The process for determining the national budget all begins with the President. This is when the Chief Executive submitted the detailed budgetary request for the upcoming fiscal year, which often starts on the 1st of October. The request is then developed via interactive process that happens between the President’s Office of Management and Budget and the federal agencies which then starts before spring.
3 Steps in Determining National Budget
There are three critical roles that this plays and these are discussed in the following:
Number 1. This is telling the Congress what is recommended by the President for the overall federal fiscal policy including:
- How much must be spent on public purposes by the federal government
- How much must it take in as tax revenues and;
- How much surplus or deficit the federal government must run which is practically the difference between A and B
In most of the time, the federal spending is exceeding the tax revenues and to finance the deficit, it’s done through borrowing.
Number 2. The budget that came from the president is laid out along with his/her relative priorities for the federal programs, from how much he believed must be allocated on agriculture, education, defense, health and so forth.
The budget in this case will be so specific, recommending the funding levels for each budget accounts. In most cases, the budget is sketching out the fiscal policy as well as budget priorities not just for the upcoming year but also, for the next 9 years.
The budget is also backed by supporting volumes including the historical charts from the past budget reports.
Number 3. The last role for the President’s budget is to signal Congress the recommendations of the president for both tax policy and spending changes. The budget consists of various programs in which some are requiring new funding every year to maintain while others that don’t need annual action by Congress.
And while the President has to recommend the levels of funding for yearly funded programs, he/she does not have to propose legislative changes for the ongoing parts of the budget that’s been funded already by the prior laws.
The Congress Takes Over
Then after, Congress will be having hearings. This is to question the Administration officials regarding their request. Then after, it is going to develop their personal budget plan which is referred to as budget resolution. This work is executed by the Senate Budget Committees and the House that was established by Congressional Budget Act of 1974.
If you’re in the finance market, then it is important that you keep track of the proposed budget for the upcoming years as this will help you in finding FOREX broker reviews that can guide which industry to invest your money.