Federal Budget Guide What is the Federal Budget The Federal by ramhood15


									                            Federal Budget Guide

                        What is the Federal Budget?

The Federal Budget is the government's annual plan for spending of tax
revenues. Ninety percent of the government's revenues come from three major
categories of taxes: individual taxes, corporate income taxes, and payroll taxes.
The Federal Budget outlines the amount of this money to be spent on programs
and agencies of the government such as defense, Medicare, education,
community development, and protection of the environment. The Federal
Budget is comprised of a mandatory and a discretionary budget.

Mandatory spending accounts for two-thirds of all spending and is authorized
by permanent laws. It includes entitlements such as Social Security, Medicare,
veterans' benefits and Food Stamps. Mandatory Spending also includes interest
on the national debt, which the Government pays to individuals and institutions
that hold Treasury bonds and other Government securities. The President and
Congress have the ability to alter laws in order to change the funding of
entitlements and other programs.

The remaining funds constitute the discretionary budget and supply funding for
various other agencies and programs within one specific sector. The
discretionary budget is divided into 13 annual appropriations bills, which are
debated, amended, voted on, and appropriated every year.

                        The Budget Creation Process

The President and Congress both play a role in developing the Federal Budget.
First, Congress passes a budget resolution that estimates annual revenues and
proposes spending targets. After reviewing the President's proposed budget,
Congress develops its own budget. Once Congress passes the budget resolution,
it turns its attention to passing the 13 annual appropriation bills.

Each year the President is obligated to submit to Congress, by the first Monday
in February, a proposed federal budget for the following fiscal year beginning in
After consulting with his senior advisors, cabinet officials, and other agencies,
the President directs The White House's Office of Management and Budget
(OMB) to prepare the budget proposal.

Congress examines the President's budget in detail. The responsible committees
and subcommittees of Congress hold hearings on proposals of appropriation
bills under their jurisdiction. The Budget Director, Cabinet officers, and other
Administration officials work with Congress as it accepts some of the President's
proposals, rejects others, and changes others.

After Congress has passed the Appropriations Bills, the information is presented
to the President. The President has ten days to decide whether to sign the bill
into law, allow the bill to become law without his signature, or to reject and veto
the bill. A Presidential veto sends the bill back to Congress and the process of
budget negotiations begins anew.

                          Glossary of Budget Terms


An appropriation is an act of Congress that enables Federal agencies to spend
money for specific purposes.


An authorization is an act of Congress that establishes or continues a Federal
program or agency, and sets forth the guidelines to which it must adhere.

Balanced Budget

A balanced budget occurs when total revenues equal total outlays for a fiscal

Budget Authority (BA)

Budget authority is the amount that the law authorizes, or allows, the Federal
Government to spend for programs, projects, or activities.

Budget Enforcement Act (BEA) of 1990

The BEA is the law that was designed to limit discretionary spending while
ensuring that any new entitlement program or tax cuts did not make the deficit
worse. It set annual limits on total discretionary spending and created "pay-as-
you-go" rules for any changes in entitlements and taxes (see "pay-as-you-go") -
still valid?

Budget Resolution

The Budget resolution is the annual framework within which Congress makes its
decisions about spending and taxes. This framework includes targets for total
spending, total revenues, and the deficit, as well as allocations, within the
spending target, for discretionary and mandatory spending.

Budget Surplus

The federal budget has a surplus when the revenue exceeds the spending. If the
government spends more than it takes in, the budget reports a deficit.


A "cap" is a legal limit on annual discretionary spending.


The deficit is the difference produced when spending exceeds revenues in a fiscal
If the federal government runs on deficits over a long period of time, the national
debt grows. A high debt, and the annual interest payments that follow, constrain
the activities of the federal government and limits the amount of money spent on
vital programs and activities.

Discretionary Spending

Discretionary spending is what the President and Congress must decide to spend
for the next fiscal year through 13 annual appropriations bills. Examples include
money for such activities as the FBI and the Coast Guard, housing and education,
space exploration and highway construction and defense and foreign aid.

Debt Held by the Public

Debt held by the public is the total of all Federal deficits, minus surplus, over the
years. This is the cumulative amount of money the Federal Government has
borrowed from the public, through the sale of notes, and bonds of varying sizes
and time periods until maturity.

Debt the Government Owes itself

Debt the Government owes itself is the total of all trust fund surpluses over the
years, like the Social Security surplus, that the law says must be invested in
Federal Securities.

Debt Subject to Legal Limit

Debt subject to legal limit, which is roughly the same as gross Federal debt, is the
maximum amount of Federal securities that may be legally outstanding at any
time. When the limit is reached, the President and Congress must enact a law to
increase it.


An entitlement is a program that legally obligates the Federal Government to
make payments to any person who meets the legal criteria for eligibility.
Examples include Social Security, Medicare, and Medicaid.

Excise Taxes

Excise Taxes apply to various products, including alcohol, tobacco,
transportation fuels, and telephone service.

Federal Debt

The gross Federal debt is divided into two categories: debt held by the public,
and debt the Government owes itself. Another category is debt subject to legal

Fiscal Year

The fiscal year is the Government's accounting period. It begins October 1 and
ends on September 30. For example, fiscal 2004 ends September 30 2004.

Gross Domestic Product (GDP)
The GDP is the standard measurement of the size of the economy. It is the total
production of goods and services within the United States.

Mandatory Spending

Mandatory spending is authorized by permanent law. An example is Social
Security. The President and Congress can change the law to change the level of
spending on mandatory programs - but they do not have to.


By law, the Government must distinguish "off-budget" programs separate from
the budget totals. Social Security and the Postal Service are "off-budget."


Those programs not legally designated as off-budget.


Outlays are the amount of money the Government actually spends in a given
fiscal year.


Set force by the BEA, "pay-as-you-go" refers to requirements that new spending
proposals on entitlements or tax cuts must be offset by cuts in other entitlements
or by other tax increases, to ensure that the deficit does not rise (see BEA).


Revenues include the collections that result from Government activity, such as
taxes. They do not include collections that result from the Government's
business-like activities, such as the entrance fees at national parks. Business-like
collections are subtracted from total spending to calculate outlays for the year.

Social Insurance Payroll Taxes

This tax category includes Social Security taxes, Medicare taxes, unemployment
insurance taxes, and Federal employee retirement payment.

A surplus is the amount by which revenues exceed outlays.

Trust Funds

Trust funds are Government accounts, set forth by law as trust funds, for
revenues and spending designated for specific purposes.

Unified Federal Budget

The unified budget, the most comprehensive display of the Government's
finances, is the presentation of the Federal Budget in which revenues from all
sources and outlays to all activities are consolidated.

 Federal Budget and the Appropriations Process for Fiscal Year 2005

Each year, the Congress and the President formulate a budget proposal for the
fiscal year, beginning on October first and ending on September thirty-first of the
following year. Annually, two-thirds of tax revenues are immediately allocated
for mandatory spending; on programs such as Social Security and food stamps.
The remaining tax revenues are allocated to discretionary spending and
distributed among thirteen appropriation bills. Spending for these bills falls into
the following categories:

   •   Agriculture, Rural Development, FDA and Related
   •   Commerce, Justice, State and the Judiciary
   •   Defense
   •   District of Columbia
   •   Energy and Water
   •   Foreign Operations, Export Financing and Related
   •   Homeland Security
   •   Interior
   •   Labor, Health and Human Services, and Education
   •   Legislative Branch
   •   Military Construction
   •   Transportation, Treasury, Postal Service and General Government
   •   Veterans Affairs, Housing and Urban Development, and Independent

Typically, each of these categories is funded by a separate appropriations bill,
which must pass through extensive negotiations and a series of votes in congress
before being sent to the President to be signed into law. Bills must first be passed
by a sub-committee and a committee in both the Senate and the House of
Representatives. Committees are small groups of either senators or
representatives who focus on a specific category of appropriations, such as
homeland security. Bills must then be passed in a Senate vote and a House of
Representatives vote, in which all members participate. After this, bills are
reviewed in a conference made up of various committees from both the
Legislative and Executive branches. After passing through this final review
process, bills are sent to the President's desk for final passage into law.

                        What bills have been passed?

Of the thirteen bills, only four have completed this extensive process and signed
into law:

Department of Defense: On August 5, 2004, President Bush signed into law the
Department of Defense Appropriations Act. The bill appropriated $416.9 billion
for the coming fiscal year, which will end September 30, 2005. The appropriation
is $900 million less than the President's request and $48.6 billion above the fiscal
year 2004 sum. Please see the Cities for Peace factsheet on national military
spending for more details on the U.S. defense budget.

Military Construction Bill: On October 13, 2004, President Bush signed into law
the military construction bill, which appropriated a total of $10 billion to an array
of military construction projects. $5.5 billion went to military construction, $4
billion for family housing, $160.8 million for NATO infrastructure
improvements, and $246.1 million for costs associated with base closings and
realignments. The appropriation is $450 million, or five percent, more than Bush
requested, and $687 million, or seven percent, more than the fiscal year 2004.
Attached to the Military Construction bill was the fiscal year 2005 Disaster Aid
package of $14.5 billion, $11.6 billion of which was emergency funding. Here's
the breakdown of this emergency funding:

   •   $6.5 billion for the Federal Emergency Management Agency
   •   $1.5 billion for repairs of road damage caused by hurricanes Charley,
       Ivan, Frances, Jeanne, and Gaston.
   •   $1.1 billion for defense department repairs and the costs of evacuation,
       base preparation, and base recovery.
   •   $929 million for small business administration disaster loans.
   •   $609 million for agricultural and rural assistance, including $250 million
       for the Emergency Watershed Protection Program, $10 million for
       cottonseed producers and handlers, $8.5 million for pecan producers, $10
       million in dairy production loss payments and $40 million in sugar cane
   •   $377 million for the Army Corps of Engineers and the Bureau of
       Reclamation to restore navigation channels, repair coastal areas and
       restore beaches.
   •   $126 million for NASA, in part to repair and strengthen the Kennedy
       Space Center.
   •   $124 million for the Veterans Affairs Department.
   •   $100 million for Jamaica, Haiti and other Caribbean nations.
   •   $70 million for the American Red Cross.

Homeland Security: On October 18, 2004, President Bush signed into law
Homeland Security funding bill for the fiscal year 2005, while declaring that he
will ignore many of the conditions Congress sought to put on the funding. The
bill appropriates $33.1 billion for the Department of Homeland Security, which is
$896 million more than President Bush requested, and $2.8 billion more than the
fiscal year 2004 appropriation.

District of Columbia: On October 18, 2004, President Bush signed into law the
District of Columbia spending bill. The bill appropriates $8.2 billion, which is
equal to President Bush's request, and a three percent increase over last year
($560 million).

The remaining nine spending categories were combined into one "all or nothing"
omnibus bill. This $388 billion appropriations bill has been passed by Congress.
This omnibus bill will provide funding for all of the following programs:

   •   Agriculture, Rural Development, FDA and Related
   •   Commerce, Justice, State and the Judiciary
   •   Energy and Water
   •   Foreign Operations, Export Financing and Related
   •   Interior
   •   Labor, Health and Human Services, and Education
   •   Legislative Branch
   •   Transportation, Treasury, Postal Service and General Government
   •   Veterans Affairs, Housing and Urban Development, and Independent
          Ok, then how does the 2005 budget affect Americans?

Due to an economic recession, massive war spending, and excessive tax cuts, the
U.S. budget deficit is the largest in history; $413 billion, as reported by the
Congressional Budget Office. Meanwhile, the US treasury continues to borrow
money and increase debt. Currently, the "debt ceiling," or amount at which the
US, in theory, will stop borrowing money, was raised in November 2004 to $8.2
trillion. The debt ceiling has been raised a total of four times during the Bush
Administration. (And, just 2 other times since the creation of the debt ceiling in
1917.) Since Congress has failed to pass nine of the thirteen appropriation bills by
the end of the fiscal year, they have passed three continuing resolutions that will
fund all non-governmental programs at current spending levels until December

The greatest portion of the 2005 budget will fund Defense and Military
Construction while crucial domestic programs will remain underfunded. In
order to meet the Administration's tight budget cap, a blanket .8% cut has been
imposed on all programs unrelated to defense or homeland security. These
reductions represent the fourth consecutive fiscal year of program cuts. With
rising inflation, vital social programs will receive substantially less money than
in previous years. In addition, the omnibus bill includes certain provisions that
have little to do with the allocation of funds. These provisions will also affect the
lives of American citizens.

Civil liberties

One provision in the omnibus bill would give Congress's Appropriations
Committee and their agents the right to examine individual American's tax
returns. The IRS-drafted provision is said to have been slipped into the Omnibus
bill secretly and initially escaped the attention of individual Congressmen and
Senators. On December 6th, members of the House will vote on a resolution to
repeal this provision before the omnibus bill is sent to the President and signed
into law.

Women's rights

Also included in the final bill was a provision that would exempt federal, state,
and local heath care providers, hospitals, HMOs and insurers from laws that
require them to provide or pay for abortions or give referrals. Opponents in
Senate agreed not to block this provision from entering the omnibus bill when
Senate Majority Leader Bill Frist promised to schedule a vote on a bill that would
repeal the provision.

Affordable Housing

Community planning and development, and programs which fund housing for
the elderly, and disabled, for those suffering with AIDS, and for Native
Americans and low-income Americans has been reduced by $378 million in 2005.
Funding for section 8 housing vouchers increased slightly to $13.36 billion for
2005. However, the budget includes rules that regulate the budgets of housing
authorities and effect how HUD may distribute money to housing authorities.


Language in the bill authorizes the opening of Alaska's Wildlife Refuge to oil and
the opening of Georgia's Cumberland Island (a previously protected wilderness
area) to commercial fish hatcheries. It also exempts some large dairies and
livestock owners from environmental restrictions.


Funding for the largely unpopular No Child Left Behind Act has increased by
$500 million to $12.8 billion, which is $7.7 billion less than the amount authorized
by President Bush. Language in the bill also allows for the reduction of grants to
low-income college students.


Funding for the Individuals With Disabilities Act increased by $607 million to
$10.7 billion. The program, which was intended to reimburse 40% of each state's
costs, will only supply a 19% reimbursement.


With fuel prices expected to continue to rise, the Omnibus bill has increased
funding for LIHEAP (Low Income Home Energy Assistance Program). The
program, which serves just 17% of the 30 million eligible households, has been
raised to $2.2 billion.

Funding for childcare remains at less than $2.1 billion, and funding for Head
Start increased slightly to $6.841 billion. Neither amount is enough to provide the
same level of service as in 2004. Twenty-first Century Community Centers, an
after-school care program received $990 million. These insufficient funds will
result in 40,000 children loosing access to the program. Juvenile Delinquency
Prevention (JABG) has been cut to $54.5 million, down from its $249.5 million
funding levels in 2002.


The supplementary nutrition program, Women Infants and Children (WIC) is
given $5.3 billion, 10% more than President Bush's request.


Job training and worker education programs such as the Workforce Investment
Act, vocational technical and basic adult education, and Job Corp have all
incurred the blanket .8% funding cut.

Health Insurance

The State Children's Health Insurance Program (SCHIP), which may provide
health care to 750,000 uninsured children, was set to receive $1.1 billion.
However, no action was taken to allocate this money, and funds have been
transferred to the U.S. Treasury.

                           To put it in perspective

The United States' 2005 budget gives priority to Defense, Military Construction,
and Homeland Security. With the promise of "protecting the American people,"
programs that defend Americans against hunger poverty and homelessness have
been drastically cut. There is a startling discrepancy is between the amount of
money that funds social programs and the amount that funds the industrial-
military complex. Here is a breakdown of the nation's priorities according to the
2005 fiscal budget contrasted with alternative uses of the funds.

   •   $388 billion - Funding for the omnibus bill which covers domestic
       programs such as education, and healthcare and spans nine of the thirteen
       spending categories
   •   $413 billion- The current deficit
   •   $416.9 billion - The 2005 appropriated funds for the Department of
       This was the first bill passed and clearly a priority of this administration.
   •   $2.2 billion - Cost of one B-2 Bomber
   •   $2.1 billion - 2005 budget appropriations for child care in the US
   •   $1.7 billion - World Food Programs annual budget to assist 77 million
       people in 82 countries

The Borgen Project, a nonprofit research group working to bring political
attention to issues of world poverty and hunger, estimates that annually it would

   •   $19 billion - to eliminate starvation and malnutrition from the world
   •   $21 billion - to provide shelter to the world's homeless
   •   $10 billion - to provide clean safe water
   •   $4 billion - to remove land mines around the world
   •   $7 billion - to eliminate nuclear weapons worldwide

In contrast, by the end of 2004, the US will have spent $152 billion on the war in

                           Informational Resources:

             The Federal Budget and Appropriations Process

A Citizen's Guide to the Federal Budget: From the U.S. Government Printing Office

Library of Congress: Status of appropriation bills

National Priorities Project: The Federal Budget Explained

OMB Watch: Updates and analysis on the appropriations process

Tax Foundation: Factsheets on fiscal policy
University of Michigan: Great overview, links, resources about the budget

U.S. House of Representatives: An introduction to the budget process

U.S. House of Representatives: Budget rules and process

                           Federal Budget Updates

April 18, 2005 - House Republicans debate Medicaid cuts from CNN.com

March 21, 2005 - Bush, Congress Hide True Cost of Permanent Tax Cuts by OMB

March 21, 2005 - House, Senate Pass Irresonsible FY06 Budget Resolutions by
OMB Watch

March 18, 2005 - Women's Actions for New Directions information and tool kit
on the 2006 Federal Budget

March 17, 2005 - Federal Spending Cuts, Caps to Hurt States Facing Own Deficits
by OMB Watch

March 8, 2005 - Bush Budget to Increase Deficits $1.6 Trillion over 10 Years by
OMB Watch

February 16, 2005 - "Local Costs of the Iraq War" A comprehensive state, city,
and county breakdown of the Iraq and Afghanistan Wars on a current estimated
cost of $207.5 billion.

February 16, 2005 - Federal Budget Trade-Offs from the National Priorities
Project Database on how tax dollars spent in the military and defense budget
could be used for different areas of domestic spending.

February 12, 2005 - State-by-state impact of the 2006 federal budget by the
National Priorities Project

February 11, 2005 -- Agency breakdown of the 2006 budget proposal from the
Washington Post.
February 11, 2005 -- How does the federal budget affect local communities?
Talking points by the Center for American Progress.

February 10, 2005 - Department of Housing and Urban Development Factsheet
on Fiscal Year 2006 Budget

February 9, 2005 - Assesing President Bush's New Budget Proposals from the
Center on Budget and Policy Priorities

February 9, 2005 - How the Budget Affects Human Needs Programs from the
Coalition on Human Needs

February 7, 2005 - The Official Federal Budget for Fiscal Year 2006 from the
White House

February 7, 2005 -- Federal Budget Update from OMB Watch

January 31, 2005 - Talking points on Federal Budget by the Center for American

January 26, 2005 -- Update from the Center on Budget and Policy Priorities: CBO
Data Show Tax Cuts have Played Much Larger Role than Domestic Spending
Increases in Fueling the Deficits

January 14, 2005 -- The Back to Basics weekly summary from the Campaign for
America's Future.

December 13, 2005 -- Robert Borosage's article "Shafting Kansas" comments on
the omnibus bill, and how republicans have been successful in arousing social
conservative backlash while trampling economic interests.

                                  Social Security

National Social Security Factsheet

May 12, 2005 - "“Progressive” Social Security Benefit Cuts Would Fall Heaviest on
Middle Class" by The Center for Economic and Policy Research

April 15, 2005 - "Bush Keeps Social Security Specifics to Himself" by Terence Hunt in
the Miami Herald
April 14, 2005 - "Private Account Buy-In Hasn't Sold-Out" by Marty Goldensohn in the
Maketplace "Morning Report"

April 12, 2005 - "A Misinformed Public: The Real Problem" by Dean Baker, Mark
Weisbrot, and David Rosnick of the Center for Economic and Policy Research

February 2, 2005 - Pacifica Radio with guest Karen Dolan on topic: Social Security:
Collapse or Crisis? Download the show in .mp3 format, or listen to the streaming version.

January 26, 2005 - Karen Dolan's Op-Ed piece, "Goodbye New Deal; Hello Raw Deal"
on Commondreams.org

November 16, 2004 - Brief Outline of Basic Facts on Social Security and
Privatization by Dean Baker and David Rosnick of the Center for Economic and Policy

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