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Normally, without authorization, an agency or program cannot receive annual appropriated funding. Authorization is not tied to the same schedule as the budget appropriations process; programs can be authorized at any time of year on an annual, multi-year, or permanent basis.

Borrowing and the Federal Debt

As with most things Congress does , its two chambers—the Senate and the House of Representatives—each draft their own budget resolution. The two plans are merged , and each chamber votes on the identical resolution. The appropriations committee for each chamber divides the amount allotted for federal agency funding between 12 subcommittees. Each subcommittee is in charge of funding for different functions of government, such as defense spending, energy and water, and interior and environment, and for the agencies involved.

The subcommittees conduct hearings with agency leaders about their budget requests and draft appropriations bills setting the funding for each. The full House and Senate vote on their bills, merge both versions of each one, and vote on the identical version of every bill.


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Each one, if passed, goes to the president for signature. If Congress passes, and the president signs, all 12 bills by September 30—the last day of the current fiscal year—the country has a new budget in time for the start of the next fiscal year. In the event of a shutdown, the government stops issuing passports, closes national parks and monuments, halts NASA operations, and puts many other functions on hold.

When the budget process is finally complete or Congress passes a continuing resolution, the government resumes normal operations. When the amount of money the government collects in taxes and other revenue in a given year is less than the amount it spends, the difference is called the deficit. If the government takes in more money than it spends, the excess is called a surplus. The deficit is financed by the sale of Treasury securities bonds, notes, and bills , which the government pays back with interest.

The debt ceiling is the maximum amount of debt the government allows itself to hold. Congress can vote to raise the debt ceiling.


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Close Search Search. American Flag Branches of the U. Government Budget of the U. Government Data and Statistics about the U. Presidents, Vice Presidents, and First Ladies. Show Description of Infographic Each year, Congress works on a federal budget for the next fiscal year. How does the government get money? Where does it go? Most government money comes from: Collecting taxes, or revenue, from people and businesses Borrowing it by selling Treasury securities savings bonds, notes, and Treasury bills The government spends money on: Social Security, Medicare, and other mandatory spending required by law Interest on the debt--the total the government owes on all past borrowing Discretionary spending, the amount Congress sets annually for all other programs and agencies.

The President submits his plan Typically by the first Monday in February, the President gives Congress his budget proposal for the next fiscal year. Appropriations committees distribute funding House and Senate appropriations committees divide the discretionary spending portion of the budget resolution among 12 subcommittees. Chambers vote on appropriations bills The full House and Senate vote on their bills.

The President signs the bills into law. Without a budget, many government services stop With no budget, Congress must pass a continuing resolution to fund the government temporarily. Share This Page:. Mason explains , the major culprit was actually interest rates.

And interest rates in turn were high because then-Federal Reserve Chair Paul Volcker jacked them through the roof to bring down inflation. In other words, price increases were regarded as so harmful that the federal government ate huge extra borrowing costs to bring them down. The Fed could have stabilized borrowing costs by printing money and buying up government bonds, but that would have just pushed even more money into the economy, further fueling inflation.

Though this could have been controlled better, as I will explain below. Again, the first priorities in economic policy should always be full employment, maximum production, and price stability. Borrowing is useful or dangerous only insofar as it bears on those things.

How Congress Really Spends Your Money

This reality is never internalized in mainstream budget reporting , which almost always assumes that austerity — that is, spending cuts or tax increases — will cut one's debt burden. In reality, austerity can make a debt burden heavier , by cutting output and thus a nation's ability to pay. Countries like Greece have strangled their economies half to death with austerity, only to see their debt-to-GDP ratio increase because of the recession caused by the austerity.

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Even granting the dubious premise of debt paranoiacs, in times of economic weakness the "responsible" thing to do is borrow and spend. Indeed, grasping the reality of debt leads to a very counterintuitive conclusion: The greater the amount of outstanding debt, the more important borrowing and spending becomes to hitting output, employment, and price targets. The reason, as Mason and Arjun Jadayev point out , is that if one has a giant quantity of debt, even a small change in the underlying interest rate can hugely increase the necessary interest payments — just as happened to the U. Therefore, under such circumstances the central bank should ideally print money to keep borrowing costs down, and the rest of the government should use borrowing and spending or austerity to keep the economy in fighting trim.

And as Jadayev and Mason write, this is exactly what happened after "In response to the very high debt ratio in the immediate post World War II-period U.

Budget of the U.S. Government

Now, in general it is probably a better idea to rely on taxation rather than borrowing to fund government programs especially permanent ones. Most government debt ends up owned by the wealthy, and so a huge outstanding debt can end up being a sort of subsidy of the rich. Similarly, the current debt explosion is objectionable insofar as it represents a giant transfer of income to the top 1 percent.

But that is a tactical issue, and one that could be corrected through progressive taxation.

At bottom, the American national debt is no big deal, and insofar as it can be a problem, it has nothing to do with how mainstream budget reporting presents the issue. Silly propaganda like the national debt clock deserves nothing but a snicker.