Posted: March 24th, 2023

The Approval Stages of the United States Federal Budget

Introduction

Budgeting refers to the process of planning and apportioning resources to the various spending needs of an organization, government, or an individual. It also involves the development of proposals and the models to raise funds to finance particular projects. In the United States, drawing and passing budget estimates is a prerogative of the federal government’s executive and legislative branches. The process is multi-staged and is prescribed by law. This paper offers an analysis of the origin of the U.S. budget policy law, the circumstances surrounding its implementation, and the specific individuals and institutions that initiated and spearheaded its development. In addition, the paper provides an overview of the United States federal budget approval stages as laid down by law. The U.S. budget is one of the most daunting processes of a country since there are critical stages it must pass through. Some of the processes include developing and passing the congressional appropriation bill, which specifies the extent of departmental spending among other authorization bills that allow the government to run its programs over several years. However, despite its complexity, the US budget development and approval processes are integral parts of the country’s democratic system based on consultation and collective decision-making principles. Although the U.S. budget-making process is entrenched in legal processes, the procedure establishes systems to enhance participation of key stakeholders, leading to an inclusive and a legitimate exercise that delivers effective results.

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The Budget Approval Process

The U.S. Constitution has assigned the responsibility of fiscal management, also known as “the power of the purse,” to Congress. Fiscal management refers to activities such as revenue collection, government borrowing, and public expenditure under which budgeting falls. The budget approval process starts with drafting a budget proposal by the president. Then, it is submitted to Congress for consideration. The proposal is done every February, representing a fiscal year commencing on October 1. Once the budget request has been submitted to the Congress, the House and Senate Committees on the Budget discuss and pass their resolutions. Further, once the resolutions are passed, the Appropriations Committees of both houses determine the suitable budget authority, which involves the maximum allowable expenditure for discretionary spending. Accordingly, both houses consider all the appropriations and hence schedule a vote to pass them. The final stage involves the submission of each appropriations bill to the president for assent, after which the budget becomes law. Twelve appropriations bills are utilized to fund the various programs, which the president must sign before the fiscal year begins. The appropriations bill provides an opportunity for discussion and scrutiny of the projected spending items to reduce unnecessary and unjustifiable expenditures.

Historical Challenges in the Budgeting Process

The budget process has undergone various modifications to make it respond to the expectations of the political class and the general citizenry. Before 1974, the budget approval process did not exist as it does today (Tax Policy Center, 2016). The budget policy process was first embedded into law during President Richard Nixon’s reign. The president had in 1972, arbitrarily suspended funding of $12 billion for various social programs without the approval of Congress (Tax Policy Center, 2016). Nixon’s argument was based on the reasoning that since no clear-cut process of controlling the federal budget created by Congress was available, irresponsible spending was likely to expand the budget deficits. To avoid such a scenario, Nixon argued that the president needed to have the power to impound some spending. Sensing the substantive logic behind the president’s argument, Congress responded by passing the monumental Congressional Budget and the Impoundment Control Act of 1974, which had a two-fold purpose. First, the Act established a formal budget policy process (Tax Policy Center, 2016). Secondly, President Nixon’s action of legally taking control of spending appeared to be an unchecked use of power (Tax Policy Center, 2016). Thus, the Act was intended to limit such powers and further entrench the spirit of a democratic constitutional system where decisions had to be reached within the confines of the law and in a consultative manner. The process was, thus, designed to insulate the U.S. budget from manipulation by an influential individual within the political offices by introducing important checks and balances. 

Goals of the US Budgeting Policy

It was significant that the president’s executive authority over the budget spending is restrained. A legal framework was scheduled in the houses to ensure the process was realized. The Congressional Budget & Impoundment Control Act of 1974 was introduced amidst fears of the President’s executive power of impounding expenses to avoid a budget deficit. The two primary objectives of the act were increasing and centralizing Congress’ budget authority and reducing the President’s impounding control over the funds appropriated by Congress. Although the policy has managed to resolve certain issues concerning spending legislation and taxes, it still needs reforms to act in the best interests of Americans and the whole country. The act implemented regulations within the budgeting systems and introduced controls protected by legal measures.

Circumstances Leading to the Enactment of the Policy

The process to control the budget between the executive and the Congress was arbitrated through the U.S. legal systems. President Nixon lost every case in court at the appellate level, but before the Supreme Court’s consideration, the Congress took steps to curb his powers of impounding appropriated funds. Nixon had an argument stating that Congress lacked the means to control the federal budget; hence, budget deficits might tend to expand irresponsibly if the President had no right to block funding (Tax Policy Center, 2016). Congress realized the viability of Nixon’s argument and was alarmed that it could not limit the president’s impounding powers without creating its own formal budget process. For this reason, it passed the Congressional Budget and Impoundment Control Act of 1974. Therefore, the act introduced a platform for inclusivity and models to regulate the authority of the president in budget making and allocation of funding.

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Advantages of the Budgeting Policy

The budgeting policy has various advantages for institutions within the federal system. The policy has developed a systematic framework for Congress to outline budgets. It enhanced the information and analytical capacity available to Congress and increased the congressional authority over the budget (Berger, Hanlon, & Seth, 2018). Besides, it showed adherence to the democratic system where all the decisions are made based on the law. Thus, the policy preserves values of democracy and consultation within American society.

Disadvantages of the Budgeting Policy

 Although the budgeting policy has significant advantages and democratic values, the process reveals some weaknesses. The law has given undue advantage to Congress because special interests are being examined during consultations and analysis. The budget process has also turned out to be increasingly cumbersome. Over the past 40 years, on-time budget resolutions have been passed only six times, and on nine occasions, Congress has failed to pass a budget resolution (“Slaying the Dragon of Debt” n.d.). Notably, deficits and inflation have risen considerably. The disadvantages have created delays while maintaining bureaucracy and lobbying within the procedures.

The Approval Process of the Budget Policy

A budget constitutes a record of the revenue and expenditures of an entity over a specified period, usually one year. Examples of budgets include the capital budget, regulatory budget, insurance budget, and tax expenditure budget. The process consists of all the processes involved in developing the budget to make informed decisions concerning the provision of services and capital asset and promoting the contribution of the stakeholders. The capital expenditure policy is one of the many budgeting policies used by the government, organizations, or individuals to offer guidelines that help to approve and rank the fiscal year’s capital budget. Additionally, the policy assists in monitoring, tracking and evaluating capital expenditure. Therefore, the capital expenditure policy helps the government to prioritize significant projects and seek alternative funding sources for long-term projects that may not be a priority at the moment but could need prioritizing in the future.

Encouraging the participation of all stakeholders is vital in creating a capital expenditure policy. Therefore, linking the capital expenditure budget process with the policy-making procedure is essential to implement the stipulated guidelines. Moreover, it is critical to evaluate the potential impact of a policy change on the available resources before a consideration. Treasury obtains all expenditure proposals from respective departments for review before they are accepted for evaluation and approval. Upon receiving the expenditure suggestions, treasury coordinates with the federal government through a ministerial committee for further processing. The federal government oversees the budget preparation process to ensure it is achieved through the defined lines. Besides, the government mediates disputes between treasury and other departments while guaranteeing the involvement of relevant stakeholders in the budget process. Moreover, an inter-ministerial committee is usually formed to manage crosscutting issues and assess sensitive matters that may adversely affect the capital expenditure budget process. Therefore, stakeholders’ participation is a critical practice in the approval process of the expenditure policy.

Consultations in the policy development process can reinforce the legislative examination of government policy and the budget. Committees of experts and congressional members develop a suitable approach for promoting extensive consultation on the suitability of policies outside the pressure associated with the annual budget environment. Moreover, it is vital for the government to consult with the civil society for feedback concerning the proposed capital expenditure policy and budget execution. The civil society team may comprise of consultative boards and group representatives from different sectors of the society or ad hoc groups established by the government to discuss critical policy issues. Another practical approach for consulting the civil society is through user surveys and meetings with stakeholders and consumers when planning policy that will significantly impact their effectiveness. Therefore, consultations form a significant part of policy formulation.

 Feedbacks from stakeholders are important instruments for decision making in policy formulation. The feedback from the consultations should enable the treasury in conjunction with the federal government, to implement a policy. Additionally, various departments are responsible for implementing the policy in their respective areas. The current capital expenditure policy requires a five-year budget for long-term projects. As a result, multi-year estimates are used in the formulation of the budget and additional expenditure that may be required for the projects. The policy was supported by the legislature and the civil society, who perceive its value as increased control of expenditure on long-term projects and efficiency in handling short-term goals. Feedbacks received from stakeholders inspire the ownership of the expenditure policy process.

The budgeting process in the U.S. was assigned to the legislative and the executive arms of government. The departments collaborated throughout the process to ensure it was effectively delivered. The process is an outcome of the monumental Congressional Budget and the Impoundment Control Act of 1974, designed to serve two purposes (Regents of University of California, 2011). Firstly, it was to provide an appropriate fiscal management policy. Secondly, it was meant to address the unchecked use of power. Consequently, it established a clear-cut process that regulated the federal budget by Congress. The legislative arms of government thus became the key stakeholders in the congressional budgeting process.

To understand the budget policy, it is important to analyze the implementation process undertaken and its ability to attain a specific purpose. The Congressional Budget and the Impoundment Control Act was formulated with clear objectives to determine efficiency (Regents of University of California, 2011). The overarching objective of the budget policy was to establish effective guidelines that would assist the government in planning, approving, and prioritizing its revenue collection and expenditure (Regents of University of California, 2011). The policy was to aid the government in monitoring, follow, and evaluate its expenditure. The policy was guided by the set objectives, indicating that the executive and the legislative arm of the government were compelled to enact measures consistent with the prevailing times and circumstances. Besides, the policy addressed the unchecked power in federal spending, which, if not regulated,, would have significantly increased the budget deficits (Regents of University of California, 2011). Notably, the policy established a clear-cut process towards budget approval that begins with the president’s drafting of a budget proposal. After that, the Congress,, through the House and Senate Committees,, deliberates and votes on the accrued resolutions. The process concludes by submitting the resolutions to the president for assent as appropriations bills. Besides, the budget approval process provided an appropriate framework, phases of implementation, and timeframe for the federal government to plan, monitor, and evaluate its fiscal management. 

A process of engagement and intense lobbying preceded the budget. Intense stakeholder engagements ensured that all their divergent input or interests were considered to achieve an appropriate federal budget. The budgeting process has a clear pathway on the conduct of the deliberations and consultations among the stakeholders. Besides, the stakeholder deliberations and consultations exhibit the underlying political commitment that is critical for the legitimacy of the process. Consequently, it grants the process the desired public confidence. Based on the high political commitment and public confidence, the probability that the budget approval process will be undertaken with little resistance to attain its intended purpose is elevated. Hence, the process attributes several engagements, deliberations, and consultations among its stakeholders.

Budget policy ensured that the federal government enacted procedural guidelines on the budget approval process. Firstly, it provides a systematic approach to the budget approval process where the relevant tasks are matched with competent personnel. Secondly, it offers adequate measurement and evaluation procedures that assess the efficiency of the process. For instance, allowing feedback from the various stakeholders facilitates examining and evaluating various issues, interests, and concerns in the budget. Thirdly, it ensures the stakeholders align their interests towards a common good. Consequently, they can exercise their mandate to provide appropriate fiscal management. Therefore, the policy has been effective in regulating the unchecked use of power in the fiscal management process.

Budgeting approval provides an appropriate pathway for the federal government to conduct its fiscal management process. It also offers a systematic framework, phases of implementation, and timeframe with clear goals and objectives. Besides, it provides extensive consultations and deliberations among stakeholders to consider divergent views. Finally, it provides an appropriate approach for the federal government to monitor, track, and evaluate its fiscal management. The approval process enhances collaborations and utilizes the opportunity anchored in the legal environment to offer comprehensive advice on estimates for appropriations over a period.

Budget-Policy Analysis-Action

Management- Good

The House and Senate Committees on Appropriations are responsible for the federal budget approval process. They are responsible for legislation that allocates funds before they are spent by treasury (Marini, 2014). They have subcommittees that conduct hearings on the programs under respective jurisdictions before voting out a bill. The committees then mark the bills and send them to respective houses, and any differences are deliberated upon in a conference. Once both houses synchronize the contrasting sections, the bill is forwarded to the president. The president is expected to either veto, assent or forward the bill to the houses for harmonization with his or her suggestions.

Measurement – Good

Every January, the President of the United States (POTUS) submits a state of the union message, a budget, and an economic report to the Congress. Economic reports seek to evaluate the impact of the previous budget on the economy (Rieselbach, 2018). The Government Accountability Office is the supreme audit institution in the US mandated with investigating how the government spends taxpayers’ money. The processes are significant in the implementations of the budget in the U.S.

Alignment- Weak

The Senate and the Congress are expected to agree on the budget proposals. However, the houses rarely align even on the broadest budgetary blueprints. As such, seeking agreements is a daunting and time-consuming endeavor (Bardach & Patashnik, 2015). It is even worse because Congress and the president cannot negotiate any differences that arise until the very end of the process when the Senate and House have ironed out their differences and sent the appropriations bill to the White House. The position should be enhanced through consultations and ceding grounds.

Legitimacy

Public Confidence- Weak

Recent years have seen delays at the budget approval stage, specifically in completing action on appropriation bills and passing budgetary resolutions. It is an age of divided government where members of Congress are increasingly polarized (Pitsvada, 2015). The polarization affects the progress, which weakens public trust expected in the implementation process. In extreme cases where Congress cannot approve federal spending bills, government shutdowns occur because there are no approved spending plans. This calls for enhanced relationship and institutional trust to foster collaboration and public confidence. 

Stakeholder Engagement- Good

The approval stage of the budgetary process involves negotiations and interactions with key stakeholders. Individuals, businesses, the public, interest groups, and institutions communicate their opinions in town hall meetings and legislative hearings to enhance openness, transparency, and public accountability during the process (Harbridge, Malhotram, & Harrison, 2014). It also allows Congress to reflect current realities in the budgetary process for effective execution. The engagement with stakeholders within the budget-making system may lead to satisfactory results.

Political Commitment- Fair

Budget making is a political process that establishes realignments and supports sectional interest. The enhanced political interest makes the budget a highly contingent on party affiliations. Party members tend to side with the President’s budget estimates, while the opposition commonly disapproves (Sinclair, 2016). Having Congressional standoffs along party lines in budget approval is typical. Therefore, the process calls for political consolidations and agreement to deliver the desired results.

Policy

Evidence- Good

The budget is rarely written from scratch. Some of its major sections can be anticipated by drawing on evidence generated by analyzing previous years’ budgets (Tomkin, 2016). Further, through stakeholder and public engagement, opinions are sought on what the budget should contain. Accordingly, this information is used to identify needs and priorities.

Clear Objectives-Good

Congress deliberates on how to raise revenues and spend taxpayers’ money in the approval stage. New initiatives are identified, and existing programs expanded. In this stage, Congress sets the overall federal spending level for an entire year (Oleszek, Oleszek, Rybicki, & Heniff Jr, 2015). It also directs various committees that are mandated to oversee federal spending. The objectives are clearly stated.

Feasibility- Good

The feasibility process is a challenging procedure that requires timely intervention. Hence, if the process is not complete by the start of the fiscal year, every 1st of October, the Congress has the obligation to pass a continuing resolution to ensure that all government agencies affected by government shutdown receive funding until the budget is approved. Therefore, the process is implemented to ensure that departments continue to operate.

Recommendations for Policy Reforms

  1. Transform the budget resolution into a joint resolution subsequently signed into law by the President.
  2. Design declining annual targets on debt with revenue and spending policies designed for attaining those targets.
  3. Lay down enforcement procedures to be put in place if the limits are breached.
  4. Transform annual to biennial budget policy.
  5. Escalate scope of programs within existing spending caps.
  6. Create a procedure to involuntarily increase revenues in line with current measures, leading to an automatic reduction in spending, which would be triggered if budget targets are not reached.
  7. Increase the President’s authority to withdraw funds by ensuring the Congress votes on his proposed revocations (Q&A: Congressional Budget 2014).

Since the Congressional Budget & Impoundment Control Act of 1974 could not attain the goals in favor of the U.S. economic and financial interests, certain reforms, including the powers of the President, should be enhanced to ensure a more fiscally efficient budgeting policy. In reality, the reforms have not succeeded in creating a more transparent, effective, and accountable process for outlining the nation’s budget priorities. These improvements failures indicate that process alone is not the solution for congressional budgeting problems. However, some issues that require shared commitment towards enhanced government functioning are evident.

 

References

Bardach, E., & Patashnik, E. M. (2015). A practical guide for policy analysis: The eightfold path to more effective problem-solving. CQ Press.

Berger, Sam, Seth Hanlon, and Galen Hendricks. 2018. “Reflections on the Congressional Budget Act.” Center for American Progress, Retrieved from https://www.americanprogress.org/issues/economy/reports/2018/10/26/459894/reflections-congressional-budget-act/

Harbridge, L., Malhotra, N., & Harrison, B. F. (2014). Public preferences for bipartisanship in the policymaking process. Legislative Studies Quarterly, 39(3), 327-355.

Idzikowski, L. (2019). The federal budget and government spending. Retrieved from https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/

Marini, J. A. (2014). The politics of budget control: Congress, the presidency and growth of the administrative state. Taylor & Francis.

Oleszek, W. J., Oleszek, M. J., Rybicki, E., & Heniff Jr, B. (2015). Congressional procedures and the policy process. CQ Press.

Pitsvada, B. T. (2015). The executive budget: An idea whose time has passed. In Public Budgeting (pp. 71-89). Routledge.

Rieselbach, L. N. (2018). Congressional politics: The evolving legislative system. Routledge.

Sinclair, B. (2016). Unorthodox lawmaking: New legislative processes in the US Congress. CQ Press.

Tax Policy Center. (2016). What is the history of the federal budget process? In The Tax Policy Center’s Briefing Book. Retrieved from https://www.taxpolicycenter.org/sites/default/files/briefing-book/bb_full_2018_1.pdf.

The Regents of University of California. (2011). Slaying the dragon of debt. Retrieved from http://bancroft.berkeley.edu/roho/projects/debt/budgetcontrolact.html

Tomkin, S. L. (2016). Inside OMB: politics and process in the president’s budget office: Politics and process in the president’s budget office. Routledge.

 

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