The annual U.S. federal budget begins as a proposal from the president to Congress that includes recommended funding for the next fiscal year. Congress follows a framework known as the budget process to create the official budget that defines annual funding for various public services. The current budget process was established in large part by the 1974 Congressional Budget and Impoundment Control Act, which was enacted to restore to Congress the power to make budgetary decisions. The Act grew from President Nixon's refusal to disperse nearly $12 billion in funds that had been appropriated by Congress. Nixon used his power of impoundment in an effort to curb government spending rather than allow Congress to address the issue with spending reforms. The budget process used by Congress includes budget committees that set spending limits for House and Senate committees and appropriations committees that approve or refuse funding for different federal programs. Funding is finalized by appropriation bills that are sent to the president to be signed into law or vetoed. When bills are vetoed, they go back before Congress and may be passed into law with a two-thirds majority vote from each chamber.
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The president can also influence spending by asking for additional appropriation bills. Funding for the federal budget comes from tax revenues. These revenues have three main sources: personal income taxes (47 percent of revenues), payroll taxes from employers and workers (33 percent) and corporate income taxes (12 percent). Other miscellaneous taxes such as excise taxes and custom duties make up a smaller segment of tax revenues. Some tax revenues go into federal funds, meaning they can be used for general government spending, while others are placed into trust funds where they are earmarked for specific federal programs. Revenues from corporate taxes and personal income taxes are designated for federal funds. Payroll taxes become trust funds that are used primarily for entitlement programs like Medicaid, Medicare and Social Security. These expenditures are referred to as mandatory spending. The federal budget covers a fiscal year (FY), which runs from October through September. In FY2011, the Congressional Research Service reported that mandatory spending accounted for over half of the total federal budget of $3.6 trillion. This represented an eighth of the GPD. In comparison, mandatory spending in 1962 (before creation of the Medicare and Medicaid programs) was less than 30 percent of the federal budget.
In addition to mandatory spending, other expenditure categories in the federal budget include national defense and international security, which accounted for about 20 percent of the FY2011 budget. The majority of this funding goes to the Department of Defense and includes the $159 billion spent in support of military efforts in Iraq and Afghanistan. Another 20 percent of the federal budget is allocated to retiree benefits for veterans and federal employees, transportation infrastructure, science and medical research, and education. Non-mandatory spending is referred to as discretionary; funding for discretionary spending must be approved each year as part of the budget process.
Economists and public policy analysts often use the ratio between the federal budget and the GDP to gain historical perspective on government spending. In 1907, federal spending represented 2.2 percent of the GDP. This figure rose to 16 percent during the Great Depression and 48 percent during World War II, dropping to 14.4 percent in 1951. From 1971 to 2008, government expenditures represented approximately 20 percent of the GDP. In 2010 and 2011, spending increased to 24 percent of the GDP. For the past decade, federal government spending has exceeded funding provided by tax revenues. To compensate for the difference, the U.S. Treasury raises money by issuing bonds. A Treasure bond is a loan to the federal government. About 24 percent of all federal government revenue is in the form of money borrowed through bonds. This money must be repaid (with interest) at some point in the future. Hence the continuing debate about the budget deficit and government spending.
Federal Budget Careers Careers in budget analysis are often focused on policy issues rather than number crunching and accounting. Budget analyst positions with public agencies frequently include research into program history, analysis of program funding and spending, and budget recommendations. Entry-level budget analyst positions require only an undergraduate degree, but more advanced positions require an advanced degree in public administration or public policy. Federal agencies that review overall budget issues provide many opportunities for MPA careers.
The Federal Acquisition Service (FAS) is an office within the General Services Administration (GSA). The FAS generates and guides approximately $95 billion in annual government spending. The commissioner leads the FAS organization and is responsible for bringing savings to taxpayers and federal agencies through strategic sourcing, contract reform and acquisition expertise. Other commissioner responsibilities include creation and support of GSA's strategic direction and continuous improvement of current programs and solutions for contracting, travel, fleet and card services. The commissioner also must mentor leaders and provide growth paths for members of the FAS organization.
The congressional liaison specialist position is located in the Bureau for Legislative and Public Affairs in the U.S. Agency for International Development (USAID). USAID functions as an independent agency of the federal government and works in support of economic growth, trade, education, global health and humanitarian assistance in Africa, Asia, Latin America and Europe. The agency receives foreign policy guidance from the secretary of state. Responsibilities of the congressional liaison specialist include advising senior staff on congressional actions related to programs and policies that are funded by the Foreign Operations Bill, the Foreign Assistance Act, the Farm Bill, and other related aid programs and authorities. Additional responsibilities include preparing written speeches and researching proposed legislation, regulations and statutes.
The position of budget analyst for the Smithsonian Institute's National Air and Space Museum (NASM) includes financial management, administrative management, procurement and contract management. The position requires support for current policies and procedures related to the museum's budget and finance as well as training for museum personnel on federal funding procedures. The budget analyst is responsible for analyzing and assembling data for development and justification of the NASM's annual trust and federal budget and the development of five-year projection plans.