Budget Politics

PS 426

April 8, 2008

Budget categories, 2008 (pie chart)

The Budget Process

lCongressional spending is a two-step process: authori-zation and spending. Goes through two committees. An authorization for a discretionary spending program is only a license to enact an appropriation. The amount of budgetary resources available for spending is determined in annual appropriations acts.

lThree types of appropriations:

–Regular appropriations provide budget authority for the next fiscal year.

–Supplemental appropriations provide additional budget authority during the current fiscal year when the regular appropriation runs out or new funding is needed for emergencies.

–Continuing appropriations provide stop-gap funding for agencies when the regular appropriations have not been approved.

Important budget legislation

lThe Congressional Budget Act of 1974. Established the current budget process, the budget committees in the House and Senate. Also controlled impoundments and established the Congressional Budget Office (CBO), which gave Congress independence from the OMB. System very decentralized before the Budget Act.

lBalanced Budget and Emergency Deficit Control Act of 1985 (also known as the Gramm-Rudman-Hollings Act). Tried to reduce the budget deficits of the early 1980s with deficit targets.

lThe Budget Enforcement Act 1990 -- replaced the deficit targets with caps on discretionary spending and a pay-as-you-go requirement for revenue and direct spending legislation.

l BEA extended in 1997 and 2007. PAYGO provision lapsed from 2003-2006. 2007 also tried to limit earmarks.

Budget lingo

lBudget resolution sets the budget aggregates and spending levels for each functional category of the budget, including targets for committees. These include:

-- total revenues (and the amount by which the total is to be changed by legislative action);

-- total new budget authority and outlays;

-- the surplus or deficit; and

-- the debt limit.

lSequestration: a process involving automatic, across-the-board cuts in nonexempt spending programs if the targets were exceeded. This was the main enforcement mechanism for enforcing budget targets from 1985-2002 (it is not currently part of the budget process)

Budget lingo, cont.

lReconciliation -- Used by Congress to bring existing revenue and spending law into conformity with the policies in the budget resolution. Reconciliation is optional process, but Congress has used it more years than not: from 1980 through 2007, 19 reconciliation measures were enacted into law and three were vetoed.

lReconciliation was used in the 1980s and into the 1990s as a deficit-reduction tool. Beginning in the latter part of the 1990s, some reconciliation measures were used to reduce taxes and increased the deficit. In the 110th Congress, both chambers adopted rules requiring that reconciliation be used solely for deficit reduction.

lThe process has two stages — the adoption of reconciliation instructions in the budget resolution (which tells committees what they have to do) and the enactment of reconciliation legislation that implements changes in revenue or spending laws.

Budget lingo, cont.

lPAYGO: Legislation reducing revenues or increasing spending for a fiscal year had to be offset (in the same or other legislation) by revenue increases or reductions in direct spending for that fiscal year so that the effect on the budget deficit remained at or above zero. Originally it was enforced through sequestration – now just through points of order that can be raised. The biggest problem is that emergency spending and revenue (as defined by the President and by Congress), is exempted from the PAYGO process. Most of Iraq spending is “emergency.”

Congressional Budget Process Timetable

First Monday in February: President submits budget to Congress – this is only a request to Congress. However, it is an important starting point for negotiations.

February 15: Congressional Budget Office submits economic and budget outlook report to Budget Committees.

Six weeks after President submits budget: Committees submit views and estimates to Budget Committees.

April 1: Senate Budget Committee reports budget resolution.

April 15: Congress completes action on budget resolution.

May 15: Annual appropriations bills may be considered in the House, even if action on budget resolution has not been completed.

June 10: House Appropriations Committee reports last annual appropriations bill.

June 15: Congress completes action on reconciliation legislation (if required by budget resolution).

June 30: House completes action on annual appropriations bills.

July 15: President submits mid-session review of his budget to Congress.

October: 1 Fiscal year begins.

Source: Section 300 of the Congressional Budget Act of 1974, as amended (P.L. 93-344, 2 U.S.C. 631).

Diagram of the more complicated timetable and process

Other budget issues

lThe secret budget – very little oversight or accountability for these lines of the budget.

lThe line item veto -- The Line Item Veto Act was enacted during the 104th Congress (it was part of the “Contract with America”). The Supreme Court ruled it was unconstitutional in June, 1998.

lThe act authorized the President to identify individual items in legislation that he proposed not go into effect. The President had to notify Congress of his proposal and provide supporting information. Congress had to respond within a limited period of time by enacting a law if it wanted to disapprove the President’s proposals; otherwise, the veto would take effect permanently.

lPresident Clinton used the line-item veto several times in 1997 before it was struck down.

Inside the “black budget”