WHAT IT IS
The federal budget is the set amount of money the federal government can spend in one fiscal year. [U.S. Senate]
Most government money comes from taxes placed on people and businesses. [USA.gov]
It also comes from borrowing money by selling Treasury securities (bonds, notes, and Treasury bills). [USA.gov]
WHY IT MATTERS
CIVICS: Your vote for your state's seats in the Senate and the House of Representatives directly impacts this process. Since Congress is ultimately responsible for passing the budget, it is important that representation is thoughtfully chosen by voters.
SOCIAL: The federal budget is a highly debated topic and has caused the federal government to shutdown. This debate is usually centered around taxes.
- Some believe the budget is large enough and money should be reallocated.
- Some believe the budget is not large enough and should be increased.
- Others believe the budget is too large and needs to be reduced.
Step 1: Executive Branch
The president is responsible for creating the first draft of the budget, based on the state of the economy and proposals from federal departments and agencies. [USA.gov]
Federal departments, such as the FDA and CDC, negotiate their requested budget with the President of the United States.
The President then proposes his or her budget to Congress. [USA.gov]
Step 2: Legislative Branch
Both the House of Representatives and the Senate review the proposal and create a “budget resolution” that sets a spending limit and plan for the fiscal year.
A Congressional committee is formed to combine the two budgets into one. [U.S. House of Representatives]
Appropriation committees, also formed from both the House and the Senate, divide the combined budget among 12 subcommittees. [House Committee on Appropriations]
Each subcommittee drafts a bill for spending their part of the budget among various departments, resulting in 12 budget bills.
Step 3: Law
Congress as a whole votes on each bill one by one.
Once they are approved by Congress, they go to the presidential office to be signed into law. [U.S. Congress]
The money spent goes to three categories:
- (1) Mandatory spending = Social Security, Medicare, other spending required by law,
- (2) Debt = paying back past borrowed funds both nationally and internationally, and
- (3) Discretionary spending = money divided among programs and departments for the year. [U.S. Government Accountability Office]
If Congress cannot agree on all 12 separate bills, it can pass an Ominous bill that combines various fundings into one. If the President signs this into law, it becomes the federal budget. [Vox]
If a budget is not signed into law by September 30, a continuing resolution is passed to keep the government temporarily open or the government enters a shutdown.
There is a budget surplus when the government brings in more money than it spends and a deficit when the government spends more money than it brings in. [U.S. Government Accountability Office]
Typically, presidents want to decrease or eliminate the deficit, known as "balancing the budget."
WHERE WE ARE NOW
2020 Fiscal Year:
The current federal budget is set at $6.6 trillion. [Congressional Budget Office]
Tax cuts passed by the Trump administration have decreased the amount of revenue the federal government receives. [NPR]
Battling the COVID-19 pandemic has caused historic government spending, resulting in historic deficit figures.
Oct. 2020: The federal government spent $522 billion and received $238 billion. [The New York Times]
Nov. 2020: The Treasury Department announced a record $3.3 trillion deficit. [Congressional Budget Office]
Lawmakers are having difficulty agreeing on another stimulus package, with Democrats wanting to spend more on relief than Republicans. [The New York Times]
THINGS TO THINK ABOUT
How worried should you be about the federal deficit and debt? Learn more from The Brookings Institute.
If you were in charge of dividing the federal budget, what would be your top priorities for funding?
Taxes are a big part of funding the federal budget. How would you tax the citizens of the United States to fund the budget?
Suppose you were in charge of ending a government shutdown. How would you negotiate with an opposing side?