Budget, debt ceiling glossary: A cheat sheet for understanding the debates

April 29, 2011

Tony Burke, a member of Young Americans for Liberty, asks UC Irvine students to sign a petition to Congress protesting the national debt. (JEBB HARRIS/AP)


Authorization and appropriations

These are the two steps of the federal spending process. Once Congress receives the president’s budget, lawmakers can authorize funding for a federal agency or program by enacting legislation. The amount authorized can be clear-cut or indefinite (e.g. “such sums as may be necessary”) and can be good for a fiscal year or multiple years. A federal agency or program can then tap funds from Treasury once Congress passes an appropriations measure. This is done annually. Appropriations measures establish an agency’s budget authority, which gives that agency responsibility to spend the funds based on specified criteria.

Not all federal agencies and programs go through this two-step process. Some programs, such as Social Security and Medicare, are entitlements, which means that the federal government is required to pay benefits to everyone who qualifies, regardless of cost.

Interactive Graphic: A primer on the federal budget process

Interactive Graphic: How spending and revenue changed over time

Interactive Graphic: 30 years of spending priorities


Bush-era tax cuts


President George W. Bush renewed his fight for hundreds of billions of dollars in tax cuts over the next decade on April 15, 2003. (SUSAN WALSH/ASSOCIATED PRESS)

Bush and the GOP say the laws have helped to bolster the economy and add jobs. Critics of the tax cuts say that they give outsized benefits to wealthy Americans and deprive the government of needed revenue at a time of record annual deficits. Despite strong opposition from some members of his own party, President Obama in December signed into law an $858 billion package that maintained the Bush tax cuts for two years. The law also called for a one-year payroll tax holiday and extended emergency unemployment benefits. Many see the short-term extension as a stopgap measure that gives leaders a chance to devise a major overhaul of the federal tax code.

Read: Analysis: Deficit talk gets serious

Read: Biden deficit task force off to rocky start

Read: S&P lowers its outlook on U.S. debt


Budget authority

This is the responsibility given to government agencies by law for how to spend federal funds. With budget authority, Congress can specify the amount of funds available to an agency and for how long.

Read: How do $38.5B in cuts become $350M?

Read: CBO report reduces initial impact of budget deal


Continuing resolution/continuing appropriations

Legislation used by Congress to fund federal agencies and programs at current or reduced levels until formal appropriations measures are passed. On April 9, President Obama signed a continuing resolution, or stopgap bill, into law to avert a government shutdown that would have affected 800,000 workers.

Read: Rubin: CR confusion

Read: No win-win deal?

Read: Summary of fiscal 2011 continuing resolution


Debt ceiling or debt limit

The debt ceiling is the legal limit on borrowing by the government. Before 1917, Congress had to approve each issuance of debt as it came up. To give the Treasury more flexibility in borrowing, lawmakers established a limit covering nearly all government debt. The ceiling has been raised almost 100 times since then. Under George W. Bush, the national debt soared with the costs of wars in Iraq and Afghanistan, the new tax cuts and higher spending on government programs. The debt has climbed even higher under President Obama, fueled by a massive $814 billion economic stimulus package and the collapse of tax revenues during the recession.

Today, the United States is facing a debt limit of $14.3 trillion. Treasury Secretary Timothy F. Geithner has warned that if the limit is not raised by early July the nation may default on its debt obligations, roiling global financial markets. Republican lawmakers say they need a commitment from the White House for more spending cuts in exchange for voting to raise the limit. The White House has rejected the inclusion of spending caps or other changes to the budget process in legislation, arguing that ensuring the government’s solvency is too important to be held hostage to other issues. Vice President Biden is leading talks with lawmakers in hopes of reaching a compromise on deficit reduction that could clear the way for the debt limit vote to go forward.

Motion Graphic: Showdown over the debt ceiling

Read: Why is everyone in Washington talking about the debt ceiling?

Graphic: Raising the debt ceiling

Video: The Fast-Fix: Dealing with the debt


Default

Default means the failure to make good on financial obligations. The U.S. debt is more than $14 billion, within striking distance of the legal limit on borrowing. On April 4, Treasury Secretary Timothy F. Geithner warned lawmakers that if they don’t raise the debt limit, he would be forced to make do with using tax revenues, which come nowhere near covering the nation’s bills. Some Republicans argue that Geithner could avoid default by paying interest to the nation’s creditors before other obligations. But Treasury officials say they will be forced to halt payment if they can no longer borrow, and that the failure to meet any commitment would be viewed by the market as a default, potentially triggering another financial crisis.

Read: Treasury plans for debt showdown


Deficit

The nation’s deficit represents the annual gap between spending and revenue. When a government runs a budget deficit, it means it has spent more money in a given fiscal period than it has brought in. According to a recent estimate from the nonpartisan Congressional Budget Office, the federal government will incur a $1.5 trillion deficit this year, which would be the widest budget gap in U.S. history. The CBO projects that the gap will narrow as the economy recovers, tax collections return to normal levels and the government stops spending so much on food stamps, unemployment support and health care for the poor. However, without significant changes in federal tax and/or spending policy, deficits will remain elevated throughout the decade, adding around $10 trillion to the national debt by 2021. A political consensus has emerged in Washington that such skyrocketing deficits would pose serious economic risk. Obama and congressional Republicans have offered plans for trimming borrowing over the next 10 to 12 years by an estimated $4 trillion to $4.4 trillion dollars.

Read: Poll: More see budget deficit as big problem

Read: Gerson: How serious are we really about the deficit?

Read: Klein: No on taxes = yes on deficits


Entitlements

Any federal programs that guarantee payment to individuals who meet a certain criteria set by law are called entitlements. These programs include Social Security, Medicare, Medicaid, veterans’ compensation and pensions. Payouts for these programs, especially Social Security, constitute more than half of all federal government spending.

Read: Two very different approaches to a budget deal

Read: Dems have called for entitlement reforms, GOP has rejected tax increases


Fiscal year

The fiscal year covers a 12-month period that a business, government or other entities use as a framework for their yearly accounting statements. For the U.S. government, the fiscal year is the period that begins on October 1 and ends on September 30.


Gang of Six


This combination image from file photos shows the six-member bipartisan group of U.S. senators, referred to as the “Gang of Six.” They are, clockwise from top left, Sen. Tom Coburn, R-Okla., Sen. Dick Durbin, D-Ill., Sen. Saxby Chambliss, R-Ga., Sen. Mark Warner, D-Va., Sen. Kent Conrad, D-N.D., and Sen. Mike Crapo, R-Idaho. (AP)

Read: ‘Gang of 6’ takes deficit fight to public


Medicaid

This joint federal-state health entitlement program serves certain categories of people with lower incomes such as children, pregnant women and people with disabilities. The number of people on Medicaid has soared in recent years to more than 50 million, putting an enormous strain on state budgets. The Congressional Budget Office forecasts that nearly 100 million Americans will be on Medicaid by 2021. Republicans have proposed making Medicaid into a program that provides block grants to states. That would save money because the amount of federal funding would not vary according to how much a state spends. Opponents say it would also force states to dramatically scale back the program, pushing as many as 11 million people who need the aid off coverage by 2021.

Read: Wonkbook: The GOP hearts ObamaCare?

Read: Klein:What cutting Medicaid means

Read: Klein: Guidelines for controlling health-care costs


Medicare


Seniors attend a "Medicare Monday" seminar at the Holly Creek retirement community in Centennial, Colo. (John Moore/GETTY IMAGES)

Read: Klein: RyanCare vs. the public option

Read: GOP faces tough questions on Medicare

Read: Klein: The wrong argument on health-care costs


National Commission on Fiscal Responsibility and Reform

Last year, Obama created a presidential commission to study “policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run.” Obama directed the commission to balance the budget - not counting interest on the debt - by 2015.

Read: Bowles and Simpson: There’s still hope for dealing with debt

Read: Obama turns to deficit commission’s blueprint for reducing debt

Read:: The commission’s ‘Moment of Truth’ report


National debt

This is the amount of money the federal government owes to creditors. When Congress approves spending and tax policies that create budget deficits, the Treasury must borrow money to cover the excess costs. The debt is the accumulation of many years of deficit spending. The United States owes creditors a little over $14.2 trillion. About $4.6 trillion is owed to other government accounts, particularly the Social Security trust fund. The rest -- known as publicly held debt -- is owed to outside investors, including individuals, pension plans, financial institutions here and abroad, and foreign governments such as China and Japan. While the entire debt is subject to the legal limit on borrowing, economists typically consider only the publicly-held debt when assessing the nation’s fiscal condition.

The national debt clock

This is one of the many debt clocks that exist. There is no official debt clock or one that the government endorses.

Read: S&P lowers its outlook on U.S. debt

Graphic: Raising the debt ceiling


Simpson-Bowles


National Commission on Fiscal Responsibility and Reform Co-Chairmen Alan Simpson, right, and Erskine Bowles, testify on Capitol Hill March 8. (J. Scott Applewhite/AP)

Read: Wonkbook: Ryan, Obama, Simpson-Bowles would all bust debt ceiling

Read: Klein: Simpson-Bowles on health-care costs

Read: Klein: Ryan vs. Simpson-Bowles


Social Security


Trays of social security checks await mailing from the U.S. Treasury. (Bradley C Bower/AP)

Read: Fact Checker: Excessive rhetoric on Social Security


Stopgap budget bill

See definition for continuing resolution.

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