Each year Congress decides how much to spend and how to raise the money to pay for that spending. This is called the Federal Budget Process.
There are many laws and procedures that dictate this process . We’ve tried to simplify it here.
First, it’s important to know that each fiscal year starts on October 1, three months before the calendar year starts. So, FY 2017 began on October 1, 2016 and ran through Sept 30, 2017. The budget process starts a full year before the fiscal year when Federal agencies submit their budget requests.
One: The President submits a budget request for the coming fiscal year.
- This establishes three important numbers
- How much money the federal government should spend on public programs
- How much the government should raise through tax revenue
- These two numbers determine how much of a defecit the federal government shoudl run
- This budget contains recommendations for how much should be spent on different federal programs (e.g. defense, agriculture, education, health, etc)
Two: Congress holds hearings and the House and Senate Budget Committees generate their own budget plan called a “budget resolution”. These then go to the House and Senate floors where it may be amended and then adopted. The bill does not go to the president for veto or signature, requires only a majority vote to pass, and cannot be filibustered.
- Congress is supposed to pass the budget resolution by April 15th – but it often takes longer. Sometimes no resolution is passed and the previous years resolution stays in effect.
Three: Enacting Budget Legislation Congress must offset tax cuts with entitlement cuts. Under the pay-as-you-go (PAYGO) law the President and Congress must offset a tax cut with an entitlement cut. If policymakers fail to do so, automatic spending cuts are triggered.
- The $1.5 trillion tax cut will trigger automatic spending cuts to medicaid.
- It’s likely that PAYGO will be waived and the cuts will not take effect in 2018 however the growing deficit will pushy policy makers to make deep cuts in the future.