This release merits a D
Source: U.S. Treasury Department.
Release Time: 14:00 ET, about the third week of the month for the
Raw Data Available At: http://www.fms.treas.gov/mts/index.html
The monthly Treasury budget data follow strong seasonal patterns which
produce huge month-to-month fluctuations in the deficit. These fluctuations tell
us little about long term budget trends. To the extent that the market analyses
the monthly Treasury data, the focus is on year/year changes in receipts and
outlays, since the data are not seasonally adjusted. Only in April, the most
important month for tax inflows to the Treasury, does the market pay any
attention to this report. The data can be predicted with reasonable accuracy by
using daily data in the Daily Treasury Statement.
The President's Budget
The annual budget process begins in late January or early February with the
presentation of the President's budget for the coming fiscal year. The
President's proposals serve as an outline for Congress, particularly when the
White House and Congress are controlled by the same party. In the 1980s, the
conflicting agendas of the President and Congress often resulted in a final
budget which bore little resemblance to the President's budget. After a quiet
budget year in 1994 when Democrats controlled Congress and the White House, the
Republican takeover of the House and Senate has produced more contentious budget
battles in 1995 and 1996.
One of the most common misperceptions about the budget process is that the
annual budgeting actually covers all federal spending. Though the President's
proposed budget will include projections for all federal government outlays,
less than half of all spending is actually controlled by the annual budget
legislation. Roughly 67% of federal outlays are mandated by "permanent" law.
Unless these laws are changed, no legislative review of spending programs funded
by permanent law is required in the appropriations process. The same is true of
federal receipts, where permanent law does not require annual review of
Permanent law should not by any means be construed as suggesting true
permanence. Permanent laws are changed frequently, with the 1990 and 1993 budget
deals being the most recent examples. These recent efforts to reduce the deficit
have incorporated both changes in discretionary spending and changes in
permanent laws affecting taxes and spending. Such deficit reduction efforts are
usually packaged into a so-called Omnibus Budget Reconciliation Act (OBRA). In
the absence of these comprehensive deficit reduction efforts, the annual budget
review will only deal with discretionary spending which makes up roughly 33% of
the budget. It is perhaps one of the better kept secrets in Washington that the
annual budget review which seems at the core of the democratic process does not
in fact review even half of all federal spending.
The Budget Resolution
Once the President has submitted his budget to Congress, the legislative
process begins. Within six weeks of the date that the President presents his
budget, each Congressional committee must report to the House and Senate Budget
Committees regarding budget estimates for programs overseen by their committee.
The Budget Committees then approve a budget resolution based on these estimates.
After full House and Senate approval of these resolutions, any differences
between the House and Senate versions are worked out in conference committee and
then a final resolution is approved by each house. This process is scheduled to
be completed by April 15, but is often delayed, as was the case this year. As
the budget resolution is only a blueprint for the budget and not actual
legislation, it does not require presidential approval.
The real job of budgeting begins after the budget resolution is adopted. The
appropriations process is when actual budget authority for discretionary
programs is legislated. We have already noted that annual budgeting only covers
discretionary programs, which are responsible for just 33% of total spending.
Even these discretionary programs are not bundled into one budget package. The
annual budget for discretionary spending is actually comprised of 13 separate
appropriations bills. The House and Senate Appropriations Committees each
include 13 subcommittees which are responsible for the 13 bills. The 13
subcommittees are listed below.
Subcommittees of the House and Senate Appropriations Committees
District of Columbia
Treasury, Postal Service
As all tax and spending bills must originate in the House, the House
Appropriations subcommittees will see the first action in the appropriations
process. The 13 bills are crafted individually and do not work their way through
the House and Senate on the same timetable. The goal is of course to complete
legislation on all 13 bills by the beginning of the fiscal year on October 1.
Yet these bills proceed and are approved of on their own, and are not packaged
into one comprehensive bill known simply as the budget.
Once a House Appropriations subcommittee approves its bill, the legislation
proceeds to the full Committee and then to the House floor. Approval by the
House sets in motion the same process in the Senate. Upon approval by the full
Senate, differences between the House and Senate versions of the bill are
reconciled in conference committee and then a final version of the bill is sent
back to the House and Senate floors. Presidential approval of each of the 13
appropriations bills completes the process. When work on the 13 bills is delayed
past the start of the fiscal year, Congress and the President must approve of
continuing resolutions which fund government programs at the prior year's level
until the relevant appropriations bill is signed into law.
One final note about the appropriations process is that the appropriations
bills do not set actual outlays for the coming fiscal year, but instead
legislate "budget authority." The Office of Management and Budget (OMB) defines
budget authority as "the authority to incur legally binding obligations of the
Government that will result in immediate or future outlays." Actual outlays may
exceed or fall short of budget authority in any given year depending on past
budget authority and the duration of a program.
Omnibus Budget Reconciliation Act
In years such as 1985, 1987, 1990, and 1993, Congress has enacted legislation
aimed at long term deficit reduction. These legislative efforts occur separately
from the annual appropriations process. They may change permanent laws and set
caps which affect discretionary spending, but the regular budget process will
nevertheless be unchanged. OBRA legislation affects permanent law and is not a
substitute for annual budgets. OBRA legislation packages changes in permanent
laws which will typically affect both taxation and mandatory spending. The
legislative process for OBRA is completely different than the appropriations
process. Legislation is still initiated in the House, but is not limited to work
by the Appropriations Committee. The House Ways and Means Committee oversees tax
law, and thus plays a critical role in OBRA legislation, as does its Senate
counterpart, the Finance Committee. Legislation affecting entitlement programs
also falls under the jurisdiction of committees other than Appropriations, i.e.
proposed Medicare changes would be considered by a House Ways and Means
subcommittee on health care.
The 13 appropriations bills are not necessarily the last word for the year on
federal spending. Supplemental appropriations bills may be approved at any time
to provide additional funding for government programs. Tight caps on
discretionary spending set by the 1990 and 1993 budget acts require a
pay-as-you-go approach to such funding, thus limiting the number of supplemental
appropriations. "Emergency" spending circumvents the pay-as-you-go mandate,
however, allowing for a variety of supplemental appropriations. Past
"emergencies" have covered everything from the Gulf War to extended unemployment
insurance to natural disaster relief.