The Federal BudgetFederal spending constitutes one of the significant roles of the government in the U.S. economy. The federal budget provides an analysis of expected future income and a detailed plan of spending for the upcoming year. It must be enacted into law in order to legalize the collection of revenues and the expenditure of funds.
The budget is prepared under the supervision of the president, then submitted to Congress for modification and approval. Budget accounts are maintained by the Department of the Treasury and are audited at the close of each year. Except for areas of sensitive national security, all citizens have the right to review the audits and inspect how public funds were received and spent.
The successive stages in budgeting -- preparation, authorization, execution and audit -- are known as the budget cycle. The budget is designed to indicate major categories of revenue sources such as personal income tax, ad valorem sales tax and business tax. Expenditures are listed by government departments and agencies, and are often enumerated in broad terms such as amounts for health, national security or education. The document also shows the amount requested for each program, as compared with the amount actually authorized by Congress. These amounts are listed for three years so that anyone reading the budget can get a sense of the direction in which expenditures for a particular program are moving.
Preparation of the budget is a complex political process, beginning almost a year in advance. Almost every agency in government makes strong bids for funds it wants, often supported by special interest groups. The president makes the final decisions on how much to request from Congress for each program and what the total amount will be.
The initial congressional examination of the president's budget is made by the House of Representatives Appropriations Committee. Through subcommittees, it holds hearings for each department and agency included in the budget. The requests for funds are defended in open sessions by officials of each agency. Hearings are often very detailed; members of Congress often question closely those officials who spend money.
An appropriations bill is then presented to the entire House of Representatives, where it is passed and sent to the Senate. The Senate Appropriations Committee holds hearings of its own and sends its recommendations to the full Senate. A committee from each body then meets to reconcile differences in the two budgets, item by item. The resulting bill is then enacted into law and sent to the president for his signature. Should the president veto the appropriations bill, it goes back to Congress. If a two-thirds vote of each House approves the bill, it becomes law despite the veto of the president. If the necessary number of votes cannot be mustered, a new compromise appropriations bill has to be worked out and voted into law. The total budget for all agencies and departments of government is broken down into 12 to 15 different bills.
The president's budget request reflects the economic policy priorities and goals of the administration. In general, the government seeks to stabilize the economy by spending more or less money during the year. Stability is generally considered in terms of full employment, control of inflation and deflation, and national economic growth. Other considerations can include distributing funds equitably among various regions of the country, meeting needs of the poor, and attempting to achieve a relatively balanced budget. Achievement of the latter goal seems uncertain in view of the fact that most federal budgets over the last quarter of a century or more have been in deficit.
In 1974 Congress set up a staff of its own, the Congressional Budget Office (CBO), to advise it on the likely economic effects of different spending programs and to provide information on the costs of proposed policies. The CBO also monitors the overall effects of government spending on the economy, including the federal budget. Work of the CBO has helped improve congressional discipline. This budget-making process permits Congress to establish its own national priorities, which can then be negotiated with the president.
The U.S. budget process, then, is complex and comprehensive. It permits input by citizens at many critical points, and it is always a compromise among the various interests and political philosophies of the American people.