Stephen C. Goss Presentation for Mercatus Center SSDI Panel
Making the Federal Budget
1. The Federal Budget Process – A Primer
Dr. Jason J. Fichtner
Senior Research Fellow
Mercatus Center
2. Federal Budget Process – Important Terms
Authorizing Legislation
Appropriating Legislation
Budget Resolution
Budget Authority
Budget Outlay
Impoundment
Mandatory Spending (Direct)
Discretionary Spending
Rescission
Section 302(a) Allocation
Section 302(b) Allocation
Sequestration
Off-Budget vs. On-Budget
Omnibus Appropriation Bill
3. Administration Development of the Budget
Budgeting is Politics
February 7, 2011 – President’s Budget (FY’12) due 1st
Monday of 1st full week of February
Agency Formulation 10 Months Prior to being submitted
to Congress; 18 months before start of fiscal year
Office of Management & Budget (OMB)
July 15 - Mid-Session Review of the Budget
4. Congressional Development of the Budget
“Views & Estimates” – Within 6 weeks
Budget Resolution – Provides Revenue and Spending
Framework
Passed by April 15. ☺
No spending, revenue, debt-limit legislation can be
considered before Budget Resolution passed or rules
waived or May 15. 5-year window / sometimes 10
Budget Resolution can’t be filibustered in the Senate –
Not a Law; President doesn’t sign
5. Congressional Development of the Budget – Con’t
Budget Resolution – Established under Sec 301 (a) of
the 1974 Congressional Budget Act, as amended,
requires BR to include:
Aggregate levels of new Budget Authority, Outlays,
target levels for surplus/deficit and debt ceiling
Aggregate levels of federal revenues
Sec 302 Allocations – House and Senate Appropriations
Committees subdivide the 302(a) allocation among the
Appropriations Subcommittees – 302(b)
6. Congressional Development of the Budget – Con’t
Budget Authority – Amounts Congress allows a federal
agency to commit to spend.
Outlays – Amount allowed to flow from the Treasury.
Difference is mostly one of timing.
BA represents limit on how much funding Congress
provides
7. Congressional Development of the Budget – Con’t
Points of Order – Once Budget Resolution Adopted, any
legislation/amendment that violates aggregate levels is
prohibited, unless waived.
Reconciliation – Directives in Budget Resolution to
initiate necessary changes in revenue, direct spending,
and debt-limit laws – considered under expedited
procedures that limit debate and amendments
8. Budget “Reconciliation” Process
Procedure designed to facilitate passage of deficit
reduction legislation – used recently to pass tax cuts.
Single piece of legislation that typically includes multiple
provision, all of which impact federal budget on spending
or tax side.
Like Budget Resolution, “Reconciliation Directive” can’t
be filibustered in Senate – needs only majority vote
“Byrd Rule” – No “extraneous” provisions – need direct
fiscal implications – waived by 60 votes.
No entitlement increases or tax cuts beyond window
(5/10 years) in reconciliation directive, unless PAYGO.
Why major tax cuts recently enacted have expired rather
than made permanent.
9. Authorization vs. Appropriation
Authorization: Congress exercises legislative power
Can establish, continue, or modify an agency or program
– responsibilities, etc. Bar usage of funds.
Sets out the terms / boundaries for how spending in
appropriations should occur
Can’t have appropriation without authorization
Rules prohibit inclusion of authorizing (legislative)
language in appropriations bills.
House – Not Senate – prohibits appropriations language
in authorizing legislation.
Can be waived under of rules
Politics of Authorizing Legislation vs. Appropriation
Legislation
10. Budget Enforcement
“Point of Order” – Raised in House or Senate – prevents
Congress from passing legislation not in line with Budget
Resolution.
House – Not really important – waived by simple majority.
Senate – subject to filibuster – need 60 votes.
PAYGO – Pay As You GO – Requires tax cuts and
entitlement spending increases to be fully offset unless fit
within targets of Budget Resolution
PAYGO expired with the Budget Enforcement Act 1990, as
amended. Extended twice – Expired after FY2002.
House and Senate Rule in 111th Congress.
11. Budget Enforcement – Changes in the House of
Representatives for the 112th Congress
Focus shifts from controlling the deficit to controlling
spending
CUTGO – new mandatory spending be offset by mandatory
spending cuts alone; exempts tax reductions from needing to
be offset under House rules
Spending Reduction Accounts – “lockbox” in which
discretionary spending cuts can be put aside for deficit
reduction, rather than just freeing up room under spending
limits to allow spending elsewhere
12. Budget Enforcement – Changes in the House of
Representatives for the 112th Congress, Continued
Long-term Spending Point of Order – legislation that
increases mandatory spending by more than $5 billion in
subsequent 4 decades subject to point of order.
Reconciliation – rule changes prohibit net increase in
mandatory spending and allows tax reductions
Elimination of Gephardt Rule – House will now have to vote
explicitly for debt ceiling limit increase. No longer deemed
passed with adoption of conference report on the budget
13. Budget Enforcement – Changes in the House of
Representatives for the 112th Congress, Continued
Elimination of Highway Spending Guarantee – eliminate
restrictions preventing the full House from cutting spending
levels authorized by the House Transportation and
Infrastructure Committee, which effectively guaranteed
federal highway spending would rise each year
Authority for Budget Chairman to Set FY11 Budget Levels –
Chairman Paul Ryan has ability to set FY11 discretionary
spending levels for the House Appropriations Committee in
order to reduce FY11 spending and govern completion of
FY11 appropriations process
