A Brief Introduction to the Federal Budget Process

Publication Date: October 1997

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance

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Abstract:

Each year, the federal government raises and spends more than $1.5 trillion through its budget process. The federal budget process is widely regarded as a complex, time-consuming, and arcane set of activities often suffused with controversy, frustration, and delay. These characteristics of the process are attributable to various factors, including the vast scope and complexity of federal activities and the numerous types of financial transactions needed to fund them, the profusion of participants in the budget process and the wide dispersal of budgetary power, and the far-reaching economic and political consequences of budgetary decision-making.

The federal budget cycle begins each year with the preparation and submission to Congress of the President's budget. The President's budget is only a request to Congress; Congress is not required to adopt his recommendations. Nevertheless, the President's budgetary proposals often guide congressional revenue and spending decisions, though the extent of the influence varies from year to year and depends more on political and fiscal conditions than on the legal status of the budget.

The Congressional Budget and Impoundment Control Act of 1974, as amended, establishes the congressional budget process as the means by which Congress coordinates its various budget-related actions. The process is centered around an annual concurrent resolution on the budget that sets aggregate budget policies and functional priorities for a multiyear period. Because a concurrent resolution is not a law ' it cannot be signed or vetoed by the President ' the budget resolution does not have statutory effect; no money can be raised or spent pursuant to it. The main purpose of the budget resolution is to establish the framework within which Congress considers separate revenue, spending, and other budget-related legislation. Revenue and spending amounts set in the budget resolution establish the basis for the enforcement of congressional budget policies through points of order. The budget resolution also initiates the reconciliation process for conforming existing revenue and spending laws to congressional budget policies.

Budget resolution policies are implemented by Congress through the enactment of annual appropriation and other spending measures, revenue measures, debt-limit legislation, and reconciliation bills. Each class of budgetary legislation is considered under its own set of rules and procedures.

The President may avail himself of special authority to impound appropriated funds. Under the Impoundment Control Act of 1974, the President may propose the cancellation of spending; special procedures are included in the act to provide for House and Senate action on these proposals. Beginning in January of 1997, the President has had special line-item veto authority to cancel not only discretionary appropriations, but new entitlement spending and targeted tax benefits as well. The line-item veto procedures provide that the President's recommendations go into effect unless disapproved by Congress within a relatively short period of time.