What Is The Federal Budget Process?

Every Government has social, political, and economic responsibility, that’s why the allocation of resources is not done properly. Due to the wrong allocation of resources, lots of money gets wasted. To save money, a budget is a very helpful tool. The budget also plays an essential role in our economy. A budget maker uses the federal budget process to prioritize spending and identify revenues to pay for all economic activities. The federal budget is one of the most important policy instruments used by the U.S. government. If you are excited to know more about the federal budget process, read our blog.

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what is the federal budget?

steps of federal budget process?

what is federal budget deficit?

causes of budget deficit.

What Is The Federal Budget?

The U.S. federal government’s expenditures and revenues are included in the budget. The budget reflects historical conflicts and different economic theories. The budget is the financial reflection of the Government’s priorities.

The federal budget is prepared by the President’s Office of Management and Budget in the U.S. The Federal Government spends money on different types of goods, programs, and services that support the economy and people of the United States. 

also read: Are Small cap index fund a good investment?

Steps Of Federal Budget Process

Below are some steps showing federal budget process.

Steps Of Federal Budget Process

#1. President’s budget request:

The federal budget process starts when the President submits a detailed budget request for the coming fiscal year, which starts on 1 October. This budget request was developed through an interactive process between federal agencies and the President’s Office of Management and Budget.

The white house proposes the level of spending for federal agencies and programs every year. They forecast revenue and expenditures and detail the administration’s policy and spending priorities.

The federal budget includes:

(a) How many funds should the Federal Government spend on public purposes?

(b) how much it should take in as tax revenues.

(c) How much of a deficit and surplus should the federal Government run?

#2. Budget resolution:

Normally, Congress holds hearings to question Administration officials about their requests before creating its own budget plan, known as a budget resolution. This work is done by the White House and Budget Committees, established by the Congressional Budget Act of 1974, the primary function of these committees is to draft and enforce the budget resolution. Once the Budget Committees pass their budget resolutions, the resolutions go to the white house, where they can be amended by a majority vote.

The resolution is without the force of law, and it doesn’t go to the President of the U.S. Budget makers have often skipped this essential step in recent years, instead working out a series of 2-year deals that increased spending caps set by law.

#3. Appropriations bills:

This appropriation committee for each department divides the amount allotted for federal agency funding between twelve sub-committee. Every sub-committee performs different 

functions of Government, like defense spending, energy and water, and interior and environment, and for the agencies involved.

The sub-committees conduct hearings from agency leaders according to their budget requests and draft appropriations bills setting the funding for each. The full white house and Senate vote on their bills and vote on the identical version of every bill. Then passed bills go to the President for signature.

#4. Budget Completion:

If Congress passes and the President signs all 12 bills, the budget process will be complete, and then the bill will become law. If bills are passed on 30 September (the last day of the current fiscal year), the country has a new budget in time for the start of the next fiscal year (1 October). If Congress can’t agree on 12 different bills, it can pass an Omnibus bill with funding for multiple areas. If the budget is not completed before the new fiscal year, Congress must pass a continuing resolution authorizing temporary funding at the previous year’s levels or face a government shutdown.

Previous Year Data:

The Federal Government collected $4.1 trillion in revenue in 2021 (FY2021) — or $12,294 per person.

92% came from individual income, payroll, and corporate income taxes.

The Federal Government collected revenue in 2021.

What Is The Federal Budget Deficit?

A federal budget deficit occurs when the Federal Government spends more money than it collects in revenue. The federal budget deficit is the annual amount that the Government borrows. The Government usually financed the budget deficit by selling bonds to the private sector.


Causes Of Budget Deficit

#1. Politics:

This is one of the main causes of a federal budget deficit. When the Federal Government spends more than its revenue, it isn’t easy to make decisions. They have to increase taxation, reduce spending, or just carry on borrowing. 

Federal governments also use budget deficits in the run-up to an election. Due to political factors, the Federal Government must continue to spend money after the election, and so the cycle repeats. While some governments try to resist, they also have to win votes.

#2. Cyclical Reasons:

During economic contraction, federal government revenues can decrease rapidly. While revenues decrease due to people losing their jobs, costs also rise, increasing unemployment and decreasing income support. So incomes fall and spending increases frequently. This provides a strong force that causes a federal budget deficit.

#3. Interest Payments:

If a country runs a continuous budget deficit, its debt can aggregate; as it aggregates, Its obligation to pay interest always grows, which may result in a budget deficit.


The U.S. paid $389 billion in interest alone in 2019. That is about 33% of its overall budget deficit. This works in a vicious cycle that continues to create future federal budget deficits.


The federal budget process is not as easy as it sounds; it rarely goes according to plan. But after everything about how the process goes, there are always points where people in the U.S. can weigh in to let their representatives know what they want and don’t want in the federal budget.

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