Government Spending Briefing Book

a guide to budgeting and appropriating — July 23, 2012 —

WHAT’S IN SIDE 01

Introduction to the budget: Congressional budgeting 101

03

A Quick Glance: Appropriations 101

04

A Quick Glance: Mandatory Spending 101 05 graphic

07

a closer look: How does the budget and Appropriations Process Work?

11 graphic

13

A Closer Look: Can We Count on the sequester to cut spending?

15 graphic

01 INTROduction TO THE BUDGET: Congressional Budgeting 101

It’s that time of year again in Washington: Appropriations season. It’s the time of year that the House and Senate traditionally will begin to consider yearly spending bills. With that, it’s a good time to examine how the government spends your money. It’s also a good time to address other bigticket spending items happening in Washington.

It might surprise you, but most federal spending happens outside of the appropriations process. So this briefing book not only looks at appropriations spending but we also will take a look at federal spending that happens automatically—outside of the yearly appropriations process.

The Federal Budget

63%

37%

Mandatory & interest spending Discretionary spending (Appropriations)

03 A Quick Glance: Appropriations 101

Each year, the federal government’s fiscal year runs from October 1 through September 301.

The next fiscal year – 2012 – will begin on October 1, 20122.

The top-line dollar amount that the Appropriations Committee can spend is set by a budget3. Generally, a budget is needed so the Appropriations Committee knows what it can spend.

Congress must pass 12 spending bills to fund the government at the start of the new fiscal year. If all bills are not signed into law, they are likely to pass a stopgap funding measure, sometimes called a continuing resolution4.

In the last fiscal year (2011), discretionary spending accounted for about 37 percent of all federal spending5.

In general, the bills considered during the appropriations process only cover discretionary spending programs—not mandatory spending (explained in the next section)6.

Generally, appropriation bills only apply to one fiscal year7.

In other words, this process to fund the government is done on a yearly basis.

A Quick Glance:

Mandatory Spending 101 As mentioned before, discretionary spending is funded through the annual appropriations process. This is a stark contrast to mandatory spending programs (Social Security, Medicare, and Medicaid are examples of mandatory spending) whose funding stream is on autopilot.

These mandatory spending programs are “controlled by laws other than appropriation acts8.”

Further, “spending levels for mandatory programs are generally controlled by eligibility criteria and size of the eligible population.” In other words, unless Congress takes up legislation to reform these programs, it has very little control over how much money is spent on them.9 These programs are referred to as being on autopilot because they continue to spend money automatically.

In fiscal year 2011, mandatory spending programs made up 56 percent of all federal spending10.

07 A Closer Look:

How does the Budget and Appropriations Process Work?

The budget and appropriations processes are some of the most complex legislative procedures in Washington. Below, we try to break it down for you.

April 15 is the target date by which Congress should pass a final budget resolution11. (In theory, the House and Senate should pass their own budgets earlier than this date and then reconcile the two versions by April 15).

However, the process doesn’t work that way. According to the Congressional Research Service, “During the past 37 years, when Congress has completed action on a budget resolution, Congress adopted the budget resolution by the target date only six times, most recently in 200312.”

Fiscal Year 1997 was the last time all regular appropriations were enacted by the start of the fiscal year13.

For the last three years, Congress hasn’t completed action on a budget14.

While the budget resolution does not have the force of law, it sets caps on how much Congress can spend for discretionary spending—the money Congress spends on a yearly basis through the appropriations process15.

“Emergency spending” is exempt from this cap. In other words, if Congress determines something is a compelling and sudden need, it can classify it as emergency spending.

The Appropriations Process ( I n t heo r y )

Top-level budget cap

Appropriations bills (each take part of top-level budget cap)

Each bill marked up separately

HOUSE

Senate

Differences reconciled in conference committee

Sent back to house & Senate for final vote

HOUSE

Senate

09 Emergency spending has “become the tool of choice for Congress and the presidential administration to avoid caps set by annual budget resolutions, resulting in dramatically increased government spending16.”

After a budget sets a cap, this top baseline cap set by the budget resolution is divided among the 12 Appropriations Committees who each have their own cap17.

In theory, the House and Senate then consider and pass each 12 appropriation bills individually and then reconcile the difference between each of the 12 appropriation bills in a conference committee. That compromise version then goes back to each chamber for a vote on final passage.

Congress is supposed to consider each individual appropriation bill so the president can sign them into law on or before the start of the new fiscal year (October 1).

But the process doesn’t work.

For the upcoming Fiscal Year 2013, the House has passed a budget but the Senate has not.

Because Congress needs a cap in place from the budget to move appropriation bills, this means Congress has to “deem” a budget resolution passed for the purpose of establishing a budget cap.

Currently, House appropriators are working from the $1.028 trillion discretionary spending cap. The Senate is working with the discretionary spending cap set at $1.047 trillion.18 At some point, they will have to reconcile the fact that they are working from two different budget caps.

As a spending comparison, last year the House and Senate agreed to a spending cap of $1.043 trillion19.

It should be noted that the $1.047 trillion dollar cap was set in August 2011 when the President signed the Budget Control Act into law20. In addition to raising the debt ceiling, the law slowed the increase of future federal government spending, as outlined in the infographic on the next page, by establishing certain spending caps on discretionary spending, beginning with the upcoming fiscal year which begins on October 1, 2012.

Although this cap was set, according to the Senate Parliamentarian, it does not take the place of a budget21.

To view more on the appropriations timeline, check out our interactive website.

[SCREENSHOT OF WEBSITE]

13 A Closer Look:

Can We Count on the Sequester to Cut Spending?

Over the past several years, “cutting spending” has become more popular in Washington. When the debt ceiling was raised last August, a provision ensured that spending would be cut even if the “Super Committee” failed to reduce the deficit.

Now that the Super Committee has failed and sequestration will go into effect in January 2013, what is sequestration, and will it get the United States’ fiscal house in order?

What is sequestration? By definition, sequestration makes spending reductions to get budget levels in line with statutory spending goals22.

Many federal programs are exempted from the sequestration process—some of these exempted programs include Social Security, Medicaid, and federal retirement and disability programs, among others23.

But at least it’s a start.

It will reduce our debt, right?

No. According to the non-partisan Congressional Research Service, the Budget Control Act doesn’t do enough to get the United States’ debt under control. “While the Budget Control Act is projected to reduce the deficit, it does not eliminate budget deficits or growth in the federal debt” over the next 10 years.24

Under one projection, over the next 10 years, the deficit is expected to grow an additional $8.5 trillion if the nation continues down its current fiscal path.25 In the January 2013 sequester cut, $54.7 billion of the savings will come from defense spending and $54.7 billion will come from non-defense spending26.

According to the independent Congressional Budget Office, a large majority of total cuts, 71 percent, would come from reductions in discretionary appropriations. Thirteen percent would come from mandatory spending reductions, while the remainder would come from interest payment savings accomplished through the sequester’s deficit reduction.27

So these cuts will actually happen‌ Right?

Not necessarily. In fact, there already are talks of amending the Budget Control Act so the sequestration cuts are modified28.

In fact, Congress has a track record of sending formulas that bring spending to a grinding halt.

On the infographic on the next page, we examine another attempt by Congress to control spending. In 1997, Congress enacted the Sustainable Growth Rate formula to slow the growth in Medicare spending. The cuts, created by the Sustainable Growth Rate formula, have been blocked every year but one.

1. Congressional Research Service. The Congressional Appropriations Process: An Introduction. P. Summary. February 23. 2012. http://assets.opencrs.com/rpts/97-684_20120223.pdf 2. Congressional Research Service. The Congressional Appropriations Process: An Introduction. P. Summary. February 23. 2012. http://assets.opencrs.com/rpts/97-684_20120223.pdf 3. Congressional Research Service. The Congressional Appropriations Process: An Introduction. P. 4. February 23. 2012. http://assets.opencrs.com/rpts/97-684_20120223.pdf 4. Congressional Research Service. The Congressional Appropriations Process: An Introduction. P. 5. February 23. 2012. http://assets.opencrs.com/rpts/97-684_20120223.pdf 5. OMB Historical Table 8.1. http://www.whitehouse.gov/omb/budget/Historicals 6. Congressional Research Service. The Congressional Appropriations Process: An Introduction. P. 14. February 23. 2012. http://assets.opencrs.com/rpts/97-684_20120223.pdf 7. Congressional Research Service. The Congressional Appropriations Process: An Introduction. P. Summary. February 23. 2012. http://assets.opencrs.com/rpts/97-684_20120223.pdf 8. Congressional Research Service. Mandatory Spending Since 1962. March 23, 2012. P. Summary. http://www.fas.org/sgp/crs/misc/RL33074.pdf 9. Congressional Research Service. Trends in Discretionary Spending Since 1962. September 10, 2010. P. 1. http://www.fas.org/sgp/crs/misc/RL34424.pdf 10. Congressional Research Service. Mandatory Spending Since 1962.

March 23, 2012. P. 1. http://www.fas.org/sgp/crs/misc/RL33074.pdf 11. Congressional Research Service. Congressional Budget Resolutions: Historical Information. March 13, 2012. P. Summary. http://www.senate. gov/CRSReports/crs-publish.cfm?pid=’0E%2C*PLS2%23%20%20%20%0A

12. Congressional Research Service. Congressional Budget Resolutions: Historical Information. March 13, 2012. P. Summary. http://www.senate. gov/CRSReports/crs-publish.cfm?pid=’0E%2C*PLS2%23%20%20%20%0A 13. Congressional Research Service. The Congressional Appropriations Process. February 23, 2012. P. 12. http://assets.opencrs.com/rpts/97684_20120223.pdf 14. Congressional Research Service. Congressional Budget Resolutions: Historical Information. March 13, 2012. P. Summary. http://www.senate. gov/CRSReports/crs-publish.cfm?pid=’0E%2C*PLS2%23%20%20%20%0A 15. Congressional Research Service. The Congressional Budget Process: A Brief Overview. March 3, 2011. P. 1 -3. http://assets.opencrs.com/rpts/ RS20095_20110303.pdf 16. The Never-Ending Emergency. Mercatus Center. August 2011. http://mercatus.org/sites/default/files/publication/Emergency_Spending_de_Rugy_August2011_1.pdf 17. Congressional Research Service. The Congressional Budget Process: A Brief Overview. March 3, 2011. P. 3. http://assets.opencrs.com/rpts/ RS20095_20110303.pdf 18. CQ Today. Spending Contracts Become Clearer. April 20, 2012. http://cq.com/doc/news-4066767?wr=RDlYTlRja3lSajRKa29rd0drVHoq UQ. 19. CQ Today. Spending Contracts Become Clearer. April 20, 2012. http://cq.com/doc/news-4066767?wr=RDlYTlRja3lSajRKa29rd0drVHoq UQ. 20. For more information, see our fact sheet on The Debt Limit Compromise at http://www.bankruptingamerica.org/wp-content/uploads/2011/08/ Washington-Debt-Plan-Compromise.pdf 21. Politico. Harry Reid Loses Procedural Ruling on Budget Vote. April 3, 2012. http://www.politico.com/news/stories/0412/74801.html 22. CRS: Budget Sequesters: A Brief Review. March 8, 2004. P. 2.

23. CRS: The Budget Control Act of 2011. August 19, 2011. P. 31. http://www.himss.org/content/files/pulse/2011CRSRept-TheBudgetControlActof2011.pdf 24. CRS: The Budget Control Act of 2011: Effects on Spending Levels and the Budget Deficit. September 16, 2011. http://www.aau.edu/WorkArea/ DownloadAsset.aspx?id=12708. P. Summary.

25. CRS: The Budget Control Act of 2011: Effects on Spending Levels and the Budget Deficit. September 16, 2011. http://www.aau.edu/WorkArea/ DownloadAsset.aspx?id=12708. P. Summary.

26. CRS: The Budget Control Act of 2011. August 19, 2011. P. 30. http://www.himss.org/content/files/pulse/2011CRSRept-TheBudgetControlActof2011.pdf 27. CBO: Testimony of Douglas W. Elmendorf on Discretionary Spending. October 26, 2011. P. 17. http://www.cbo.gov/ftpdocs/124xx/ doc12490/10-26-DiscretionarySpending_Testimony.pdf 28. Politico. Buck McKeon Sounds Alarm on Sequestration. June 27, 2012. http://www.politico.com/news/stories/0612/77910.html

For more information on the facts that affect your pocketbook, visit us at: thepublicnotice.org [published July 23, 2012]