The Federal Budget Process or The Federal Budget development, execution, implementation, and control

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Abstract

The Congress and the executive federal budget-making process is a highly complex and painstaking process. It involves the active participation of the executive represented by the president and his advisers, and Congressional members as well as the input of thousands of staff in the legislative and executive arms of the government. This paper describes the budget process including development, execution, implementation, and control processes. It further highlights the roles and impact of various stakeholders in the budget process including the President, Congress, executive and congressional staff, congressional committees, civil society, lobby groups, the general public and other budget process interest parties. Finally, the paper concludes with a lesson from the budget process. Annually, the federal government collects and spends approximately $3 trillion, which is equivalent to a fifth of the country’s gross domestic product (GDP). Consequently, the federal government is the largest investor, social welfare financier, and employer in the country as well as the largest player in the capital markets through servicing federal debt.

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Introduction

The budget-making process draws the interest of numerous interest groups and the general public. All the stakeholders involved in the budget process navigate through thousands of small and big decisions, complex procedures and rules, and debate about the amount and composition of public revenue and expenditure. Accordingly, the federal budget-making process is characteristically contentious and tense due to the many issues at stake as well as the numerous interests and institutions affected by the budget decisions. The scarcity of budget revenue characteristically pits Republican and Democrats as well as the executive and the legislature against each other in the fight over the budget money allocation. This research explores the roles of the executive and legislature in the federal budget-making process as well as the conflicts and politics that characterizes and informs budget allocation decisions (Chen & Wang, 2013).

Findings

The Executive Phase

The budget process kicks off with the President’s budget request to Congress every financial year. The “budget request” comprises a detailed account of expected expenses for the subsequent federal fiscal year submitted to Congress by the President on or before the 1st Monday of February to have adequate time for planning before the federal fiscal year begins on the 1st of October. The budget request is prepared by the President’s Office of Management and Budget (OMB) to serve three major roles. First, the request informs Congress about the comprehensive federal fiscal policy beliefs of the President as spelled in three major components. The first component is the amount of money the federal government must spend on public purposes and the second one is the amount of tax revenue that the federal government should take. Lastly, is the amount of surplus or deficit that it should run as the difference between spending and tax revenues.

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Second, the budget request states the relative priorities of the President for federal programs in the form of the amount the President believes should go to agriculture, health, defense, education, and other programs. The President’s budget request is specific and recommends financing levels for each federal program or minor programs groups known as “budget accounts.” In most cases, the budget request outlines budget priorities and fiscal policy for the subsequent year as well as the coming five years or even more. The request is further accompanied by historical tables setting out previous budget figures.

Thirdly, the budget request notifies Congress about tax and spending policy changes recommended by the president. However, the president does not necessarily propose legislative reforms for budget parts governed by fixed law. For instance, almost every federal tax code is permanently set by law with no expiry date. Also, nearly two-thirds of federal expenditure such as Medicaid, Medicare, and Social Security are permanently enacted. Similarly, interest payable on the national debt is automatically paid without the need for legislation. However, the “debt ceiling” limit on the amount the government can borrow is raised periodically through legislation (Meyers, 2014).

The federal budget process is often tailored to foster budgeting transparency, which entails conducting the budget decision-making process in public. It also entails debate and open deliberation in the budget process. Transparency enables the public and similar stakeholders such as the media and lobbyists who bring information to public attention to monitor politicians and hold them to account. Some transparency tactics also empower the public role in the budget process, which include delayed disclosures in which information is made available some moments after budget decisions have been agreed upon. Delayed disclosure empowers the voter by reducing the power of interest groups in influencing the budget outcomes. Transparency also prevents self-interest bargains but can promote inflexibility and posturing that results in bad deliberation. Therefore, opacity is recommended early in the budget process such as when committees draft the macro-level allocations embodied within consensus budget resolution. On the other hand, transparency is suited for final stages of the budget process when committees participate in concrete bargaining. Budgetary inputs by the civil society also improve budgetary decisions and process transparency of the media and legislators, and further increases budget literacy and awareness. Although budget process structures make considerable changes in spending priorities impossible, public input directly impacts budget allocation positively subsequently increasing decision-makers’ accountability.

Presidential politics further influence federal budget allocation. For instance, states that strongly backed the incumbent president in last presidential elections often get more funds than swing and marginal states (Grier, 1987). Party affiliations also determine federal budget spending, whereby states whose governor is a member of the president’s party in Congress elections get a more federal allocation. On the contrary, states led by opposition governors receive fewer funds, which is part of the tactical allocation of federal funds.

The Congressional Phase

Upon receipt of the President’s budget request, Congress convenes hearings to interview Administration officials concerning their requests and then come up with individual budget resolution through the Senate and House Budget Committees. The sole mandate of House and Senate Budget Committees is to develop the budget resolution, which then goes to the House and Senate Floor for amendment through a majority vote. The budget resolution then goes to a House-Senate conference to solve all disagreements for passage of a conference report by the two houses. It does not require President’s signature or veto as it is a “concurrent” congressional resolution rather than an ordinary bill. Furthermore, a budget resolution requires a simple majority vote for passage and is among the few pieces of Senate legislation immune to a filibuster. Congress should pass the budget resolution by 15th April although passage takes much longer. Sometimes, Congress fails to pass a budget resolution and the multi-year plan resolution of the previous stays in force.

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Unlike the highly detailed President’s budget request, the congressional budget resolution is a simple plan. It comprises a collection of figures noting the amount Congress should spend in every one of the nineteen broad expenditure categories referred to as budget functions as well as the amount of overall revenue the government shall collect for everyone in the subsequent five or more years. Although the Congressional Budget Act prescribes the resolution coverage at least five years, Congress occasionally opts to prepare a decade-long budget.  In Congress, the budget process entails development of tax and spending legislation under the guidance prescribed by a collection of specific procedures set out in the Congressional Act of 1974. The Budget Act requires Congress to come up with a “budget resolution” every financial year establishing overarching limits on tax cuts and spending. These limits guide legislation enacted by separate congressional committees and all amendments made to such legislation on the Senate or House floor.

As the budget has expanded and taken center stage in United States politics and economy, the scope of budget process conflict has similarly grown. Budgeting puts Congress’s authorizing committees in charge of federal programs against the appropriation committees, which has jurisdiction over a large part of federal expenditure. The budget process also creates strife between the committees in charge of tax legislation and those with jurisdiction over expenditure decisions. Conflicts result from friction on who is responsible for payment versus those that benefit. The conflict is also over the distribution of the tax burden as well as over decision on more allocation or cuts to the various programs. The budget process is an allocation activity whereby the money is never adequate to allocate to all demands. Budgeting is also a redistributive process whereby some people gain, while others lose. Similarly, some people receive more from the government than the taxes they pay, while others receive less than their tax payment (Kramer, 2012). Therefore, budgeting entails choice among numerous demands on public resources, which never suffice to satisfy all demands even during good times. Budgeting also entails rationing process in which budget is balanced by cutting some claims. All these features of the budget increase the potential for conflict between Republicans and Democrats, the president versus Congress as well as over thousands of backstage within the government agencies, interest groups, and lobby groups as well as local and state government. Budget conflicts and constraints also result from the requirement that budget should be resolved (Hou, 2012).

Budget resolution begins early in the budgeting process when claimants request less than their needs. At the final stage of the budget process, the resolution requires combatants to shelve remaining disagreements to reach a consensus. Therefore, a budget resolution is achieved through self-denial as it self-resolves through order and routine to budgetary decisions and demands. Furthermore, budgetary procedures mitigate conflict through the allocation of roles and tasks, the establishment of expectations and action’s deadlines, and limitation of the issues for consideration. The budgeting routines further dampen conflict, the repetitiveness of tasks, which enable completion of the budget process with little or no change every year as well as the patterned behavior of budget makers. The absence of this accommodating disposition leads to the breakdown of routines and ultimate collapse of the budget process.

The Execution Phase

The budget resolution spending policies are typically executed by two distinct forms of spending legislation. Discretionary spending policies are executed through annual appropriations acts, while those involving mandatory or direct spending are executed through substantive legislation. The Senate and House Appropriation Committees have jurisprudence over every discretionary spending, while direct spending is a prerogative of different legislative committees of the Senate and House including the Means and House Committees as well as the Senate Finance Committee, which bear the largest jurisdiction on direct spending. Several entitlement programs, for instance, Medicaid, are financed through annual appropriation acts, although such expenditure does not fall under discretionary spending category.

House rules and a few Senate rules require the legal authorization of agencies and programs before execution of any appropriation. An authorizing acts law serves two purposes, including setting up an agency or program as well as conditions and terms for its operation. Second, it authorizes the passage of an appropriation for that agency or program. Authorizing law originates in either the Senate or the House and is considered at any time in the year. Most programs and agencies have temporary authorization and thus require renewal annually or after some few years. On the other hand, an appropriation law is a piece of legislation enacted by Congress that gives federal agencies legal mandate to incur obligation and authority to the Treasury Department to make payment for specific functions. Appropriation power originates from the Constitution under Article I, Section 9, which states that no money should be drawn from the Treasury except in consequence of appropriations made through legislation. The Constitution further gives exclusive power through legislation as a limitation to the executive branch. It also prohibits an agency from spending more than the appropriated amount and use available funds strictly for the appropriated purposes and according to congressional conditions. The Constitution does not prescribe annual appropriations, although the tradition set out by the First Congress require appropriations request for one fiscal year. An appropriation should be obligated within the prescribed fiscal year, except when the law allows for their availability for a longer period.

Conclusion

The goal of democracy is for a federal budget process that reflects the will of the majority. However, most people feel excluded from the budget process probably because of the complexity of the process, which makes it difficult for the public to follow, understand or contribute to the process. Multiple forces also drive the budget process including written laws such as the statutory roles of the President and Congress, while other forces stem from political system realities. Although the federal budget may fail to articulate the majority’s interests, the people still reserve the sovereignty to reconstitute government in charge of the budget-making process. Therefore, the input of people in the budget process is exercised through the election of government officials and holding them accountable for policy decisions.

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  1. Chen, S., & Wang, C. (2013). Do Politics Cause Regime Shifts In Monetary Policy? Contemporary Economic Policy, 32(2), 492-502.
  2. Grier, K. B. (1987). Presidential Elections and Federal Reserve Policy: An Empirical Test. Southern Economic Journal, 54(2), 475-486.
  3. Hou, Y. (2012). Budget Stabilization Fund in Interaction with Balanced Budget Requirements. State Government Budget Stabilization Studies in Public Choice, 99-117.
  4. Kramer, M. (2012). A People’s Guide to the Federal Budget. Northampton: Interlink Publishing.
  5. Meyers, R. T. (2014). The Implosion of the Federal Budget Process: Triggers, Commissions, Cliffs, Sequesters, Debt Ceilings, and Shutdown. Public Budgeting & Finance, 34(4), 1-23.
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