Funding the World's Largest Government
In a town known for keeping important business until the last minute, the fiscal year (FY) 2022 budget process has been especially slow. Normally, the White House releases the president’s budget outline in early February of each year. Lawmakers didn’t get President Joe Biden’s full FY 2022 request until May 28.
Is a brutal election and lengthy transition to blame? Perhaps, but in 2001, President George W. Bush released his FY 2002 budget outline in late February. President Obama’s first budget was also submitted about a month after he took office. The Biden administration’s delay means Congress will have to scramble to fund the government even more than usual.
What happens next, exactly? The current fiscal year ends at midnight on September 30. If spending bills are not signed by then, the agencies that those bills fund will shut down (at least partially). Four months isn’t a lot of time to hammer out agreement on the approximately $1.5 trillion in discretionary spending that’s up for grabs in the federal appropriations process.
Let’s discuss what will happen, and how things might play out.
A History of the Federal Budget Process
Article 1, Section 9 of the U.S. Constitution says, “No money shall be drawn from the treasury but in consequence of the appropriations made by law ...” The Budget and Accounting Act of 1921 required the president to submit a budget request to Congress to kickstart this annual process.
But while modern presidents tell Congress what they would like to spend money on, it’s still up to the legislative branch to decide whether or not to listen to the White House — and it has been that way since the 1st Congress. (Each two-year session of Congress is numbered. Lawmakers serving today are doing so in the 117th Congress.)
As the District Policy Group reminds readers, “Just because funding for a program is included in the president’s budget … does not mean that the program will be funded. That is just the first step in gaining funding; the Senate and House Appropriations Committees must allocate funding for money to actually reach a federal program.”
According to the U.S. House Committee on Appropriations, in 1789, the nation’s first year, Congress passed a single spending (or appropriations) bill. It totaled $639,000. The House Committee on Ways and Means, which was in charge of federal spending until the Civil War, wrote the legislation. In 1794, Congress passed two appropriations bills for the first time — one for civil and diplomatic expenses and the other for the military. In 1799, there were three spending bills.
The Ways and Means Committee continued to oversee appropriations until spending grew so high that lawmakers thought it was too much for one panel to handle both tax matters and appropriations. The House Appropriations Committee was established in 1865. The Senate followed two years later.
The committees, and the spending they approve, grew steadily over the coming decades. So much so that, as the Congressional Research Service explains, in 1921 “the House reorganized its Appropriations Committee by establishing for the first time a set of subcommittees to consider appropriations bills based on the administrative organization of the executive branch.” The Senate followed the next year.
This structure is largely the one that we have today. There are 12 appropriations subcommittees in the Senate and the same number in the House. Each panel writes a single spending bill, approves it, and then sends it to the chamber’s full Appropriations Committee for consideration. Once the House and Senate chambers have approved their respective bills, conference committees meet to reconcile the difference between each of the 12 pieces of legislation.
The products of those discussions — the final 12 fiscal year spending bills — must also then be approved by the full House and Senate. Once that step happens, the president can add his signature. At least that’s the way it’s supposed to work. But more on that in a bit.
At this point you might notice that we’ve skipped a step. What about the congressional budget resolutions, which outline not only lawmakers’ spending desires, but their tax plans too? Don’t these play role in the process?
Yes, but that step is relatively new.
Throughout the 19th century, and for most of the 20th, the White House’s budget request and the various spending bills were the only budget documents floating around Washington.
In the mid-1970s, lawmakers added that other layer of complexity: the congressional budget resolution. As House Appropriations Committee historians explain, “By the early 1970s, battles between the Nixon Administration and Congress helped spur passage of the Congress Budget and Impoundment Control Act of 1974, which established the Congressional Budget Office and required Congress to pass an annual budget resolution intended to better reconcile revenue and spending.” That legislation also established the House and Senate Budget committees.
If that sounds complicated, it’s because it is. So let’s summarize.
A Step by Step Guide to Today’s Budget Process
STEP 1: Staff at the Office of Management and Budget, which is in the Executive Office of the President (White House), meet with officials at each agency to determine how much spending the president should propose. STATUS: Complete.
STEP 2: According to Politico, the second step is that the “president sends a proposed budget to Congress the first Monday in February.” STATUS: Complete, but delayed.
STEP 3: In February, the Congressional Budget Office (CBO) submits economic and budget reports to Congress’ budget committees. STATUS: Complete, and the news is bleak. The CBO said if current law remains unchanged, the federal budget deficit will total $2.3 trillion and federal debt will reach 102 percent of the total economy this year. That projection is without the additional spending that President Biden and Democrats want to devote to infrastructure. (And it’s why this year’s appropriations process will be even more difficult than usual.)
STEP 4: The House and Senate Budget committees hold hearings to question administration officials and draft a budget resolution. STATUS: Hearings have been held, but we haven’t seen anything in writing yet.
STEP 5: A committee made up of both House and Senate Budget Committee members resolve differences between the two chambers’ budget resolutions. STATUS: Since no resolutions have been written, this step is not finished.
STEP 6: The House votes on the conference report and STEP 7: The Senate votes on the conference report. STATUS: Also not yet complete.
STEP 8: Each chamber’s 12 appropriations panels hold public hearings and then write their respective spending bills. STATUS: Not yet complete.
STEP 9: House and Senate Appropriations committees vote on their individual legislation, STEP 10: Full House and full Senate vote on each appropriations bill, and STEP 11: The president either signs or vetoes each appropriations bill. STATUS: Also incomplete.
As we have noted before, federal lawmakers are so behind on the annual appropriations process that the Congressional Research Service still has not created a tracker for FY 2022, which is typically Washington’s go-to tool to keep up with the federal spending process. One data point that might provide some solace, however: last year the Senate Appropriations subcommittees did not pass a single bill and the House didn’t approve any until July.
Of course, we also had to wait until after the December holidays to get a final deal on FY 2021 spending, following passage of a series of temporary, stopgap “continuing resolutions” that kept the federal government open. And this year will prove more difficult.
Spending Bills Plus Debt Ceiling Equal … Disaster?
As we mentioned two weeks ago, Congress also will need to tackle how to increase the federal debt ceiling in the coming weeks.
That, combined with appropriations season, are a recipe for brinkmanship.
Two years ago, Washington found itself in a similar situation. The Trump White House and Congressional Democrats reached a budget deal to increase federal spending and raise the debt limit … but only after months of debate and just before the Treasury Department ran out of runway before hitting the limit. As The Wall Street Journal explained, the agreement allowed for work on 12 individual annual spending bills to move forward.
Debt ceilings talks also coincided with budget and appropriations discussions in 2017, 2015, 2013, and 2011. And each time partisan gridlock took the nation to the brink of default. There’s no reason to think that this year will be any different, particularly given the very slim margin of control in both the House and Senate. So buckle up for a very rocky summer and fall.