We the People are in the midst of a heated debate on the approval of the 2011 Federal Budget but do most of us understand what is going on and how our government puts the budget together? Why aren't we discussing the 2012 Budget anyway? Below I will layout the budget process and hopefully answer your questions and allow you to understand who is telling the truth when you watch the news and who is playing politics, more then likely at your expense.
First off, prior to 1974 there was no formal process to establish the federal budget. There was in place the Budget and Accounting Act of 1921 that stated the President must submit a budget to Congress each year and in its current form, federal budget legislation and law states the President submit a budget sometime between the first Monday in January and no later then the first Monday in February (President Obama released his proposed 2012 budget on Monday, February 14, 2011 - oops, a little late). The Congressional Budget and Impoundment Control Act of 1974 created the Congressional Budget Office (CBO) and directed more control of the budget to CBO and away from the President’s Office of Management and the Budget (OMB). Regardless, the President is still the one who kicks off the process by submitting the Budget of the U.S. Government for the next fiscal year which traditionally is during the first week of February. This budget submission contains detailed information on spending and revenue proposals along with any policy proposals and initiatives that have significant implications on the budget.
A quick word on our fiscal year. The Federal Government’s fiscal year begins October 1st and ends on September 30 of the next calendar year. The fiscal year corresponds to the calendar year in which it ends: thus, fiscal year 2011 began October 1, 2010 and will end September 30, 2011. Fiscal year 2012 will then start October 1, 2011. There have been two changes in our fiscal year over our history, the first in the 1850’s and the second in 1976.
Sometime in March the CBO comes out with their analysis or scoring of the President’s Budget (As of this posting the CBO had not yet rated President Obama's proposed 2012 Budget). They produce a study that looks at the current law as a baseline for the projections and estimates what federal spending and revenues would be in “absence of new legislation for the current fiscal year and for the coming 10 fiscal years.”
There are two categories of spending that the President and Congress must deal with in the Federal Budget: Discretionary spending which is subject to annual approval by Congress and is currently only about 33% of the budget while Mandatory spending, which legislatures have less control over, is devoted to entitlement programs and is approximately 66% of the federal budget and has grown 5 times faster then our Discretionary spending. This is where all the debate and angst occurs in that the Mandatory category or entitlements, continues to grow automatically and encompasses the biggest sector of our budget and thus limits the amount of actual spending cuts that can be accomplished without changing the entitlement programs themselves. How about this as an alternative, capping them as a percentage of Gross Domestic Product (GDP).
Based on the President’s proposal the House and Senate’s own budget committees develop budget resolutions that establish targets for spending and tax revenue and identify policies that will need to move through reconciliation. These are sent to the floor of Congress for a vote. Differences are resolved in conference as the House and Senate Appropriations Committees divide the discretionary spending that is in the budget resolution among each of their 12 subcommittees.
Each subcommittee holds hearings on the programs under its jurisdiction and votes out a bill. The full committee marks up the bill and sends it to the floor of its corresponding chamber. Each chamber passes their bills and resolve differences in conference. Each house of Congress votes again and this conference report is sent to the President for signature or veto. All these appropriations bills are supposed to be signed by the President by October 1st, the beginning of the new fiscal year – however, unlike you or I or any business, our government rarely does this and as a result a series of Continuing Resolutions (CR) are passed to continue funding the government at their current fiscal year levels until the new Budget (raising or lowering those levels) can be passed and signed by the President.
Reconciliation occurs if Congress needs to legislate policy changes in Mandatory spending or tax laws to meet the annual targets laid out in the budget resolution. Once the resolutions have the relevant authorization committees develop plans and report back to the budget committees the budget committees combine all of the authorization plans into an Omnibus package and send it to the floor for a vote. Any differences between the House and Senate are worked out in conference, voted on again and then they send the final version to the President to either sign or veto.
There you have it, our U.S. Federal Budget. The President with his OMB starts it out and gives us his proposal in early February; in March the CBO tells all of us what it will cost this budget year and for ten years into the future; the House and Senate discuss and debate it in subcommittees throughout the year, the CBO scores their ideas and proposals, they agree; then Congress sends it to the President for signature so the new Federal Budget can go into effect by October 1st.
Why is this so hard?
Note: Congress often fails to meet the deadlines in this schedule
Budget calendar
| First Monday in February | Deadline for submission of president's budget |
| 6 weeks after president's budget submission | Deadline for committees to submit their "views and estimates" to the Budget Committees |
| April 15 | Congress passes Congressional budget resolution |
| May 15 | House may consider annual appropriations bills, even if budget resolution not yet adopted |
| June 10 | House Appropriations Committee reports the last of its annual appropriations bills |
| June 15 | Congress completes actions on reconciliation bills (if necessary) |
| June 30 | House completes action on House appropriations bills |
| July 1 - September 30 | Senate completes actions on Senate appropriations bills; conference committee completes action on appropriations, reports to floors of House and Senate; joint appropriations bills pass both chambers |
| October 1 | Fiscal year begins |
