Federal Budgeting and Federal Spending

America’s recent crisis in federal budgeting cannot be solved by government policy measures alone. Federal spending has a tendency to grow because budget objectives and the budget process are in direct conflict. Congress, as a whole, is concerned with stable prices, low interest rates, and full employment. But as individuals, members of Congress confront pressures to increase spending. The reality of the American system has shown that the collective need to control spending is no match for the pressures each individual member of Congress faces to increase spending. Therefore, the resolution of the budget crisis in America must focus on entitlement reform and increasing personal savings.

Until early in the twentieth century, taxing and spending procedures were relatively simple. Each executive department negotiated directly and separately with Congress for its funds. Revenue-raising and spending bills were passed as needed. All these activities took place without a formal budget process. Concerns over deficits and debt arising out of World War I brought about a change to more structured procedures. From the 1920s to the 1970s, budget making was in the hands of the president, who was assisted by the Budget Bureau (now part of the Office of Management and Budget [OMB] in the Executive Office). Under this process, Congress (in partnership with the president) exercised its constitutional responsibility for passing the taxing and spending laws needed to implement the president’s budget. As the years went by, Congress became increasingly frustrated by what it regarded as its less than central role in financial matters. This frustration, in conjunction with soaring expenditures and deficits, ultimately led to the passage of the Congressional Budget and Impoundment Control Act of 1974: “The Budget Reform Act of 1974 made the most comprehensive change in congressional budget procedure in American history” (Stein, 1989, p. 37)….

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