How Does a National Budget Work?
The Facts
In the United States of America, the president is required to submit an annual budget proposal by the first week of February. The national budget is calculated according to the fiscal year, which begins on October 1st. All of those campaign promises made by the president before he was elected are what will be present (or missing) in the proposed budget plan that's submitted.
Process
In terms of the United States' , a budget proposal is submitted by thepPresident for review by Congress. From there, Congress instates a budget resolution whose conditions its members are expected to review and/or modify. Limits are assigned in areas of spending, expected revenues are identified and issues regarding a surplus or deficit are addressed.
Committees and subcommittees within Congress hold hearings on the proposed budget plan. Coordinating this budget resolution process are the Budget Director, Administration officials and Cabinet officers. Once Congress and the President come to an agreement on the budget, the national budget is passed for that fiscal year.
In some cases, Congress will require a detailed outline of how spending cuts or tax increases will be implemented. This part, when done, is called the reconciliation process.
Identification
A national budget outlines, in detail, how and where money will be allocated for the coming year. Budget monies are also allocated towards future long term goals, be they a space exploration project or paying off the national debt. The seeks to allocate total spending across the main government functions. These areas include --
· Social security program
· Medicare/Medicaid
· Retirement and insurance programs
· National defense
· Education
· Housing
· Transportation
· Science
· Foreign aid
· Interest payments (on national debt)
Tax policies are then drafted as the means by which said federal programs are financed. Tax sources used are individual income tax, corporate income tax, payroll taxes and excise taxes.
Types of Spending
The budget resolution process tracks two types of spending within the proposed national budget. One is discretionary spending, and the other is mandatory spending. Discretionary spending includes money spent in areas of housing and education, space exploration, defense, and foreign aid, to name a few. Discretionary spending is allocated through the 13 annual appropriation bills, meaning bills are drafted by their respective committees for each area of discretionary spending.
Mandatory spending includes monies spent on Medicare/Medicaid, Social Security, veterans benefits and interest owed on the national debt. Mandatory spending measures take on the characteristics of permanent law, once enforced. Unless the president and Congress act to change mandatory spending criteria, they will remain intact from year to year.
Overall, each type of expenditure is budgeted according to actual fiscal cost versus, total cost of each expenditure. What this means is certain projects --like the space program- are so expensive, and long-term, that they must budgeted over a period of years. The total cost of such a project is measured as the "budget authority" cost. The annual expense of the project is considered its "outlay" cost.
Tags: budget resolution, national budget, national debt, budget plan, budget proposal, budget resolution process