What is the agency that supports the president in preparing the federal budget?
Note: The COVID-19 recession and relief packages dramatically, but mostly temporarily, changed spending and revenue levels for fiscal years 2020 and 2021, and to a lesser extent 2022. We use recent budget projections by the Congressional Budget Office (CBO) for 2023 to illustrate the composition of the federal budget and taxes under more normal circumstances. Show
Policy Basics: Introduction to the Federal Budget Process No single piece of legislation establishes the annual federal budget. Rather, Congress makes spending and tax decisions through a variety of legislative actions in ways that have evolved over more than two centuries. The Constitution makes clear that Congress holds the power of the purse, giving it authority “to lay and collect Taxes, Duties, Imposts and Excises,” and specifying that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by law.” In short, federal taxing and spending requires legislation that is enacted into law. Under the practices that have evolved, some tax and spending legislation is permanent — unless and until changed, which it often is. Other legislation covers multi-year periods, requiring periodic renewal. And many budget decisions are made year by year, through enactment of annual appropriations bills. In addition, the Congressional Budget Act of 1974 establishes an internal process — called a congressional budget resolution — for Congress to formulate and enforce an overall plan each year for acting on budget legislation, though Congress has increasingly chosen to ignore that process. Updated October 24, 2022 In this backgrounder, we address:
Basic Budget Spending and Revenue CategoriesShare Chart on Facebook Share Chart on Twitter Chart Spending. Federal spending is classified in two basic categories: mandatory and discretionary. About 63 percent of the federal budget is mandatory spending, 30 percent is discretionary spending, and the rest is interest payments on debt (see chart). These categories are not named for the relative importance or necessity of the programs involved; they refer to the relationship between the law that authorizes a program or activity and the law that determines the program’s spending. In the case of mandatory spending (sometimes also called “direct spending”), those two functions are combined. The law that authorizes a program and determines its purposes and rules also determines the funding. For many of these programs, the authorizing law provides that all who meet eligibility criteria can receive benefits determined by formula or benefits such as health care. Examples include Social Security, Medicare, Medicaid, federal military and civilian retirement, veterans’ disability compensation, the Supplemental Nutrition Assistance Program, or SNAP (formerly known as food stamps), and some farm price support programs (see chart below). These authorizing laws are written by the committees of jurisdiction over each such program. Examples include: SNAP, by the House Agriculture Committee and the Senate Committee on Agriculture, Nutrition, & Forestry; Medicaid, by the House Energy & Commerce Committee and the Senate Finance Committee; and veterans’ disability compensation, by the House and Senate Veterans’ Affairs Committees. Share Chart on Facebook Share Chart on Twitter Chart Other mandatory programs have specific funding amounts directly provided in the authorizing law. Examples include grants to states to support child care assistance, highway and transit assistance financed by the federal gas tax, and some of the funding for community health centers. Changing mandatory programs requires amending the relevant authorizing law, to modify eligibility or benefits (up or down) or to adjust the funding levels set in authorizing law. For discretionary spending, in contrast, the authorizing law that sets up the program, agency, or activity does not itself determine the funding level, which is instead set in annual appropriations legislation. For example, almost all defense spending is handled this way, along with the operating budgets of civilian agencies, medical care for veterans, grant programs such as for education and medical and scientific research, and some low-income assistance programs (such as for housing) that are not set up to necessarily serve everyone who is eligible. Under current practice, annual funding for discretionary programs is under the jurisdiction of the House and Senate Appropriations Committees, which produce 12 appropriations bills, although some or all of those bills are often combined into omnibus packages. When a program that is traditionally funded through an annual appropriations bill instead receives some funding directly from an authorizing bill, then that funding is considered mandatory. Revenues. On the revenue side of the budget (see chart above), taxes and fees are similar to mandatory spending in that they are generally governed by laws that remain in place until changed. But some tax policies are enacted on a temporary basis and expire if not extended. For example, most of the individual income tax cuts enacted in the 2017 tax law expire after 2025. Almost all revenue law is in the jurisdiction of the House Ways & Means Committee and the Senate Finance Committee. Summary. Each year’s budget process in Congress requires, at a minimum, enactment of appropriations covering all discretionary programs. Congress is also likely to pass legislation affecting some mandatory spending, to renew programs if funding is expiring or to change eligibility, benefits, or funding, or to create new programs. It may also pass legislation changing tax law or extending expiring tax provisions. In addition, as described more below, Congress is supposed to adopt a budget resolution to guide its budgetary action for the year. The President's Budget RequestShare Chart on Facebook Share Chart on Twitter Chart The annual federal budget process traditionally starts when the President submits a detailed budget request for the coming fiscal year, which begins on October 1. (The request is supposed to come by the first Monday in February, but sometimes the submission is delayed, particularly when a new administration takes office or congressional action on the prior year’s budget has been delayed.) This budget request — developed through an interactive process between federal agencies and the President’s Office of Management and Budget that begins the previous spring (or earlier) — plays three important roles. First, it tells Congress the President’s recommendation for overall federal fiscal policy: (a) how much money the federal government should spend on public purposes; (b) how much tax revenue it should collect; and (c) how much of a deficit (or surplus) it should run, which is the difference between (a) and (b). In most years, federal spending exceeds tax revenue and the resulting deficit is financed primarily through borrowing (see chart). Second, the President’s budget lays out the administration’s relative priorities for federal programs — how much should be spent on defense, agriculture, education, health, and other areas. The budget is very specific, recommending funding levels for individual “budget accounts” — federal programs or small groups of programs. It typically outlines fiscal policy and budget priorities not only for the coming year but also for the subsequent nine years. The budget is accompanied by supporting volumes, including historical tables that report past budgetary results. Third, the President’s budget typically includes some proposals to alter some mandatory programs and some aspects of revenue law, even if Congress is unlikely to consider those proposals. And it updates estimates of anticipated spending for ongoing mandatory programs and revenues even when no changes to these programs are proposed, so that budget totals — overall fiscal policy — is based on more recent information. The Congressional Budget ResolutionCongress generally holds hearings to question administration officials about their requests and may then develop its own budget plan, called a “budget resolution.” The House and Senate Budget Committees draft and enforce the congressional budget resolution. Once the Budget Committees pass their budget resolutions, the resolutions go to the House and Senate floors, where they can be amended. The budget resolution for the year is adopted when the House and Senate pass the identical measure, either after negotiating a conference agreement or after one chamber passes the resolution adopted by the other. The congressional budget resolution is a “concurrent” resolution, not an ordinary bill, and therefore does not go to the President to be signed or vetoed. It is also one of the few measures that cannot be filibustered in the Senate and so requires only a majority vote to pass (or be amended). Because it does not go to the President, a budget resolution cannot enact spending or tax law. Instead, it sets targets for congressional committees to propose legislation directly appropriating funds or changing spending and tax laws. It can also establish an expedited process for action on mandatory spending and tax changes, known as “reconciliation” (discussed more in a separate section below). Congress is supposed to pass the budget resolution by April 15, which is 5½ months before the October 1 start of the fiscal year, but it often takes longer. In recent years, moreover, it has been common for Congress not to pass a budget resolution at all. Instead, the House and Senate may agree to “deeming resolutions” or statutory provisions that substitute for the budget resolution (see box, “What If There Is No Budget Resolution?”).
The report accompanying the budget resolution often contains language describing the assumptions behind it, including how much it envisions certain programs being cut or increased, or how it envisions tax law being changed. These assumptions serve only as guidance to the other committees. The budget resolution can also include temporary or permanent changes to the congressional budget process. Enacting Budget LegislationFollowing adoption of the budget resolution, Congress considers the annual appropriations bills, which fund discretionary programs for the coming fiscal year. Congress may also consider legislation to enact changes to mandatory spending or revenue levels within the spending limits and the revenue floor specified in the budget resolution and the accompanying 302(a) allocations. Mechanisms exist to enforce the terms of the budget resolution during the consideration of such legislation. Failure to enact appropriations bills by the start of the fiscal year requires Congress to take special steps to avoid the disruption of government services. A special mechanism known as “reconciliation” expedites the consideration of mandatory spending and tax legislation and is discussed in the next section. Enforcing the Terms of the Budget ResolutionThe main enforcement mechanism that prevents Congress from passing legislation that violates the terms of the budget resolution is the ability of a single member of the House or the Senate to raise a budget “point of order” on the floor to block such legislation. In some recent years, this point of order has not been particularly important in the House because it can be waived in the “rule” that sets the conditions under which each bill will be considered on the floor. Rules, which are resolutions that the House can adopt by a simple majority vote, are developed by the leadership-appointed Rules Committee. However, the budget point of order is important in the Senate, where any legislation that exceeds a committee's spending allocation — or cuts taxes below the level allowed in the budget resolution (the revenue floor) — is vulnerable to a budget point of order on the Senate floor that requires 60 votes to waive. If the point of order is not waived, the consideration of the bill on the Senate floor ends. What If There Is No Budget Resolution?Congress has seldom completed action on the budget resolution by the April 15 target date specified in the Congressional Budget Act of 1974. Moreover, while Congress agreed to a budget resolution for each of the first 23 years the Budget Act was in effect (1976 through 1998), it failed to complete action on a resolution for the majority of years between 1999 and 2022. (Nor has it yet adopted a budget resolution for fiscal year 2023.) In the absence of a new budget resolution, the spending limits and revenue floor in the prior budget resolution automatically continue for the remaining years of that budget resolution. But because the prior budget resolution had established a 302(a) allocation for the Appropriations Committees for only the prior year, those committees will have no official funding target for the coming year. Without that funding target, each of the 12 appropriations bills will be subject to a point of order. To avoid this and other potential procedural problems stemming from not having a new budget resolution in place, the House and Senate may agree to separate budget targets — often with a considerable delay — which they “deem” to be a substitute for the budget resolution. Such deeming resolutions might cover only a new appropriations target (so that the prior multi-year revenue floor and spending targets for other committees remain in effect). Or they might set a new revenue floor and new targets for the other committees. Congress has sometimes taken a different approach, establishing a “Congressional Budget” in statute as an alternative to the concurrent budget resolution, including setting new appropriations targets for discretionary programs. For instance, Congress did this in a series of “bipartisan budget acts” (enacted in 2013, 2015, 2018, and 2019) that reflected the outcome of negotiations to raise the funding limits on defense and non-defense appropriations created by the 2011 Budget Control Act. Because deeming resolutions and the statutory approach taken in the bipartisan budget acts substitute for regular budget resolutions, they effectuate the same budgetary points of order. Budget points of order can be raised if appropriations bills (or amendments to them) do not fit within the 302(a) allocation given to the Appropriations Committee and the committee-determined 302(b) sub-allocations for the coming fiscal year. Similarly, entitlement bills (or any amendments offered to them) must not exceed the budget resolution's 302(a) allocation for the applicable committee and tax legislation must not cause revenue to fall below the revenue floor, in the first year and over the total multi-year period covered by the budget resolution. The cost of a tax or entitlement bill is determined (or “scored”) by the Budget Committees, nearly always by relying on estimates provided by the nonpartisan Congressional Budget Office (CBO). CBO measures the cost of tax or entitlement legislation against a budgetary “baseline” that projects mandatory spending and tax receipts under current law. What If Appropriations Bills Are Not Passed on Time?If Congress does not complete action on an appropriations bill before the start of the fiscal year on October 1 — which has been the case in each fiscal year since 1997, and in 40 of the last 43 years — it must approve, and the President must sign, a continuing resolution (CR) to provide stopgap funding for affected agencies and programs. If Congress doesn’t pass or the President does not sign a CR (due to disagreements over its contents), agencies and programs that require annual appropriations but have not received them must largely shut down operations. For example, a dispute between President Trump and congressional Democrats over border wall funding led to a 35-day shutdown of federal agencies within nine different departments starting December 22, 2018. A dispute between President Obama and congressional Republicans over the funding of health reform legislation led to a 16-day shutdown of ordinary government operations beginning October 1, 2013. And a dispute between President Clinton and congressional Republicans in the winter of 1995-96 resulted in a 21-day shutdown of substantial portions of the federal government. The Budget "Reconciliation" ProcessThe budget “reconciliation” process is an optional, special procedure outlined in the Congressional Budget Act to expedite the consideration of spending and tax legislation. This procedure was originally envisioned as a deficit-reduction tool, to force committees to produce spending cuts or tax increases called for in the budget resolution; 16 such deficit-reducing reconciliation bills have been enacted, including the Inflation Reduction Act of 2022. However, it has been used to increase the deficit on several occasions, notably to enact tax cuts three times during the George W. Bush Administration and again under the Trump Administration in 2017, and to enact a COVID-19 relief bill under the Biden Administration in 2021. Although the reconciliation process is optional, its procedural advantages (see below) are sufficiently great that Congress has increasingly used it to enact major spending and tax changes. In recent decades, the most likely reason for Congress to proceed with a budget resolution at all is to trigger the reconciliation process; if a reconciliation bill is not envisioned, Congress is likely to forgo a budget resolution entirely.
Statutory Budget-Control MechanismsIn addition to the limits established in the annual budget process under the Congressional Budget Act, Congress has often operated under statutory budget-control mechanisms intended to prevent tax and mandatory spending legislation from increasing the deficit or that constrain discretionary spending.
Both PAYGO and discretionary funding caps are enforced by “sequestration” — across-the-board cuts in specified programs. For instance, violation of PAYGO would trigger across-the-board cuts in selected mandatory programs at the end of each session of Congress to restore the balance between the costs and savings of previously enacted mandatory spending or revenue changes. But Congress has frequently set aside the Statutory PAYGO Act by exempting costs from its sequestration rules; as a result, there has never been a sequestration under Statutory PAYGO. Similarly, appropriations that exceed the discretionary funding caps would trigger across-the-board cuts in appropriated programs to eliminate the overage. The only significant sequestration occurred in 2013, to comply with the funding limits set by the 2011 Budget Control Act (which went into effect after Congress had already enacted appropriations for 2013). The Debt LimitBudgeting involves legislation that raises revenue and funds programs. If revenue is not sufficient to cover the resulting spending (and to cover other financial transactions), the Treasury borrows as needed. Separately, however, a fixed dollar limit exists on Treasury borrowing. When the debt limit is reached, it will conflict with underlying budgetary law. That is, the government is required by law to pay contractors who have fulfilled their contracts, pay its employees, cover Medicare costs, make compensation payments to disabled veterans, pay interest on its outstanding debt, and so on — yet the Treasury will be prohibited from borrowing to do so. Congress invariably resolves this conflict of laws by raising the debt limit to a new dollar level or suspending the debt limit for a specified period, rather than by forcing the Treasury to illegally default on contracts and violate the nation’s budgetary laws. But consideration of legislation to raise the debt limit may be acrimonious and time-consuming, and the threat of a possible government default may dampen the economy until the debt limit is raised or suspended. ConclusionThe norm of applying the rules and procedures of the Congressional Budget Act on an annual basis has largely broken down. For the last decade or more, Congress has rarely followed the Act’s orderly process. Deadlines are routinely missed. Perhaps most importantly, Congress has sought to adopt a budget resolution mainly when it has chosen to create a reconciliation bill, which is not subject to a Senate filibuster. Nevertheless, the Act’s rules and procedures can still shape and influence consideration of fiscal policy in Congress, and to a significant degree the reconciliation process is used to enact major legislation. Topics: Federal Budget, Budget Plans, Budget Process The Center on Budget and Policy Priorities is a nonprofit, nonpartisan research organization and policy institute that conducts research and analysis on a range of government policies and programs. It is supported primarily by foundation grants. What agency is responsible for preparing the president's budget?Federal agencies create budget requests and submit them to the White House Office of Management and Budget (OMB). OMB refers to the agency requests as it develops the president's budget proposal.
What is the function of OMB?OMB is responsible for overseeing Federal agencies' information technology practices. As a part of this core function, OMB develops and ensures implementation of policies and guidelines that drive enhanced technology performance and budgeting across the Executive Branch.
Who prepares the president's budget quizlet?The OMB holds hearings, reviews its assessment of the economy, and prepares budget recommendations for the president. The president reviews these recommendations and decides on the agencies' budgets and overall budgetary policy.
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