Basic Training — Budget Process and Enforcement
Described in the introduction to the Committee on the Budget's Compilation of Laws and Rules Relating to the Congressional Budget Process, the "congressional budget process is a framework of laws and rules that govern the consideration, adoption, and enforcement of spending, revenue, and debt limit legislation each year." Fundamentally, the annual budget establishes limits on spending and debt and makes assumptions about revenue and deficits. The provisions of the Congressional Budget and Impoundment Control Act of 1974 ("Budget Act"), along with certain House rules, provide the enforcement mechanism to ensure that the Government does not exceed those limits.
Types of Spending
Mandatory Spending. Mandatory or direct spending is generally spending provided outside of the regular gen- eral appropriations bills. It is most often provided pursuant to a formula and is often referred to as entitlement spending because the authorizing law creates an enforceable right, or entitlement, to the benefit authorized by the statute. While entitlements do not encompass all direct spending, they represent the largest portion.
Common examples of mandatory programs are Medicare and Social Security, some kinds of student loan or student aid programs, and some farm subsidy programs. Less commonly cited examples of mandatory spending include salaries for Members of Congress, which are mandated by the Constitution. Other entitlements, such as Medicaid, have their funding provided by appropriations acts, but the ultimate amount of funding required is set through the authorizing statute, rather than the appropriations bill. Accordingly, even though Medicaid funding is included in an appropriations bill, it is still considered to be mandatory spending.
In order to reduce mandatory or direct spending, Congress must make substan- tive changes in law, such as changing eligibility criteria, rather than just reducing the amounts provided for those programs.
Discretionary Spending. Discretionary spending refers to spending provided in appropriations acts. Commonly a com- mittee will authorize the spending first, and then the Committee on Appropria- tions will provide the specific spending authority in the appropriations bill.
Much of what most people think of as government is included in discretionary spending, such as salaries and expenses for the FBI, Agriculture Department, and other agencies. It also includes salaries, expenses, and equipment for the military branches and legislative branch.
Budget Authority and Outlays. In addition to the general categories of spending(mandatory and discretionary), spending is also divided into two types. The first type of spending is budget authority, or the authority for the Executive Branch to obligate the Federal Government to pay, whether the actual payment is made immediately or in the future.
Outlays, on the other hand, are the actual payments. For instance, in the construc- tion of a large capital project, such as an aircraft carrier, the first year of the project may include a significant amount of bud- get authority (e.g. the entire cost of the aircraft carrier), while outlays may spend out over several fiscal years, and the first fiscal year may only have a small outlay. In general, the difference between bud- get authority and outlays is more easily seen in large, multi-year projects, while accounts which provide for benefits or salaries or expenses tend to have outlays which “spend out” in the same fiscal year.