The White House is expected to release its 2014 budget proposal on Wednesday, laying out the president’s vision for how Congress should structure taxes and spending.
Budgeting for the federal government is a complex and multi-layered process that bears little resemblance to the kind of financial planning most Americans do at their kitchen tables. The following is a primer on how the annual process works.
The White House role
Current law requires the president to submit a budget request before the first Monday in February, although several administrations — including the current one — have missed the deadline by several weeks.
Such proposals amount to little more than a wish list for Congress to consider while drafting budget measures. Congress has the real power to control funding levels, and that begins with the House and Senate passing budget resolutions.
Budget resolutions do not require the president’s signature, and they do not carry the force of law. They simply set spending parameters for broad categories of government, guiding Congress’s appropriations committees during the next phase of the budgeting process.
That next phase involves the House and Senate developing a series of appropriations bills to fund specific government programs.
The two chambers eventually have to work out the differences in their separate appropriations bills to come up with unified legislation. Once that happens, the president can sign the reconciliation bill into law.
Washington is expected to finalize a budget annually by Oct. 1, which is when the government’s fiscal year begins. But the whole process has broken down in recent years, forcing Congress to adopt short-term spending plans to keep the government operating.
Part of the issue is that the Senate failed to produce any budget resolutions after 2009, when Democrats controlled both chambers of Congress. The House has passed budget resolutions since then, but Democrats viewed the proposals as unpalatable and a sign that Republicans were not serious about negotiating.
“Those proposals were not designed to reach a compromise with the Senate,” said Norman Ornstein, a resident scholar and budget expert with the American Enterprise Institute. “Those were extreme proposals intended to make a political statement.”
Many experts say increased polarization between the two parties — and even within them — has led to the budgeting breakdowns of recent years.
“I think that’s the single biggest impediment,” said Steve Bell, a budget expert with the Bipartisan Policy Center who served as a member of the Thrift Savings Plan board during the Reagan administration. “Everyone becomes very afraid to compromise and move away from orthodoxy on issues like taxes.”
Whenever Congress fails to approve a comprehensive budget, the government runs the risk of shutting down. To prevent that from happening, lawmakers since 2010 have passed stopgap funding measures known as “continuing resolutions,” which essentially maintain the status quo until the budgeting process begins anew.
A fresh start
This year, the GOP-controlled House and the Democrat-led Senate both passed budget resolutions, so the regular budgeting process has moved along according to design. Still, hangups could occur in coming months as lawmakers move into the appropriations phase and try to reconcile their proposals.
This year’s House resolution aims to eliminate budget deficits by 2023, although it would increase the national debt by about $2 trillion by then. The Senate plan would allow the debt to grow by $6 trillion over the same period and would not balance the budget.
In terms of policy, the House resolution would slash spending on programs for the poor, repeal President Obama’s health-care law, and partially privatize Medicare for future beneficiaries currently under the age of 55.
The Senate plan calls for nearly $1 trillion in new taxes over the next decade and modest reductions in projected government spending relative to the GOP-favored proposal.
Obama’s 2014 budget request will call for sizable cuts to Medicare and Social Security, in addition to more than $580 million in new tax revenue over the next decade, according to an overview that White House officials provided last week.
The president’s plan would also eliminate $1.2 trillion worth of automatic spending cuts scheduled to take place over 10 years under the sequester, which took effect last month after Congress failed to reach an agreement on an alternative deficit-reduction deal.
In recent years, the White House budget has served as sort of a political statement, for the most part containing proposals that Republicans were sure to reject. This year’s proposal represents a conciliatory approach, showing that the president is willing to rankle the base of his party by offering entitlement cuts for the sake of a bargain.
“It looks like a genuine attempt to open up the dialogue for compromise,” Ornstein said. “The president has made it clear that he’ll step into the entitlement thicket and take the heat that comes along with it, but Congress is going to have to come up with revenue.”
That leaves lawmakers in the House and Senate to reconcile their differences over spending cuts and taxes. Whether or not they can avoid the negotiating gridlock that has plagued Washington in recent years is a question that will be answered in coming months.
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