The Evolution of the Federal Budget Process

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ABSTRACT. The federal budget process is a compilation of many rules and procedures, enacted primarily over the past century. Initially neutral as to budget outcome, that process, by the mid-1980s, had evolved to emphasize reducing the deficit. And the budget enforcement procedures put in place to control deficits, combined with robust economic growth, helped to produce historic budget surpluses by the end of 1990s. But in 2001, the economy slowed significantly. The budgetary effects of that slowdown, of the terrorist attacks of September 11, 2001, and other factors, brought a return of the deficit in 2002-ironically, just as the budget enforcement framework put in place to control deficits expired. Now, lawmakers face the question of what new framework should take its place. This article discusses the evolution of federal budgeting, emphasizing the major characteristics of each period and what factors drove reform efforts at each stage.


The U.S. Constitution grants the power to tax and spend to the Congress. Taxes may be levied and funds drawn from the Treasury only after laws crafted by the Congress specifically for those purposes have been enacted. James Madison, famed as the Father of the Constitution, asserted that "[t]his power over the purse may, in fact, be regarded as the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people, for obtaining a redress of every grievance, and for carrying into effect every just and salutary measure" (Madison, Federalist 58).

But beyond this broad grant of legislative authority to tax and spend, the Constitution is silent about fiscal policy and budgeting. It does not specify how tax or spending laws are to be formed or carried out, provides no direct role for the President in fiscal matters (beyond his power to veto legislation approved by the Congress), and says nothing about a national budget system. That system has evolved over the years through a combination of legislative procedures and practices, statutes, and informal practices. Its evolution continues as lawmakers confront new fiscal challenges and long-term budgetary pressures.


People use the terms "federal budget" and "federal budget process" as if those terms always mean the same thing to all people. This is misleading on both counts. In the case of the "budget," there are at least three possible definitions: the budget as proposed by the President and submitted to the Congress each year, the Congressional budget as specified by the aggregate limits set in the annual budget resolution, or the enacted budget. The enacted budget is what results from all the laws on the books today that control the collection and use of funds plus all of the laws passed by the Congress that affect taxing and spending for a given fiscal year.

By the same token, there is no single "budget process". Rather, that term refers to all the rules and procedures affecting the Presidential proposal and Congressional consideration of spending and tax legislation. Almost all of the provisions that govern current consideration of the budget were adopted in the last 75 years, and are the result primarily of three laws-the Budget and Accounting Act of 1921, the Congressional Budget and Impoundment Control Act of 1974, and more recently, the Balanced Budget and Emergency Deficit Control Act of 1985.

To understand federal budgeting and the federal budget process, however, one must start with the Constitution, where the "power of the purse" is given to the legislative branch. Only Congress may levy and collect taxes, borrow, and pass laws to spend the people's money. (United States Constitution, Article I, Section 8). The Constitution also makes clear that funds can only be drawn from the U.S. Treasury pursuant to appropriations made by law. (United States Constitution, Article I, Section 9). The Constitution, however, does not provide specifics about how these legislative functions are to be carried out, nor does it assign a specific role to the President in managing the nation's money. …