The creation of the United States federal budget follows a process known as the federal budget process. The method was first established by the Budget Control Act of 1974. The House of Representatives drafts spending bills, while the Senate makes amendments to that legislation. This budget authority has been concentrated and consolidated as a result of the Budget Control Act.
The Act for the Control of the Budget
The Act bestowed three authorities onto Congress. To begin, it makes it possible for both the House of Representatives and the Senate to establish their very own permanent budget committees. They now have the authority to draft their budgets, which can be utilized during the negotiation process for the final appropriations bills.
The Congressional Budget Office was also established as a result of the Act. This office provides objective analysis to make the process of Congress reviewing the budget more efficient. This entails doing a comprehensive analysis of the budget proposed by the President for each fiscal year.
The beginning of the fiscal year was moved from the first of July to the first of October so that newly elected authorities would have more time to study the budget for each year.1
The Primary Objective of the Process of Creating the Federal Budget
Congress possesses the authority to levy taxes and make expenditures according to Article 1, Section 7 of the Constitution of the United States.2 The will of the voters must be represented by elected leaders, or else they will not remain in office. Congress must reach a consensus regarding the distribution of the tax burden and the distribution of the benefits of spending.
Note
The budget assigns concrete monetary values to each of these goals. The final budget includes exact spending amounts for each department as well as the programs the agency oversees.
The process of developing the budget ensures that all members of Congress have their perspectives heard. It opens up a wealth of opportunities for discussion. If the budget process is adhered to, the operations of the government operate smoothly.
The procedure for the federal budget consists of nine stages.
The process of creating the budget begins one whole year before the beginning of the fiscal year. The first day of October marks the beginning of the new fiscal year, which begins one year before the calendar year. For instance, the fiscal year 2022 will begin on October 1, 2021, and end on September 30, 2022. In the fall of 2020, work on the budget for the fiscal year 2022 (FY 2022) got underway.
Early in the fall
The Office of Management and Budget receives budget proposals from each of the government departments and agencies. The budget for the president is prepared and managed by OMB.
In November, the OMB will relay its views regarding the budget review to the other agencies.
December is the month in which agencies submit their final requests for budgets. The Office of Management and Budget (OMB) then puts together the final budget and sends it to the incoming president.
January is the month that a president has until the deadline to describe their fiscal priorities in the State of the Union Address. The Economic Report of the President is a document that is submitted by the Council of Economic Advisors. It does a trend analysis of the economy.
Note
Even though the State of the Union Address is traditionally given in January, Vice President Joe Biden has decided to move it to March 1, 2022, as a result of the epidemic and the other disruptions that it has brought.3
The first Monday in February
This is the cutoff date by which the president must present Congress with his proposed budget. The budget proposed by the president lays out their priorities in terms of spending in three different areas:
Funding levels for federal agencies
Alterations to obligatory programs that have already been passed into law by Congress, such as Medicare, Social Security, Medicaid, the Troubled Asset Relief Program, and the Affordable Care Act
The budget needs to demonstrate how changes to the tax code will affect total government revenue.
On April 15th, Congress will begin working on a budget resolution to direct future spending. Hearings are held in both the House of Representatives and the Senate Budget Committee, during which agency officials present their cases for why they require the monies that are being requested. A vote on the committees' proposed resolutions will take place on the floor.
A conference committee is where the Senate and House come together to hash out their disagreements. A majority vote in both the House of Representatives and the Senate is required to approve the final budget resolution. This phase is frequently skipped by Congress, which then reverts to the resolution from the previous year.
June 10
The budget resolution serves as a guide for the appropriations bills passed by Congress. Within the discretionary budget, they detail how much money should be allocated to each agency. There are a total of 24 Appropriations Subcommittees across the House and the Senate. They proceed to prepare their bills, after which they hold more hearings. These are sent to a total of 12 conference committees to be discussed and resolved. Before the final measures are sent to the president for signature, they are voted on in the House of Representatives.
In the meanwhile, authorization committees have been established in both chambers of Congress to consider any possible amendments to legislation governing mandatory spending or taxes. These are going to be voted on in the budget committees of the Senate and the House. A conference committee is responsible for finding a solution to the disputes.
A final vote on the measure is held in the House of Representatives before it is sent on to the President of the United States. However, the president does not get them until the earliest possible point in time, the month of September. This bill is handled by the president the same way as any other legislation that Congress sends him. Within the next ten days, they are required by the Constitution to either give it their blessing or exercise their right to veto it. If a veto is exercised, the procedure must begin all over again.2
Note
The president also has the option of moving forward with the budget notwithstanding the opposition's opposition.
First of October
All laws must be signed into law by the timeframe that has been set. If this does not occur, Congress has two options available to them. Either it can enact a continuing resolution that will allow federal agencies to continue operating at their existing levels, or it can allow a shutdown of the government.
In the event of a government shutdown, all discretionary programs that are not considered essential will be terminated, and employees will be furloughed without pay. This took place in 2013, 2018, and 2019 respectively.
July 15
Mid-Session Review of the Budget The Mid-Session Review of the budget is submitted to Congress by the President.
The Function of the United States Treasury
Once the budget has been approved, its implementation is overseen by the Financial Management Services division of the Treasury Department. This is the agency that is responsible for issuing reports, including Treasury Statements, as well as making payments, collecting revenues and past-due debt, and collecting delinquent debt.4
When the Procedure for Developing the Budget Is Not Followed
Since the beginning of FY 2010, Congress has only twice followed the budget process. Some industry professionals think that the procedure cannot in any way be made to work. First, it places the responsibility of fiscal leadership on Congress, a body that is not designed to function well in a leadership capacity. Then it requires a level of coordination that Congress isn't designed to fulfill because of the way it's structured. Last but not least, it establishes timelines that are impossible to meet.5
It would appear that events that have transpired since the midterm elections in 2010 lend credence to this thesis. The tea party movement was largely responsible for the Republican Party's victory in the House of Representatives majority race. On the other hand, Democrats held both the Senate and the president. The budget process was abandoned by Republicans because they refused to endorse the budgets proposed by President Obama. They used the budget as a negotiating tool to accomplish what they set out to do.
FY 2011
The budget for the fiscal year 2011 wasn't finalized until April 2011, which was six months later than planned. There was a near-miss with the closure of many government agencies. Because Republicans were worried about the steadily increasing debt levels, they reduced expenditure on discretionary items by $38 billion.6
2012 Fiscal Year
The budget for the 2012 Fiscal Year wasn't approved until December 2011, which was two months later than planned.7 The Budget Control Act was approved by Congress to bring spending under control through sequestration.8
FY 2013
The budget for the fiscal year 2013 was never approved. As an alternative, Congress decided to keep the government operating through the end of the fiscal year by passing two continuing resolutions.9 These resolutions also included the spending reductions that were required by the sequester.
FY 2014
The budget for the fiscal year 2014 was also not approved. Instead, Republicans were responsible for forcing a shutdown of the government that lasted for 16 days. After they ultimately reached an agreement to participate in a budget conference committee, which led to a deal on December 18.10, the government was able to reopen its doors.
FY 2015
The budget for the fiscal year 2015 was adopted on December 13th, 2014. The procedure was considerably more unconventional than usual.11 On March 4, 2014, one month after it was due, President Obama finally delivered his proposed budget to Congress. The spending package that was passed by the House of Representatives for $1.1 trillion took the Senate in the United States until the 13th of December to approve.
As a form of protest against President Obama's unilateral measures on immigration, the budget bill only provided funding for the Department of Homeland Security through February 2015. This was done even though it outlined Congress' allocations for the remaining nine and a half months of FY 2015.12 The Bipartisan Budget Act imposed a limit on the amount of money that could be spent on discretionary items within the budget for the fiscal year 2015 and the remaining portion of fiscal year 2014.13
FY 2016
The budget for the fiscal year 2016 was finally approved on December 18th, 2015, only two months behind schedule.14
FY 2017
The budget for the fiscal year 2017 was never approved. Instead, funding was maintained at the same levels as in FY 2016 thanks to a continuing resolution.15
FY 2018
After two separate shutdowns of the federal government, the budget for fiscal year 2018 was finally approved. To keep the government operational until March 23, 2018, a continuing resolution was passed. On that day, the Omnibus Spending Bill was approved by Congress, which allowed for the appropriation of monies for the discretionary budget.16
On January 19, the system experienced its first downtime. Democrats were opposed to any legislation that failed to safeguard immigrants who were qualified for the Deferred Action for Childhood Arrivals program.
On February 9, there was a second shutdown that lasted for approximately four and a half hours. Rand Paul, a Republican senator from Kentucky, voiced opposition to the bipartisan budget bill for two years. By surpassing the spending restrictions set by sequestration, it contributed an additional 320 billion dollars to the national debt.10
Over the past two years, there has been a $160 billion increase in expenditure on defense, bringing the total to $700 billion. The amount was capped at $549 billion due to sequestration. The Democrats offered an additional $128 billion for discretionary spending that was not related to defense. The amount was capped at $516 billion due to sequestration. The addition of 17 tax items brought in $17 billion. The bill was approved by the Senate just after one in the morning. At 5:30 in the morning, it was approved by the House. As soon as it was presented to him, President Trump signed it, putting an end to the closure even before federal offices opened.
More Recent Events
On December 21, 2018, the government of the United States went into its longest-ever shutdown. Because it did not allocate $5.7 billion for a wall along the border with Mexico, President Trump did not sign the budget document so it could be passed on to Congress.
In October of 2021, the government passed a measure to once again raise the limit on the amount of debt that it may incur, this time by an additional $480 billion. The national debt, which had been hovering slightly about $28.4 trillion at the time, was allowed to climb to approximately $28.8 trillion. The limit was raised one more in December 2021, when President Joe Biden was in office; this time, it was raised by $2.5 trillion, bringing the total amount close to $31.4 trillion. This prevented a crisis about the federal debt.18
Why Congress Doesn't Use the Budget Process and Instead Relies on the Debt Ceiling
Before 1974, the debt ceiling was the only instrument that Congress had at its disposal to exercise control over the budget. In 1917, the ceiling was first installed.19 Because of this, its ability to say yes or no was severely constrained.