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  • Allon Advocacy

A Bumpy Budget Process

The federal budget process kicks off next week, but don’t expect a quick resolution.

The forthcoming drama over federal government spending levels will kick into high gear next week, when President Joe Biden submits his fiscal year 2024 budget to Congress.

This request will:

  • Propose spending levels for executive branch agencies and programs for the period between October 1, 2023 and September 30, 2024;

  • Outline estimates for revenue; and,

  • Generally, offer details regarding the administration’s policy priorities for the next few years. (While the budget is just for a single year, its estimates for taxation and revenue generally outline the trajectory of the federal budget over the next decade.)

While the president’s budget request does formally kick off Congress’s annual appropriations process, ultimately the document is little more than ceremony — especially during periods of divided government.

Why is that?

This week, we will review the federal budget process, preview some of the priorities we expect President Biden to emphasize, and boil down what it all means.

Who Has the Power of the Purse?

There are two clauses in the U.S. Constitution that plainly state Congress — not the president or the executive branch agencies overseen by the commander in chief — has the power to raise and spend money.

Article I, section 7, clause 1 states, “All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other bills.” Article I, section 9, clause 7 says, “No money shall be drawn from the Treasury, but in consequence of appropriations made by law; and a regular statement and account of the receipts and expenditures of all public money shall be published from time to time.”

Why does Congress have the power of the purse?

According to U.S. House historians, it was because lawmakers, in particular those in the House, would know best where the American people wanted their tax dollars spent. Indeed, Massachusetts’ Elbridge Gerry told the Federal Constitutional Convention that the House “was more immediately the representatives of the people, and it was a maxim that the people ought to hold the purse-strings.”

Even though the young country had just fought a war for independence (ostensibly over money matters) that “maxim” came from the United States’ British forebears. The British House of Commons has the exclusive right to levy taxes and spend revenue, which, as House historians note, was “considered the ultimate check on royal authority.” Of course, the U.S. colonies had no representation in parliament that approved the tea and other taxes the colonists opposed, but that just proved their point: It is harder for policymakers to spend (and therefore) tax if you are directly accountable to the people who put you into office.

These origins are why the president’s annual budget has little meaning. The budget President Biden will release next week does not have the force of law. Presidents’ budgets are really just messaging documents that the White House may use to garner support for its legislative priorities. It is up to federal lawmakers whether to even use the president’s budget as a guide.

So, what will happen after the president weighs in next week?

A Review of the Federal Budget Process

Basically, there are three steps to the annual budget process: the President’s budget request; congressional budget resolutions; and the annual appropriations bills.

We have already discussed the president’s budget. The next step, the budget resolution, is Congress’s version of the president’s budget. It is an outline for all government spending and revenue over the next year and the next decade. While the House and Senate each aim to approve a budget resolution each year, like the president’s budget, even if they approve it, that document does not have the force of law.

It is simply a blueprint—and one Congress really does not even have to approve. In fact, as Bloomberg Government explained, “Lawmakers have often skipped [the budget resolution] in recent years, instead working out a series of two-year deals that increased spending caps that had been set by law.” The Senate did not adopt budget resolutions for fiscal years (FY) 2011 through 2013, as well as FY 2023. The House didn’t adopt a budget resolution for fiscal year 2011. And in FY 2017, a budget resolution was not adopted until January 2017, four months into the fiscal year.

At this point, you might be asking yourself: when do budget documents start to matter? What actually has the force of law?

That question brings us to the annual appropriations bills. Federal agencies receive funding for each fiscal year from Congress through 12 appropriations bills that are written by the House and Senate Appropriations Committees. These panels are divided into 12 subcommittees, which hold hearings to discuss federal agency budget requests and needs. Each subcommittee writes a bill for their particular jurisdiction (say, foreign affairs or defense) and those outlines go to the full appropriations committees for approval and then on to the House or Senate floor.

The House and the Senate obviously do not write the exact same piece of legislation for each department, so a conference committee will be appointed to iron out the differences between the House and Senate bills. Once that committee agrees on a document, that piece of legislation will be voted on again by members of the House and Senate. If approved, it will go to the president for signature and then executive branch agencies can start spending!

Sounds easy, right?

Wrong. According to Senate historians, Congress has completed the required appropriations before the start of the fiscal year only four times in the past 45 years. The last time Congress completed all 12 appropriations bills on time was nearly thirty years ago, in 1996.

When Congress does not approve spending legislation by October 1 of each year, the federal government either has to shut down executive branch agencies that have not yet received funding or Congress has to approve a continuing resolution (CR) to allow them to operate at prior year spending levels. This action buys lawmakers more time to negotiate. In recent years, after approving a CR – or two or three – the House and Senate have ended up bundling all or most of the spending bills into an “omnibus” bill that gets approved a few months after the fiscal year actually has begun. These massive packages fund most or all of the federal government’s annual operations in one fell swoop – and, under the new Republican House majority’s rules, are no longer permissible.

We are a long way from knowing what will be in Congress’s spending legislation, so let’s take a look at what the president will tell lawmakers he wants.

President Biden’s Budget Priorities

The Republican lawmakers who are in charge of the U.S. House of Representatives have promised to cut federal spending. (Although, as The New York Times reported this week, they are struggling to agree on where they should cut spending.)

The first thing President Biden will do is ask members of Congress to ignore the GOP.

In fact, as The Times also reported, the president is likely to ask lawmakers to expand large federal programs like the Affordable Care Act (the health care reform bill sometimes referred to as Obamacare) and Medicaid, a health insurance program for Americans struggling with poverty. As he noted in his State of the Union address last month, President Biden is also likely to ask Congress to spend more to find a cure for various types of cancer.

There are plenty of other priorities too. According to Space News, the president is “likely to seek” a significant increase for the U.S. Space Force, a military branch of a nation’s armed forces that conducts military operations in outer space. And, according to Politico, “The Biden administration is preparing to ask Congress for the largest Pentagon budget in history, according to the Defense Department’s chief financial officer.”

To pay for this spending, President Biden has said, “I’m gonna raise some taxes.” He promised those revenue raisers would not impact families that earn less than $400,000 each year, however. Instead, according to AXIOS, the president plans “to dust off a variety of proposed tax increases on corporations and wealthy Americans — including Biden’s plan to boost rates on billionaires — to narrow the gap between what the government takes in and spends.”

President Biden also is likely to take a strong stance in defense of Social Security even though this program is not governed by the annual budget process. Spending for Social Security rises with inflation each year. Congress cannot change it unless it approves legislation to fundamentally alter the program.

And that, of course, is something Democrats are warning Republicans will do.

What the President’s Budget Resolution Really Is

As readers might recall, in last month’s State of the Union address, President Biden accused Republicans of wanting to end, or at least severely curtail, Social Security, the income support program for retired Americans. That accusation led to a match between the president and some members of the U.S. House. And it resulted in GOP leaders conceding they would never vote to end Social Security as we know it.

That exchange is a good illustration of how Americans should view the president’s budget: it is a statement of priorities that, in the run up to a presidential election year, is an effective tool to compare and contrast how a single party would approach major public policy issues.

The Senate Appropriations Committee, which is led by Democrats, will likely use President Biden’s budget outline as a guide, but its members will insert and amplify their own spending priorities. The House Appropriations Committee, led by Republicans, likely will say the Biden administration wants to spend and tax too much and will use their own budget resolution to offer an alternative vision.

Which vision will win? Then the two spending panels will have to come together to actually agree on how much to actually appropriate for fiscal year 2024. As, ultimately, will the GOP-held House and the White House.

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