com/rpts/ 98-721_20101202.pdf
  10. Library of Congress. 111th Congress. S.Con. Res. 13. Accessed February 9, 2012. http://thomas.loc.gov/cgi-bin/bdquery/z? d111:SC00013:@@@X
  11. Washington Post. House approve Ryan budget plan. April 15, 2011. http://www.washingtonpost.com/blogs/2chambers/post/house-to-vote- friday-on-paul-ryan-budget-alternative-budgets/2011/04/15/AFN7RkiD_blog.html
  12. Politico. Senate Votes Down Paul Ryan Budget Plan. May 25, 2011. http://www.politico.com/news/stories/0511/55721.html
  13. Politico. Senate Votes Down Paul Ryan Budget Plan. May 25, 2011. http://www.politico.com/news/stories/0511/55721.html
  14. Congressional Research Service. The Congressional Budget Process. January 28, 2004. P. 4. http://fpc.state.gov/documents/organization/ 34649.pdf
  15. Subscription Only. Congressional Quarterly. Reid: No Vote on Fiscal 2013 Budget Resolution. February 3, 2012. http://www.cq.com/doc/ news-4022481
  16. Subscription Only. Congressional Quarterly. Reid: No Vote on Fiscal 2013 Budget Resolution. February 3, 2012. http://www.cq.com/doc/ news-4022481

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