HY 357 Lecture Notes - Lecture 59: Congressional Budget Office, The Surplus
6 Jun 2018
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The Federal Budget
The expenses of the operations and services provided by the federal government as well as the
revenues to pay for those expenses make up the federal budget. Each government program,
agency, and activity receives a certain amount of money; programs with a higher priority receive
more funding than those considered less important. Preparing the budget and getting it through
Congress is a complicated and, needless to say, very political process. The fights between
Congress and the White House over spending priorities are annual events.
Preparing the budget
Since the Budget and Accounting Act of 1921, the president has had the authority to
prepare the budget each year. The Office of Management and Budget (OMB), which
was created in 1970 in the Executive Office of the White House, advises the president
on budget policy and collects and analyzes the requests for funding from all government
departments and agencies. The OMB then puts the budget together based on
anticipated revenues and expenditures, and it is submitted to Congress in January.
Congress's role in determining budget policy increased with the passage of the Budget
and Impoundment Control Act of 1974. The legislation set up budget committees in both
the House and Senate, established the Congressional Budget Office (CBO) to give
Congress access to expert advice to conduct a comprehensive budget review, and set a
timetable for approval of the budget.
Balancing the budget
Debts and deficits are not the same thing. A deficit occurs when, in any given time
period, spending exceeds revenue. A debt, on the other hand, is just the total amount
one owes. So it is possible to run up a deficit in one year without going into debt, as
long as excess money is available to cover the shortfall. And one can run up
a surplus, and take in more revenue than gets spent, without necessarily erasing a large
debt.
Individuals and families usually cannot run up deficits for long. They quickly become
buried in debt and find themselves unable to borrow more money. A national
government, by contrast, can support deficit spending for many years. Creditors trust
that the government will pay back loans as promised, because declaring bankruptcy
would exact severe costs to both the economy and to national prestige. U.S. deficit
spending increased sharply in the 1980s through a combination of tax cuts and high
defense expenditures, but the borrowing was able to continue for many years.
However, even governments eventually must balance their budgets. Too much debt
requires exorbitant interest payments from the national treasury and can lower
economic efficiency. By the mid-1980s, American leaders became worried about the
mounting debt and set out to get deficit spending under control. In response, Congress
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Document Summary
The expenses of the operations and services provided by the federal government as well as the revenues to pay for those expenses make up the federal budget. Each government program, agency, and activity receives a certain amount of money; programs with a higher priority receive more funding than those considered less important. Congress is a complicated and, needless to say, very political process. Congress and the white house over spending priorities are annual events. Since the budget and accounting act of 1921, the president has had the authority to prepare the budget each year. The omb then puts the budget together based on anticipated revenues and expenditures, and it is submitted to congress in january. Congress"s role in determining budget policy increased with the passage of the budget and impoundment control act of 1974. The legislation set up budget committees in both the house and senate, established the congressional budget office (cbo) to give.
