U.S. Budget Process – Legislative Consideration of the Budget Resolution

President Obama will submit his budget toCongress on Monday, February 13^th of this year. The House and SenateBudget Committees will receive the budget, thus beginning legislativeconsideration of the budget.

The Chairmen of the Senate and House Budget Committeesreview the President’s budget, hear testimony from various executive branchofficials, and create their own budget document. The budget document they eachcreate is known as the “Chairman’s Mark.” The Mark describes the chairman’spriorities in words and numbers and includes legislative language.The Mark becomes the document that the Budget Committees will work from to formthe budget resolution.

The Senate and House Budget Committees both complete aprocess called Mark-Up.This means the committees are reviewing and amending the Chairman’s Mark. EachBudget Committee must pass the budget before it can move on to consideration byeach body – the Senate and House. The budgets are different at this point.

Both the House and Senate consider their respective budgetresolutions on the floor of each chamber. Senators cannot filibuster thebudget resolution because the budget resolution has special rules that limitthe time for debate once it has started. After both houses pass a budgetresolution, a conference committee is formed to work out the differencesbetween the two resolutions. The conference committee budget resolution is thenvoted on by both houses.

The budget resolution passed by the House and Senate becomesa guide for consideration of the various appropriation bills. The appropriationbills are what actually become laws and give legal authority for agencies to incur obligations.

The process described above is how the legislature is “supposed”to pass a budget resolution. However, this process has become very difficult inrecent years and Congress does not always pass a budget resolution in a timelymanner. Recently, there has been more attention on the process and even some discussionabout reform. The Senate Budget Committee held a hearing in October 2011 tohear testimony about options for reform.

Finally, Chairman Conrad of the Senate Budget Committeerecently gave a floor speech describing the Budget Control Act of 2011. In this speech he addressed critics who said Congress had not passed a budget in over 1,000 days.

The U.S. Budget Process & the Debt Ceiling

It is no secret that the U.S. Congress rarely meets itsbudget deadline. There are a number ofideas about how to change the processwhich could facilitate better progress and enable Congress to meet deadlines.However, timing is not the only problematic aspect of Congress’ budget process.

Adjusting for inflation, spending in a number of budgetareas has actually been less under President Obama than it wasunder President Reagan over 30 years ago. However, this has not been the case with all or evenmost government programs.

Because overall government spending exceeds the revenuescollected, the government must have a mechanism in place for meeting its expenditureobligations. Although the government can do this in a variety of ways,it is often the case that Congress borrows from the entitlement trust fundsthat have been invested in U.S. Securities to make up for the shortfall.

However, there is a limit to the amount of money thatCongress can borrow, that is, the amount of debt the federal government canincur, regardless of where it borrows from. That amount is referred to as the “debt ceiling”.

In the fall of 2011, Congress’ borrowing ran up against thedebt ceiling, which at the time was $14.7 trillion. In order for the federal governmentto be able to pay its bills, therefore, Congress needed to increase the amountit was allowed to borrow. The process to raise the debt ceiling was bothpartisan and protracted, but ultimately a deal was reached between the WhiteHouse and Congress that among many things included the creation of a so-called “SuperCommittee” of 12 members of the U.S. House and Senate tasked with identifying$1.2 trillion in federal spending cuts.

Unfortunately, the Super Committee did not succeed inidentifying the spending cuts and as a result, triggered automatic,across-the-board budget cuts that total $1.2 trillion. The cuts begin in FY2013 and phase in over the next 10 year period. The speculated impacts of thesecuts are currently being debated, but what is certain is that they will affectgovernmental programs at every level from the national defense to communityhealth centers.

Welcome to PA5113, 2012 Spring

Hello friends,

Welcome to the course weblog of "State and Local Public Finance," which is an additional channel of communication for our journal together on PA5113, 2012 Spring.

Throughout the semester, each of you is required to post two blogs, one before the Spring Break and one after. Please log on the Moodle course website to register for your posting schedule.

The broad topic area for each week is generally following the lecture schedule, with some exceptions. When it is your turn, you shall pick a specific point of interest, find relevant materials on the Internet or through other sources, and present your comments or questions that are related to our lecture or readings. Each blog should provide hyperlinks to additional web-based resources, and I would love to see some multimedia ones, which are often really enjoyable. In the class, some of you may be asked to do a 2-minute "mini speech" about your post and answer one or two questions.

You are all encouraged to read these blog posts and add comments. Each week we will select a "Post of the Week," whose author will be awarded 1 extra point in the participation scores.

Let me know if you have any questions or concerns,

Jerry