Tuesday, March 19, 2013

The Federal Budget. And what the hell is sequestration? Part I

Okay TUPers, I’ve bored you several times before by writing posts about the federal budget, along with other fiscal knickknacks.  Admittedly, those posts never really garnered too many comments.  So even the thought of writing another means that I'm the living embodiment of “the definition of insanity” or just writing for self-gratification.  Either way, be warned, I’m going to talk about the budget...again.  So the numbness and blurry vision you may be experiencing may have nothing to do with that glass of Chianti you're sipping on.  It may just be in response to the post you stopped reading about three sentences ago.  However, for those of you who’ve made the questionable choice to keep reading – thank you – and know that I actually think there’s purpose behind this post.  Now, I’ve tried to get this all in one post but there is simply too much to say.  So, in an effort to build in suspense (actually, it was just too long to read...), I’ve taken a que from Tarantio and split this up in to two posts.  Sure, I the main culprit could be this long-ass introduction... but...

Whatever… here’s Part I...

As I said, we’ve actually talked about the federal budget and all the craziness that surrounds it before.  We’ve covered many things from the fiscal cliff and continuing resolutions, to democrats not passing a ‘budget’ in an millennia...millennias...?  millennium...? mill.... extremely long time, and yes, even the inflated debt ceiling debacle.  However, every time one of these issues pop up, we usually get several questions.  Most of them revolve around an understanding of the current manufactured crisis.  Recently, it occurred to me that it may help if folks had some level of understanding about the budget.  That way, you can identify where the craziness fits in and what the impact means.  You know, if someone asks, "When I hear folks say that the Democrats haven't passed a budget but the government hasn't shutdown, what does that mean."  I can say, "That means the Democratic lead Senate Budget Committee hasn't sent forth their proposal for the budget resolution process" and folks will know what I mean.  Or not... no promises. 
So, I figure a high-level overview would help to put things in context for many folks.  Or, if nothing else, serve as an excellent sedative if you have trouble sleeping tonight.  Either way, I hope it helps someone understand the ridiculousness that has taken place in our nation’s capital.

With that being said…

First and foremost:  Key terms and facts:

  • The Fiscal Year for the Federal Government is from October 1st – September 30th of every year.
  • Appropriations:  Specifies what exactly the government programs and agencies can legally pay out over a specific period of time (normally one year) and gives the Treasury permission to make it happen. 
  • Discretionary Spending:  Accounts for roughly one-third of all Federal spending; Congress determines how much to spend (or not to spend) on an annual basis using the appropriations process.
  • Mandatory Spending:  Accounts for roughly two-thirds of all Federal spending; authorized by permanent laws and doesn't have to go through the appropriations process. 

Also, as a quick process flow guide: The president submits a budget proposal by first Monday in February; budget committees in both the House and Senate consider the proposal and submit a budget resolution by April 1st and a resolved resolution should be sent to the appropriation committees by April 15th.  Once the House and Senate resolve any differences, they send it to the president to be signed into law.  Of course, that hasn't happened in... I don't know HOW long...

Again, that is an extremely high-level process.  There are plenty of details and nuances, but for the sake of this conversation, that should suffice. 

Remember This?
Now, as a threshold matter, just know that a program (or agency) must be authorized before it can spend money.  Honestly, authorization is what people think of when they think of legislation; so no real learning curves there.  Congressional committees make the appropriate authorizations.  Authorization bills can either create/extend agencies or programs.  Some programs or agencies must be reauthorized every year (see: the now infamous National Defense Authorization Act (NDAA)) while others are reauthorized every 3, 4, 5 or more years.  The most recent example: Violence Against Women’s Act, which is re-authorization every five years.  Bottom-line, authorization is the legal authority allowing a program/agency to enter into financial obligations.  There is still another - separate - step that actually identifies and allows each program/agency to spend money.  The idea is to separate (as in divide) the policy making from the funding.  With that, we transition to the Budget Resolution process.
Budget Resolution:
During the Budget Resolution process, Congress sets out the budget.  Look at it like this: if the budget were a house, the budget resolution would serve as the blueprints.  These "blueprints" serve as a framework for spending, taxation and other fiscal items.  This “blueprint” must pass both the House and Senate; however, it is NOT a ‘law’ and does not require executive sign-off.  And this, ladies and gentlemen, is our first current event moment.  When you hear someone mention the “Paul Ryan Budget,” they are referring to the Republican lead House Budget Committee budget resolution (chaired by Rep. Ryan).  It isn't law.  It doesn't actually fund the government.  The plan still needs to pass the House and resolved with the Senate’s version.  Which brings us to our NEXT current event moment (look, every time I say “current event moment, imagine the inanimate objects in your house making noise like on Peewee’s Playhouse.  You know, for effect.)  ANYWAY… our next current event moment reference:  “The Senate Democrats haven’t passed a budget in XXXX days!”  In contrast to Ryan’s annual budget, this accusation basically says that the Democratic lead Senate Budget Committee hasn’t submitted their ‘blueprint’ for passage by the full Senate and to reconcile the differences between the House and Senate versions.  While the Senate is legally required to pass this “blueprint,” since it isn’t a ‘law,’ there is no penalty for NOT doing so.  Also, the budget resolution simply establishes a framework, a spending ceiling, if you will.  There have been other enactments that have basically achieve the same results: One is the National Commission on Fiscal Responsibility and Reform, better known as the Simpson-Bowles plan – you may have heard of it.  The other was the Budget Control Act of 2011 which gave us the…wait for it… ‘Fiscal cliff’ and ‘sequestration.’  See how this all fits together like Lincoln Logs .... with missing pieces...but they weren't missing, the kid down the street stole them!  Who steals Lincoln Logs ANYWAY!?  WHY?   But I digress...Oh, just as an update: on March 13, the Senate Democrats did actually release their first “blueprint” in nearly four years.  While this stage is important, it does NOT give the program/agency the green light to actually spend money.  The budget resolution process sets limits on what Congress can spend within specific budget functions, but it doesn't actually set the spending levels for specific programs/agencies.  No, that part is left up to the appropriation committees.  There are 20 budget functions (e.g National Defense, Energy, Agriculture, etc.)   The interesting feature of the budget resolution process (at least for the Senate) is that it is not subject to a filibuster.  The Senate doesn't even need 50 votes, just a simple majority.  This is especially important because of a little thing called "reconciliation."  Basically, the budget resolution can direct Congress to change existing law to bring spending in line with the resolution.  Since these changes are part of the budget resolution, the reconciliation changes to a law cannot be filibustered. 
  So… there you go.  Part I.  Still awake?  Did you make it this far?  Did you find it helpful in ANYWAY?

Next Post, we will wrap this up.  We will get into the appropriations part of the budget.  Keeping with the house analogy, this is the part where we look at the "blueprint" and identify how much material we need to buy and how much it's going to cost.  

Until then, I hope it helps to make some sense… I hope.
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