Why is federal budget important

The size and scope of those decisions make the budget process one of the most important and complex exercises in public policy making.

The formulation of the budget is an annual process that involves the Congress, the White House, and virtually all federal agencies. From start to finish, the process of formulating, legislating, executing, and auditing the budget is complex and lasts over a period of four fiscal years. Each year, lawmakers determine how much the federal government will spend and where the money will be allocated among 15 cabinet departments and dozens of independent agencies and commissions.

But the budget is more than just a tally of numbers. It also expresses the policy priorities of our government — and country. That spending is often divided into three categories:. This affected operations, grants, and contractors to varying degrees. However, agencies found it difficult to assess the long-term effects of the shutdown in isolation from other budgetary effects, such as sequestration and other reductions.

More recently, the federal government partially shut down for 35 days in fiscal year , which affected , employees at various federal agencies, according to the Congressional Budget Office.

About , of those employees were furloughed for part of this time and not permitted to work, while the others were designated to perform excepted functions and required to work during the shutdown.

Neither furloughed nor excepted employees received a paycheck during the shutdown; however, Congress enacted legislation during the shutdown to authorize both groups to be compensated at their standard rates of pay following the end of the lapse of appropriations. Agencies had only 7 months to absorb the cuts, resulting in a range of immediate and long-term effects.

Since , sequestration of mandatory spending has occurred each year, resulting in smaller and delayed direct payments to program beneficiaries, reduced services, and reduced tax credits, among other things. Under current law, sequestration of mandatory spending will continue through Another sequestration of discretionary spending may also occur in the future if spending caps are exceeded. Duration and Number of Continuing Resolutions and Other Budget Disruptions by Fiscal Year Notes: Figure excludes continuing resolutions enacted in February , April , and March that provided funding for the remainder of the fiscal year.

Managing declining resources. Agencies must effectively manage the limited resources they have available in order to achieve their missions and deliver services to the public. GAO developed a framework that outlines three key themes to guide agency officials in managing declining resources. This framework includes examples that provide specific strategies for leading from the top, using data analytics to guide decision making, and reducing costs. Overview of Framework for Examining Agencies' Efforts to Manage Declining Resources In conjunction with the annual appropriations process, agencies may have other mechanisms to collect and use funds.

Unobligated balances from multi-year and no-year accounts. Sometimes agencies may carry forward funds received in prior years that remain available to use for the same purpose in a future year. Reviewing these balances and answering key questions about them could provide insights into why a balance exists, what size balance is appropriate, and what opportunities if any for savings exist. Actively managing these balances could help agencies better respond to unexpected events , such as disruptions in funding.

Revolving funds. Agencies contribute to intragovernmental revolving funds to pay for business-like activities within or among federal agencies. Shared services—where agencies consolidate their service needs such as payroll —to save money or improve efficiency— may be supported through these types of funds. Following key operating principles , like clearly delineating roles and responsibilities and measuring the performance of the funds, can help agencies effectively manage these revolving funds.

Budgeting for capital. Federally owned capital, such as buildings and ships, require significant amounts of funds to purchase and maintain. Alternative funding mechanisms—like operating leases and public-private partnerships—can help agencies meet their capital needs in the short term but may be a more expensive way to acquire capital over the long term. Alternative budgetary structure options , such as a government-wide capital acquisition fund, could improve the transparency of costs and benefits.

User fees. For example, Congress has enacted authority for the government to charge fees for people to enter some national parks , and to collect and obligate fees to fund some regulatory activities. Well-designed user fees can help pay for programs while reducing taxpayer burden.

Certain fee design options, such as maintaining a reserve when authorized, can help buffer against revenue instability i. Published: May 25, Publicly Released: May 25, Published: Jan 16, Publicly Released: Jan 23, Published: Mar 07, Publicly Released: Mar 07, Published: Nov 29, Publicly Released: Dec 11, Published: Feb 06, Publicly Released: Feb 06, Published: Dec 20, Publicly Released: Dec 20, Growth is also essential for the United States to maintain its position of global leadership.

Federal budget projections, however, are troubling for long-term economic growth. As that happens, government borrowing will soak up private savings that would otherwise be invested in increasing worker productivity. The government itself is projected to spend less on investments such as infrastructure, education and basic research that can increase productivity and economic growth.

Such spending is being crowded out by interest on the debt, Social Security and health care programs -- which, under current law, will all grow more quickly than the economy.

To ensure a stronger economic future, policymakers must slow the growth of debt. They can give priority to spending programs that boost economic growth, they can make other programs more efficient, and they can reform the tax code to efficiently raise enough revenue. Such changes can reduce the economic drag from debt. If you are like most people currently retired or nearing retirement, Social Security is critically important to your personal financial situation; for most retirees, in fact, it provides most of their income.

In addition, if you are working you are having Social Security payroll taxes taken out of your paycheck and, in return, should be able to count on income from it in your own retirement. However, as currently structured, Social Security is on an unsustainable path and already pays out more in benefits than it collects in payroll taxes.

The program faces large, automatic cuts in less than two decades if policymakers do nothing. That would mean lower income for retirees and a major disruption to the economy. The problem is grounded in the simple fact that as the baby boom generation ages, the number of retirees receiving benefits from Social Security rapidly increases while the number of workers paying taxes to support those benefits grows much more slowly. There are numerous options and policy levers that could put the program on a more sustainable course by reducing future benefits, increasing taxes, or a combination of the two.

Most bipartisan plans look to a combination while protecting the lowest-income retirees, avoiding cuts for current recipients, and providing younger Americans a stable source of retirement benefits. Such plans could create a sustainable and robust system. That would pave the way for more entrepreneurship among the working-age population and peace of mind among older Americans that Social Security will be there for their children and grandchildren.

The health care system is the largest industry in the country and is made up of a patchwork of public and private programs.