Federal budget process and legislative procedures

Federal Budget Process

Every year the federal administration is involved with a total revenue and expenditure of about 1.5 trillion USD as a matter of fiscal practice. (Keith, 1996) The budgetary strategy of the federal administration is an integration of the guidelines that the policy makers, legislator, bureaucrats apply for designing, continuing, regulating and accounting fro the expenditure and revenue strategy. Normally the budgetary strategy involves formulation of the budget of the President by the administrative section; the budget strategy of the Congress has its base on the resolution moved by the Congress. In some of the years the authorization and appropriation strategies, implementation and impoundments of the budgetary law, the prescribed guideline under the Congressional Budget Act of 1974 in respect of deferring or rescinding of the funds appropriated, and the policy of financial managements are taken into account while formulation of the Congressional budget, particularly in case of the reconciliation legislation. (Holtz-Eakin, 2004)

In accordance with the Budget and Accounting Act of 1921, it is customary that the President presents the budgetary proposals on the first Monday of February every year. The Congressional Budget Act of 1974 requires the adoption of the annual budget resolution by April 15. It acts as an outline for the Congressional policy in isolated niches of expenditure and revenue collection. Additionally, the total expenditure and revenue and allocations to the Congressional committees in this respect authorized by the resolution are to be implemented by the allowing the Members of Congress to raise point of orders so as to enhance the individual expenditure or revenue with due consideration by the House or Senate. It has been laid down that the legislation deserves no further consideration if the point of order raised under the Congress Budget Act is accepted. (Holtz-Eakin, 2004)

The budget resolution may direct the Committees of the Congress to resort to reconciliation legislation with a view to make the levels set out in the resolution in consonance with the guidelines of expenditure and revenue legislations. The prevailing budgetary strategy extends enough scope for the policy formulators to institute and implement major modifications in the budgetary strategy. The strategy since long is being considered as the outline for major policy proposals and budgetary linkage over the period of time that is applied in the legislation process intended to implement the reconciliation instructions in budgetary resolutions. However, the continuance of the strategy has been obstructed due to want of general consensus on the policy. (Holtz-Eakin, 2004) We shall look into the functioning of the Federal Budget process and the barriers involved in its working.

Discussion

The budgetary strategy is required to present the budgetary alternatives unequivocally and also required to be an effective outline for arriving at and continuing with the budgetary strategies and also required to indicate the budgetary guidelines that is capable of reviewing the effective implementation of the policies. The prevailing budgetary procedures extends necessary assistance to the policymakers and to institute and implement the complete budgetary strategies and assessed to be functionally the best when general agreement on the attainment of the fiscal objectives are ascertained. (Holtz-Eakin, 2004)

As is with any complicated strategy, the federal budgeting can also be split up into its basic standards of activity and measurement. The expenditure process involves three different stages of budget authorization, obligation and outlays. The Budget authority is bestowed by the Congress and President within the legal framework. It generates the legal base for federal units to make the financial responsibilities enforceable in terms of the obligations. The activities of the federal agencies in form of executing contracts, appointment of personnel and executing orders for goods and services give rise to generation of such obligations. The outlays follow when the obligations are settled down. The outlays are normally in shape of the checks, electronic fund transfers and other payments effected to by the Treasury Branch. The budget authorities mostly are provided to the agencies every year being excerpted from the legislations made during the previous Congresses. The funds are provided without the legislation by the Congress. (Keith, 1996)

The other budgetary authorizations are provided to the agencies from the prevailing enactments particularly in shape steps on annual appropriations. Most of the agencies have automatically achieved the additional budget authority legislated in the previous year and that has been brought forwarded with the remaining unspent balances. The income of the federal administration indicated by revenues or receipts attributes to various means. The income taxes in respect of the individuals as well as the corporate sector constitute about fifty percent of the total revenue of the federal government; however, the social insurance taxes are emerging to be the significant source of revenues. Besides, more money also flows to government from different excise taxes, customs duties, gifts and other miscellaneous revenues. Revenue of the government from various commercial undertakings and activities like sale of electricity from federal power administration is indicated by the offsetting collection. (Keith, 1996)

It is pertinent to note that these collections are to be offset or actually to be subtracted from the federal expenditure rather than added to the revenue. In the case of annual budgetary processes, to illustrate, each of the account normally attributes to the different captions in the legislations. The funds allotted to each of accounts are again split up in terms of programs, projects, activities and units of spending associated with the account. At the time of placing the budget the accounts are generally clubbed together under the organizational head like department or agency that controls them. However, some accounts like credit financing accounts are though counted within the budget estimates yet are used only for the accounting purposes; however, they do not actually involve any budgetary dealings. (Keith, 1996)

The budgets of the federal government are based on a group of economic hypotheses. To illustrate, a president commits the programs embodies as 'favorable for the economy' basing on the hypothesis like higher economic growth, enhanced inflation, lower unemployment in comparison to that of the preceding years. The hypotheses are considered sometimes more positive than the private economic forecasters agrees upon. The Congress is similarly at its own liberty to think of its own economic hypothesis while formulating the budget of resolution of the Congress. The hypotheses have profound impact on the levels of receipts, entitlement expenditure, and also fiscal deficits. The positive hypotheses afford to make the budgets balance and the scale of expenditure cuts and collection of revenues, essential to make so, to the minimum. The Presidential budget of late 1980s were commented upon for applying the 'rosy-scenario' too optimistic economic hypotheses so as to make the programs appear to arrive at a balanced budget. Variations in the economic and technical hypotheses are seen year after year. Such variations influence the attitude towards the budgetary concerns and have a profound impact on the sensitivity of the federal government. (Davis, 1999)

The federal budgeting involves the crucial process of baselines and scorekeeping, entailing the Congress and President a broad outline of formulating and implementing the budgetary decisions. The baseline is considered as the yardstick for formulating the federal budgetary decisions. Variation in creation of baselines is seen in the formulations by the Office of Management and Budget-OMB and the Congressional Budget Office-CBO. However, the project federal expenditure, receipts, budgetary surplus or deficit baselines occur with the prevailing the budgetary policy remaining constant. The measurement of the influence of the budget and the budgetary policies is made through scorekeeping. It helps the Congress and the President in formulation and implementation of the budgetary policies. (Heniff, 1998)

The means of formulating revenue and expenditure legislations by the Congress are guided by a set of specific measures enshrined in the Congressional Budget Act of 1974. Significantly, the Budget Act represents the annual development of the 'budget resolution' of the Congress. The resolution categorically demarcates the comprehensive confinements on expenditure and revenue cuts that are applicable to the legislation made by the individual committees - inclusive of the appropriation committees, tax writing committees and other committees that have the authority to exert control over certain expenditure policies - along with the modifications advanced to such legislations on the House or Senate. The budgetary proposals placed by the President give rise to strong deliberations every year. The comprehensive budgetary proposal for the coming financial year starting from October 1 is presented to the Congress by the President on or before the first Monday in February. (The Federal Budget Process-Resolution, Reconciliation, Authorizations, and Appropriations)

The Congress is empowered to approve or disapprove any of the proposals of the President in the subsequent resolution that exerts overall control over the revenue and expenditure and allocation of the constraints on the groups of programs and activities. The various Budget Committees existing in the House and Senate are responsible for preparation of their respective budget resolutions and suggest them to the floor for a vote. The Budget Resolution Conference Committee is formed by the Congress after the resolution is passed through the chambers for settling the disputes, if any, between the House and Senate proposals. After thorough debate on the topic the conference committee places the concurrent resolution on the budget in the House and Senate are required to vote to approve the concurrent resolution without modifications. The concurrent resolution is not considered mandatory and is not given assent by the President and therefore has no strength of the law. (The Federal Budget Process-Resolution, Reconciliation, Authorizations, and Appropriations)

After completion of the action of the Congress on the concurrent resolution of the budget for the federal financial year it is generally not the practice to think of legislation on that does not adhere to the constraints on spending and revenue spelled out in the resolution. The concurrent resolution may include the directives to the House and the Senate Authorizing Committees to explore and suggest modifications in the prevailing regulations so as to attain the expenditure cuts or revenue enhancements which the committees must adhere to so as to reconcile the expenditure gaps earmarked in the budget resolution. The Committees however, are given ample liberty to decide on the specific modifications to attain the desired spending levels. It is customary that the Committees in each chamber propose the specific modifications and suggest to the Budget Committee.

All these proposals are collectively put together to constitute the reconciliation bill and submitted by the Budget Committee for consideration by the Chamber. The respective reconciliation bills are endorsed by the House and Senate to the Budget Reconciliation Conference Committee for taking up different sub-conferences with authorizing committees and to submit an Omnibus Budget Reconciliation Act. It is mandatory that both the chambers must get through the Omnibus Budget Reconciliation Act without any further modification. The President may give assent or exercise the veto o the Omnibus Budget Reconciliation Act. After signature only the act becomes law. (The Federal Budget Process-Resolution, Reconciliation, Authorizations, and Appropriations)

The Budgetary proposals developed by the Office of the management and the Budget -OMB has three important roles to play. It depicts the vision of the President about the overall fiscal policy, as based on three integral elements -the amount of funds to be spent by the federal government, the amount of revenue to be raised and the amount of the deficit or surplus to be borne that indicates the disparity between the first and the second. Secondly, the budgetary proposals signify the prioritization accorded by the President in respect of the federal expenditure i.e. his decisions about the amount to be spent on different sectors like defense, agriculture, education, health etc. The budgetary proposals of the President often spell out the federal financial policy not only for the coming year but in a long-term basis encompassing the vision for next five years being supported by different past trends in the budgetary parameters. Thirdly, the budget proposals of the President warn the Congress about the modifications brought out in the expenditure and revenue policies that the President suggests.

The budgetary proposals of the President also includes modifications to the 'mandatory' or 'entitlement' expenditure policies like Social Security, Medicare, Medicaid and several other programs inclusive of the food stamps, federal civilian and military retirement benefits and insurance against unemployment nor regulated by annual appropriations. It further includes the modifications to the tax code inclusive of the any new tax cut policy that the President desires to implement. Any cut and enhancement in the taxation influences the federal receipts anticipated to be raised in the coming years. Alternatively, the budgetary proposals of the President signify a specified level of allocated programs and may include suggestive modifications in taxation and entitlements laws if considered. On receipt of the budgetary proposals of the President the Congress normally hold deliberations heeding to the queries rose by the Administrative officials on the budget and then goes on formulating the budget resolutions. This is being performed by the House and Senate Budget Committees, who are responsible for drafting the budget resolution. (Coven; Kogan, 2003)

After the Committees have drafted the resolution the same was presented to the House and Senate to be amended by a majority vote. Then it passes on to the House Senate conference for reconciliation of the differences and at last a conference is moved by both the houses. The budget resolution is considered to be a 'concurrent' congressional resolution and not an ordinary bill, and therefore not required to be presented to the President for assent or veto. Moreover, it necessitates a majority vote to be moved and also regarded as one such legislation that cannot be obstructed in the floor of the Senate through prolonged deliberations. It is customary to pass the final budget by April 15; however, sometimes it is delayed a little. The budget of the Congress is considered to be a simple one. It embodies a collection of figures indicating the amount that the Congress is allowed to incur expenditure on the 20 sectors referred to as 'functions' and the total revenue that the government will raise for each of the coming five years. (Coven; Kogan, 2003)

The aggregate expenditure in the budget resolution is represented in two methods. First one is to indicate the aggregate amount of the 'budget authority' to be extended and the second one is to aggregate estimate of the spending levels or outlays. The distinction between the two primarily is the underlying timing. The budget authority indicates to the amount of fund that the federal agency is allowed by the Congress to incur expenditure after the legislations on a specific sector or project. Outlays on the other hand signify the actual funds streaming out of the federal treasury in a particular year. Supplementing the schedules on expenditure and revenue the budget resolution embodies another crucial schedule known as 302(a) allocation. This schedule indicates the aggregate expenditure figures being laid down by the budget function in the budget resolution and instead allocates these aggregates by the congressional committee. The Appropriations Committee receives a single 302(a) allocation in respect of all the programs in different sectors and then decides on its own to allocate the aggregates among 13 different sub-committees. (Coven; Kogan, 2003)

The several committees with authority over obligatory projects are to receive a singly allocation that indicates a total dollar ceiling on all the legislations they entail in the current year. This schedule is visualized to be a little different in the House and Senate as result of variations in the authorities of the committees. Besides, every committee is not entitled to receive allocation that indicates an increase or decrease in the obligatory spending and often the allocation of the committee only indicates the level of the obligatory expenditure under the prevailing law. The budget resolution is also inclusive of the temporary or permanent modifications in the federal budgetary procedures. To illustrate, the budget resolution of the 2004 contains a provision confining to the amount of funds that the 2005 budget resolutions allots to the Appropriation Committees and formulated a point of order for its implementation, to be set aside only with a vote of 60 Senators.

It is evident that the Congress has selected a typical process enshrined in the Congressional Budget Act referred to as the 'reconciliation' from time to time. This process actually planned to make easier the process of reduction in the deficit legislation, since it has been understood by the Congress that the points of order only delimited the enhanced expenditures or tax reductions and therefore a new means is necessitated implement the budget resolution that involves expenditure reductions and enhancement in taxations. The reconciliations have been applied for two times during the Bush regime in 2001 and 2003 to enact the tax reduction legislations. (Coven; Kogan, 2003)

At least at the middle of the 1980s the concern for prolonged budgetary deficits constituted the important topic for budget deliberations. The policy makers had to lay emphasis on the legislations of the new outline of legal confinements aiming at reducing and abolition of such deficits. A fixed limit for the reducing deficits have been fixed since 1986 through the Balanced Budget and Emergency Deficit Control Act of 1985 referred to as the Gramm-Rudman-Hollings Act of 1985 and fixed the target to attain zero deficits during the year 1991. A process of confiscation is laid down by the Deficit Control Act to automatically reduce the expenditure in respect of many federal programs when the deficit for a fiscal year seems to exceed the prescribed limit. The confiscations is required to be carried out by an executive order enacted in consonance with the terms and conditions of the confiscation report of the Comptroller General of the United States and the head of the General Accounting Office. (Holtz-Eakin, 2004)

The report is required to be formed on the basis of the descriptions made by the Office of Management and Budget - OMB and the Congressional Budget Office-CBO. A reduction in the budget is observed in the late eighties from 221 billion USD in 1986 to 153 billion USD in 1989. However, they were short of the statutory targets in some of the years by considerable margins. The targets fixed by the Deficit Control Act including the revised one were considered to be quite unnatural taking into consideration the existing economic conditions. Due to the including some other reasons the real budgetary deficits were to remain much above the targets fixed during the period of operation of the Act. In order to further reinforce the budgetary strategy, the Budget Enforcement Act - BEA was passed in the year 1990 as a modification to the Deficit Control Act. The BEA was regarded as the portion of a multiyear agreement to decline the deficits enshrined in the Omnibus Budget Reconciliation Act of 1990 under the title XIII. (Holtz-Eakin, 2004)

Enshrining a differentiated ideology for the regulation of the budgetary deficits the BEA prescribed the guidelines to see the measured for deficit reduction in the budget agreement of 1990 would be continues. The policy makers could fix the rules through the implementation of the BEA that made them liable for variations I the deficits as a result of new legislation however, not for the budgetary effects of economic and other factors beyond their immediate control that were considered as most obstructing factors in achieving the targets of the Deficit Control Act. A budget implementation mechanism is instituted by the BEA that split the budget into two parts. Discretionary spending that is enshrined and regulated in the appropriation acts and is to be controlled by the annual total limits on budgetary authority and outlays. The regulations influencing the obligatory expenditure and receipts are to be covered by a PAYGO system in preventing those regulations from enhancing the deficits. (Holtz-Eakin, 2004) violation in the discretionary expenditure limits entails reduction only in discretionary programs and a violation in the PAYGO regulations will lead to expenditure cuts in respect of some obligatory programs. During the prevailing periods of the BEA strategy the fiscal policy of the federal government is observed to have developed considerably. The deficits have reduced persistently after 1992 and since 1998 the surplus were observed every year till 2001. The BEA strategy is responsible for such a breakthrough. During the period 1991 and 1997 the aggregate discretionary outlays were about to be balanced in terms of nominal dollars ever though, there were substantial diversion of expenditure with the aid by the culmination of the Cold War from the national defense to the non-defense programs. The new obligatory expenditures and the revenue laws were observed to be in consonance with the PAYGO requirements of being deficit-neutral; and the PAYGO balances at the end of the session scorecard persistently depicted zero or net reductions in the deficit. (Holtz-Eakin, 2004)

However, the surplus in the year 1998 observed for the first time during the last thirty years considered to have avoided the very purpose of the BEA to check and regulate the deficits. Within that new financial background the trend of growing surplus for the ensuing decade is predicted to show that BEA would not be sufficiently resist the demands for spending more. In order to meet the requirement of the law in letters and simultaneously enhancing the obligatory expenditure beyond the prescribed limits the law makers applied a number strategies including advance appropriations, belated payments and obligations, contingent designations and typical instructions. (Holtz-Eakin, 2004)

The legal budgetary procedures exerting the confinements on unrestricted expenditure and the requirements for PAYGO - pay-as-you-go for new legislations influencing the entitlements and receipts, the application of which was terminated in 2002, was successful in effectively improving the budget process. Their operation was considered more effective in restoring the wide conformity to the multiyear financial objectives. In absence of such conformity the guidelines were broadly set aside. Determining the secular commitments exerted by the new entitlements or extensions to the prevailing entitlements has been regarded as the crucial goals of some proposals. However, it is a matter of great concern to attribute to these commitments in the budget. Much effort is necessitated prior to implementation of a comprehensive budgeting strategy and execution of such commitments. Several recommendations aiming at reformulation of the system more extensively and exerting stringent expenditure regulations like joint budget resolution, biennial budgeting, restrictions on obligatory expenditure, increased rescission has been observed to exert some befits however not considered as reinforced as visualized and supposed to have inadvertent results like transfer of power to the administrative division and enhanced the intricacies in the budgetary procedures. (Holtz-Eakin, 2004)

The federal budgeting strategy is extensively considered to be a complicated and prolonged process having mysterious group of activities sometimes inundated with ambiguities, disappointment and interruption. Such a nature of the process are due to various factors inclusive of the wide scope and intricacies of the federal actions and innumerable kinds of the financial dealings necessitated to fund them, the abundance of the participation in the budget formulation, extensive delegation of the budgetary authority and the sweeping socio-economic and political impacts of the budget conclusions. (Keith, 1996)

Even though the budget process includes implementation procedures, it has been widely commented upon as being generally neutral with regard to the specific consequences. To illustrate there is no common necessity that the budget resolution should suggest a balanced budget. Efforts have been made by the authorities liable for preparation of budgeting procedures during the period 1986 to 2002 to take into consideration the additional guidelines of legal deficit control procedures that established specific objectives for reducing the projected deficits, restricting expenditure, and infusing the budget-neutral legislations. Many of the lawmakers opined that these objectives were to be included in the budgeting process for prolonged period or for the all time to come in consideration to the secular budgetary pressures in the ensuing years. (Holtz-Eakin, 2004)

Now the question arises whether the President is liability for federal expenditure. It is true that the President places the budget proposals to the Congress. However, as enshrined in the Article I, Section 9 of the Constitution no fund except that for which appropriations provided under law can be withdrawn from the treasury. The executive branch has no authority to spend without the voting by the Congress. However, the Congress is not structured. It is quite impossible to make any single representative or senator liable for expenditure incurred on any particular program. Influence exerted by any single elected representative or senator by of bringing the funds to a particular constituency is considered negligible in comparison to the aggregate federal budget. Moreover the single representative or senator is rarely made liable for the big investments like retirement benefits or implementation of health programs. (Anderson, 1995) long period of time is involved in moving through the complicated budgeting procedure while the President was in an urgency to spend money. The Congress acts as controller of federal expenditure. Since the post World War II periods there is a modification in such relationships. The Congress is observed to authorize more funding than the President proposed. It was till 1974 that the President was empowered to stop the expenditure of the funds the Congress had authorized to. One of the great difficulties involved in the federal budget then is then what is expected and permitted from the federal government. The anticipated roles of the federal government has enhanced presently to a great extent. The extensive roles for the federal administration along with the state administration are attributed to the enhanced expenditure of the governments. Sometimes this has also been attributed to the eventual declining in the values of the balanced budget. (Anderson, 1995)