BUDGET PROCESS Traditional 3 Ring Circus Budget Process

1
BUDGET PROCESSTraditional (3 Ring Circus)
Budget Process

• 1.) Authorizations and Reauthorizations from
  standing committees, variable length2.)
  Appropriations Bills from H S Appropriations
  Committees, annual
• 3.) Revenue Bills from Ways and Means (H) and
  Finance Committees (S), no fixed length

2
BUDGET PROCESSBreakdown of the Traditional
Process

• 1.) Making policy in appropriations bills
  (limitation riders---e.g. Hyde Amendment)
• 2.) Appropriating money for unauthorized
  programs
• 3.) Directing specific types of tax revenue to
  trust funds
• 4.) ENTITLEMENT PROGRAMS mandate spending
  without appropriations (e.g. Social Security,
  Medicare, unemployment insurance)

3
BUDGET PROCESSBreakdown of Traditional Process
Contd

• Entitlements are often called uncontrollable
  spending are they truly uncontrollable?
• TRULY UNCONTROLLABLE SPENDING
• 1.) Interest on national debt
• 2.) Multi-year contractual obligations
• In 1932, 90 of Federal spending went thru the
  appropriations process now, only 30 does

4
BUDGET PROCESSThe 1974 Reforms

• REASON FOR DEMANDS FOR REFORM
• 1.) Growing entitlement spending (with COLAs)
• 2.) Use of impoundments for policy reasons
• 3.) Nixons politicization of the OMB

5
BUDGET PROCESS1974 Reforms Contd

• New House and Senate Budget Committees
• New CBO
• Annual Budget Resolutions, that would provide
  targets for authorizing and appopriations
  committees
• Reconciliation process to make entitlement
  cuts/tax changes easier

6
BUDGET PROCESSIDEAL TIMELINE UNDER 1974 ICBA

• Intended Timeline
• --JanuaryPres budget delivered
• --Early Spring --H S Budget Committees report
  Congressional Budget Resolutions
• --Late Spring H S agree on single budget
  Conference Committee performs crosswalk
  calculations
• --Summer Authorization and appropriations
  committees do their thing, within targets set by
  Budget Committees
• --Fall Reconciliation bill passed
• NEW FISCAL YEAR STARTS OCTOBER 1
• (continuing and supplemental resolutions if
  necessary)

7
The Rise, Fall, and Rise of Budget Deficits

• WHY BIG DEFICITS IN THE 1970s and 1980s?
• A.) Sluggish economic growthB.) Guns and
  butter during Johnson, Nixon, and Reagan years
• C.) Raising taxespolitical suicide (e.g.
  Mondale) tax revolt mentalityD.)
  Indexation of both spending and taxes
  (eliminated bracket creep)
• E.) Big rise in health care costs
• F.) Divided government (Republican president,
  Democratic Congress)

8
Rise, Fall and Rise of Budget Deficits Contd

• WHY BALANCED BUDGET IN LATE 1990s?
• A.) Unprecedented economic growthB.) Changes
  in Medicaid and Medicare (incl. HMOs)
• C.) 1990 OBRA agreement between Bush (41) and
  Congress multiyear budgeting, pay-as-you-go
  rules (now expired)
• D.) post-Cold War cuts in defense budget
• E.) Divided Government (Democratic president,
  Republican Congress)
• WHY THE RETURN OF BIG DEFICITS
• (reversal of A thru E above, due to War on
  Terrorism, expiration of OBRA, new Medicare
  entitlement)