The Nation's Budget

The sheer growth of the budget of the United States over the last half-century is staggering. In 1930, total government expenditures were just over eleven billion dollars, about 12% of the gross national product and about $330 per family of four. By 1985, the federal budget was about 1.4 trillion dollars, over one-third of the gross national product or about $22,000 for a family of four. The FY 2002 budget is $1.9 trillion, estimated to rise to $2.5 trillion in five years, to FY 2007. Note: I will distribute tables of current budget numbers and estimates in class.

Despite its reputation of late, the defense budget has not grown as much as non-defense spending. The fastest growing sectors of the federal budget are entitlement programs such as unemployment compensation, medicare, and social security. These are not just costs associated with the national recession, but appear to be a long term secular trend. Even after twenty years of administrations committed to purging the welfare state, these entitlements appear to be largely impervious to severe budget cuts or termination.

Entitlement expenditures are rights to transfer payments or services enjoyed by large groups of citizens who fall into certain categories by virtue of such characteristics as age, income, and employment status. These recipients are entitled to these transfer benefits from government by law through public Policies Promulgated in the past. The spending for these programs is autonomous, changing according to events such as the aging of the population and the overall economic conditions. The spending level can rise dramatically, well beyond any expectations reflected in the original legislation. In fact, in 1962, entitlements cost about thirty billion dollars, but have risen to over 400 billion dollars today.

It is hard to rescind the promises made long ago in entitlement programs. Such policies are not easily revised and are immune to termination. They seem to represent an implicit social contract between the nation and certain vulnerable groups which fought and won concessions long ago. These aggregations, such as the elderly, form sizable electoral groups and can devastate a candidate for public office who holds unsympathetic views or threatens an entitlement. The vehement reaction by seniors in 1989 against a surcharge to fund catastrophic health care provides an illustration.

The Institutional Process

The President enjoys much clout throughout the budgeting process. While spending bills originate in the Ways and Means Committee of the House of Representatives and the Senate Finance Committee, the President controls the actual spending.

This power is implemented through the Office of Management and Budget. In 1921, the Bureau of the Budget was initiated within the Department of the Treasury. In 1939, the budget arm shifted to the executive office, working directly with the Presidential staff. The President has accumulated great clout as agenda setter, policy-maker, and budget director. A line item veto, the elimination of a specific program's spending authorization, represents the next potential significant change in the budget process and a shift in the power of the President relative to that of Congress. Many in Congress will balk at the prospect.

Over time, the budget process has intruded more and more into policy making. OMB has becomes the broker, the clearing house, the monopoly of information. The OMB staff has become closer to the President and the Council of Economic Advisors, which estimates the revenues, hence the state of the entire economy.

Congress maintains influence through revenue, authorizing, and appropriations committees. Both houses of Congress run roughly Parallel procedures, all complex and demanding. The Congressional Budgeting Office is assigned the task of reviewing estimates from the executive branch in light of intent of Congress and available revenues. Note that staff is greatly improved at all levels, both in the executive and the legislative branches. Yet, the process satisfies few and has not substantially restrained spending.

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The Public Policy Web
©by Wayne Hayes, Ph.D., ®ProfWork, July 13, 2001
Last Update: November 3, 2002