Lesson Objectives:- Government spending
- Preparing the budget
- Authorization and appropriation
- Budget resolutions
The House of Representatives holds the purse. Approving government expenditures and raising revenues is the main business of the House. One huge item that is involved is the executive budget.
The Executive Budget is prepared and submitted by the president to Congress. Congress breaks it down into bills, then debates, amends, and passes it some time later. Only then is it possible to estimate government spending.
A Fiscal Year (FY) is a twelve-month period that is used for bookkeeping, or accounting, purposes. Usually, the fiscal year does not coincide with the calendar year. For example, the federal government's fiscal year runs from October 1st through September 30th.
Within the fiscal year, Congress is required to conduct two reviews per year.
The first is the Spring Review, the annual process in which the Office of Management and Budget (OMB) requires federal agencies to review their programs, activities, and goals, and submit their requests for funding for the next fiscal year.
Then comes the Fall Review, the annual process in which the OMB, after receiving the agency requests for funding, reviews the requests, makes changes, and submits its recommendations to the president.
The Election-Year Budget is a very compressed process. The outgoing president does not set a budget for a year in which he will not be president and when the budget needs to be approved, the incoming president has not even been chosen yet.
The budget goes through several steps from what is possible to what is confirmed. The first is Authorization, a formal declaration by a legislative committee that a certain amount of funding may be available to an agency. Some authorizations terminate in a year; others are renewable automatically without further congressional action.
Then, there is Appropriation. That is the passage, by Congress, of a spending bill specifying the amount of authorized funds that will actually be allocated for an agency's use.
There is a cycle to the budget. It begins in May with the First Budget Resolution. That is the resolution passed by Congress in May that sets overall revenue goals and spending targets for the following fiscal year.
Then, there is the Second Budget Resolution. It has a different tone as it is a resolution passed by Congress in September that sets binding limits on taxes and spending for the following fiscal year.
When Congress fails to act, there is still a solution. The Continuing Resolution is a temporary funding law that Congress passes when an appropriations bill has not been passed by the beginning of the new fiscal year on October 1st.
The Federal Debt Ceiling is designed to limit spending, but there are problems Congress can face. When government spends more than it has, it has to issue new debt. When the federal debt reaches the debt ceiling, Congress must then raise the debt ceiling to add more debt. If the debt ceiling is not raised, the government faces being shut down as well as defaulting on its prior obligations.