In Brief

The every month treasury budget data has a strong seasonal pattern that it follows which produces massive monthly fluctuations. The fluctuations do not show a lot of information with regards to the long term budget plans. The data is usually not seasonally adjusted and thus the focus is on a yearly basis rather than a monthly one. The report becomes very important only in the month of April because it is the tax inflow month. It is possible to predict the data accurately using information from the daily treasury statements.

The President’s Budget

The process of the annual budget starts either towards the month of January or the beginning of February, it begins with the budget of the forthcoming fiscal year being presented . The presentation is not the actual budget but serves as a significant guideline that will be useful to the Congress especially in situations where the Congress and the White house are dominated by one party. In the 80s, the President and the Congress had conflicting agendas which resulted into a budget that was not anything like the President’s budget. In 94, when the White house and Congress were controlled by Democrats the years was quiet in terms of a budget, there was, however a lot of contentious budget battles in 1995 and 96 when the Senate and the House was controlled by the Republican.

Most people think that the annual budget includes all federal spending but this is not the case. The President’s budgets includes a general outlay of all federal government spending but only less than half of it is included in the annual budget.  The other part which is about 65% is controlled by permanent laws. There is no need of an appropriation process with the spending program unless the  permanent laws are changed. Permanent law requires no annual taxation review so the same applies to federal receipts.

The word permanent in ‘Permanent law” should not be assumed to mean that the law can never be changed under any circumstance. These laws are changed regularly with budget deals of 1993 and 1990 being a perfect recent example. These efforts have been made to decrease the deficit and in the process have incorporated changes in both permanent laws that affect spending and taxes and discretionary spending. Deficit deductions are incorporated in the OBRA. If these efforts are absent then the annual budget is only left with 33% which is the discretionary spending. This is a secret in Washington that the annual budget which is viewed as an important aspect in democratic processes, it actually doesn’t make even half of the total federal expenditures.

The Budget Resolution

The legislative process starts as soon the budget is submitted to Congress by the president. All Congressional committees  must, in a period of six weeks after the President submits his budget, report to Senate and House Budget Committees in matters related to the program estimates. After the submission of the reports, the Budget Committee will then approve a resolution which is based on the presented estimates. After the approval of the estimates by the Senate and the House, any present conflicts are settled in a conference and a final resolution is then approved by all the houses. The above process is supposed to be complete in mid April but is always delayed. The resolution does not need an approval from the President as it is only a guideline and not a legislation.

Appropriations Bills

Soon after  the adoption of the resolution budget, the real budgeting job commences. Appropriations process is the legislation of the actual budget. As mentioned above, annual budgeting covers discretionary programs only which amounts to 33% of all the spending. You should also know that not even the discretionary programs are in a single budget package. There care thirteen separate appropriations bills that are contained in the discretionary spending. There are 13 subcommittees n the House and Senate which handle all the 13 bills. The list below comprises of the 13 subcommittees.

Veterans, HUD, Agencies

Treasury, Postal services

Transportation

Military constructions

Legislative

Labor, Health

Interior

Foreign Operators

Energy, Water

District of Colombia

Defense

Commerce, Justice

Agriculture

All spending and tax bills must come from the House, therefore the Appropriations subcommittees in the House see the first appropriations process action. Each of the 13 bills is crafted separately and thus does not work its way on the same time in the House and Senate. After all, the deadline to beat is October 1 which is the beginning of a fiscal year. These bills are approved individually and are not bundled together in the budget which is a comprehensive bill.

After the approval of the bill by the appropriations subcommittee in the House, the legislation goes to the full committee and then to the floor of the House. When approved in the House the same is repeated in the Senate. If it is approved by the Senate, the difference between the Senate and the House are settled in conference committee then the final bill version is taken back to the floors of the Senate and House. The process is completed when there is an approval of the thirteen appropriations bills by the President. If there is a delay n the thirteen bills, the President and Congress should approve continuing resolutions to fund programs in the government until such a time when the bill is signed and becomes a law.

It is important to note that the appropriations bills don’t give outlays for the next fiscal year, they just legislate the budget authority. The actual outlays might fall short or exceed the budget authority in a certain year depending on the program duration and the past budget authority.

Omnibus Budget Reconciliation Act  (OBRA)

There were legislation enacted by Congress that were aimed at reducing deficit on a long term basis in 1985, 87, 90 and 1993. The legislative efforts did occur at separate times from appropriations processes. They might alter permanent laws which might affect the discretionary spending but there will never be a change in the normal budget process. Omnibus Budget Reconciliation Act cannot be termed as a substitute for the annual budget but affects permanent law. Changes in OBRA legislation packages affect both mandatory spending and taxation because they occur in permanent laws. Legislation is initiated by the house but it is not limited to Appropriations Committee. Ways and Means Committee handles the tax law and thus plays a vital role in the legislation of OBRA. Any legislation that affects entitlement programs will fall under committees separate from Appropriations.

Supplemental Appropriations

The thirteen appropriations bills do not necessarily close the year of federal spending. There might be needs for extra funds in different government programs and this calls for supplemental appropriations bills any time when necessary. The 1993 and the 1990 budget acts  limits the supplemental appropriations.  There are quite a number of emergencies that occur in a year and need supplement budgets to handle the situation. With the budgeted funds, the emergencies cannot be otherwise handled and this is why the supplemental  budget is important in any given year. In the past the emergencies have handle such things as  the extended unemployment to natural disasters and any unexpected event that might require extra funding.