Federal Budget

• Author: Jeffrey Lehman, Shirelle Phelps

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An annual effort to balance federal spending in such areas as forestry, education, space technology, and the national defense, with revenue, which the United States collects largely through federal taxes.

Of the three branches of the U.S. government, Congress has the power to determine federal spending, pursuant to Article I, Section 9, of the U.S. Constitution, which states, "No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." The drafters of the Constitution sought to secure the federal SPENDING POWER with legislators rather than the president, to keep separate the powers of purse and sword. In The Federalist No. 58, JAMES MADISON wrote, "This power of 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."

Still, the Constitution reserved for the president some role in legislative decisions regarding federal spending. The president may recommend budget allowances for what he considers "necessary and expedient," and if Congress does not heed these recommendations, the president may assert his qualified VETO power. But the ultimate determinations of federal expenditures belong to Congress.

When the federal government spends more money than it collects in a given year, a deficit occurs. By the mid-1990s, annual budget deficits were exceeding $200 billion, which alarmed the public and caused debate over how to balance the federal budget. President WILLIAM JEFFERSON CLINTON was successful in the latter years of his administration to provide a budget surplus, which reduced the national debt (the total amount the government owes after borrowing from the population, from foreign governments, or from international institutions) by several billion dollars. In 2000, Clinton announced a record $230 billion surplus, which exceeded the previous record surplus of $122.7 million set in 1999. However, the deficit returned under President GEORGE W. BUSH. In 2003, Bush announced an estimated $304 billion deficit, which established yet another record. He anticipated a deficit for 2004 of $307 billion.

To encourage better communication and cooperation between the president and Congress on matters concerning the federal budget, Congress has enacted laws formalizing the budget-making process. The first such law was

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passed in response to an enormous national debt following WORLD WAR I. The Budget and Accounting Act of 1921 (31 U.S.C.A. § 501 et seq.) required the president to submit to Congress an annual budget outlining recommendations, or budget aggregates. Within budget aggregates recommended by the president, Congress then was to assign priorities. The 1921 act did not change the balance of powers assigned by the Constitution: Congress retained the right to ignore the president's recommendations, and the president retained the right to veto spending legislation. Rather, the act formalized and codified the roles of each branch.

Government Shutdown

Legal commentators have argued that by keeping separate the powers of purse and sword, drafters of the U.S. Constitution encouraged battles between Congress and the president. This friction between government branches is part of the constitutionally created system of checks and balances. Discord over federal budget priorities usually resolves in short order?no politician wants the reputation of jeopardizing the national or world economy. But on rare occasions in the 1990s, budget fights led to federal government shutdowns.

In October 1990, when Democrats in Congress sought to reduce the federal deficit by implementing a surtax on the income of millionaires, Republican President GEORGE H. W. BUSH followed through on a threat to VETO any budget legislation that included tax increases. The veto effectively shut down several federal agencies. The closures lasted only three days and occurred on a weekend. Fearing negative fallout from a more extensive government shutdown, Congress and the president reached a compromise plan to reduce the federal deficit without the surtax.

Major differences in political ideologies again surfaced in the fall of 1994, when control of Congress shifted from Democrats to Republicans. The new Congress set...