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President Obama’s Budget

February 5th, 2015

Photo credit: Frankieleon via Flicker/CC

Most households have a budget — how much money you have versus how much you spend, and on what.

Just like you, the American government also has a budget.

The federal budget, however, is in the trillions of dollars (that’s 12 zeroes!) and impacts the life of every person in the US — all 300 million+ people. The U.S. also has the largest economy in the world (though some would argue these days that China does). Regardless, that’s a lot of people and money to factor in.

Where does that money come from …

Us. We all pay taxes, that’s part of being American.

When adults make money at their job, a portion of their paycheck goes to the government, called  income tax . It’s the most common kind of tax. There are other kinds of taxes as well, including taxes we pay on certain items like gasoline, for example. You can read more about the different kinds of taxes here .

Technically, the money the U.S. takes in is called revenue .

… and what’s our money spent on? 

Paying taxes, in return, allows us to live in a country that provides us with schools and roads and bridges and a military that keeps us safe, access to doctors, and the ability to have some money after we retire (those are just a few examples).

Courtesy of the National Priorities Project

Trying to balance the money that comes in with the money that is spent is, in a nutshell, the federal budget … and is one of Congress’ main responsibilities.

What did the president present this week?

The president, by law, has to propose a budget every year, always around this time. President Obama presented his on Monday.

Because it’s just a proposal, it’s like his best case scenario — if he could have his way, this is what he would do.

But his proposal is just the beginning of a long process that has to be approved by Congress. And then the president has to approve what Congress came up with.

How it’s supposed to work — the process.

After the president presents his budget, it goes to Congress. Both chambers of Congress — the House of Representatives and the Senate — each come up with their own budget plan using the president’s budget proposal as a starting point.

Once they do that, the next step is to figure out specific dollar amounts. This isn’t easy since these budget proposals are thicker than the phonebook!

Both the House and the Senate have twelve subcommittees representing different parts of government (called appropriations committees) that dive into the details and divvy up the money.

If and once these spending bills are approved, usually one at a time, then the House and the Senate have to come together and work out any differences so that they can present one final budget proposal back to the president.

The president then, in theory, signs the budget into law. After all this, the president could still veto it (single-handedly reject it), which has happened in the past.

So, it’s complicated before it even gets political.

Is that how it really works?

No. Jasmine Tucker, research assistant with National Priorities Project , an organization that helps people understand the federal budget, told HTE Kids News she would be “ flabbergasted ” if Congress came together to pass a budget, adding that, “they need to because it’s one of their big responsibilities.”

You’re actually more likely to hear about a government shutdown while they hammer out quick and temporary fixes … than an actual budget signed into law.

Why? A few reasons:

This is the first time in almost 5 years that President Obama has even presented a budget proposal on time.

The Senate and the House have until April 15 to come together and pass their versions of the budget (called a budget resolution). The last time this happened?   2009 .

This year, however, may be different. This is the first time in a while that the same political party (Republicans, in this case) control both chambers of Congress — Senate and House of Representatives. This was the big deal about the midterm elections . And, if the Republicans look like they can get things done, the thinking is people might be more likely to elect a Republican to be the next president. Presidential elections are just a year away.

But the last time the appropriations spending bills worked out on time? Around  20 years ago!

Then, after all that, it’s supposed to land back on President Obama’s desk in time for the budget to take effect on October 1.

The federal government’s budget goes from October to September (not the typical calendar year January to December). And this proposed budget is considered the 2016 (fiscal year) budget.

And this whole process, infinitely more complex that we’ve outlined here, happens ever year. Yikes.

What did President Obama’s budget proposal focus on ?

If you caught President Obama’s State of the Union address last month, you’ll have a sense of President Obama’s priorities. His proposed budget is basically putting a dollar amount on those priorities.

He wants to make the wealthiest people in the U.S. pay more taxes (namely those who make over $500,000 a year).

He wants the middle-class (people who make money somewhere in the middle and loosely defined as the majority of Americans) to be able to pay less taxes.

He wants to spend more money on education, including making the first two years of community college free.

And he wants to reduce the deficit (which is when we spend more than we have). Some people say this is great, but that he should have gone farther on this one. Click here for more  specifics .

How does this fit into the big picture?

There are some parts of the overall budget that are more or less set. These are the big programs like Social Security and Medicare. Programs like these are part of mandatory (or entitlement) spending. If Americans qualify, they are entitled to it. It is mandatory (must happen) that the government pays for it. This part of the budget isn’t really up for discussion, it just is. Mandatory spending makes up nearly 2/3 of the total federal budget. Basically the blue and the orange in the graph below:

Courtesy of National Priorities Project

The remaining 1/3 falls into a category called  discretionary  (pronounced: dis-kre-shun-a-ree) spending. That’s when you can make choices about how money is spent.

Over half of all discretionary spending consistently goes to our military to keep our nation safe. This chart is from last year’s figures but gives you an idea.

Graph courtesy of National Priorities Project

So it’s really the remainder of this that all the brouhaha is about — around 15-20% of the entire budget! And a lot has to fit into that: education, infrastructure , jobs, housing, protecting the environment, helping our veterans, our health, food safety, etc. What’s most important?

Federal budgets have a hard time getting passed because there often isn’t agreement on what our priorities are, and committing to them in actual dollar amounts makes it even harder. Here’s the White House’s interactive budget .

And even though we’re talking about trillions of dollars, some tough choices need to be made. It generally never seems to be enough.

Ideally, one goal is to balance the budget. Spend only as much as you have, otherwise you have to borrow money and owe it. The national debt is currently $18,000,000,000,000 (18 trillion dollars).

President Obama’s proposed budget doesn’t aim to be balanced. Some experts say that is okay depending on what’s happening in the economy. Others, like Republicans, don’t like that and believe he should do more do reduce the debt.

Republicans have reacted to the president’s proposal saying : “A proposal that never balances is not a serious plan for America’s fiscal future, especially when we have to borrow money just to afford the programs we already have.” Other Republicans called his proposal “laughable”.

And does whatever budget gets us through each year actually represent Americans’ priorities? That’s up for debate too.

Most Americans and politicians will agree, for example, that education is a priority, but the federal budget consistently spends only about 2% of its budget on education.

But, as a citizen, you can have your voice heard. The National Priorities Project’s (NPP) mission is for Americans to help set the agenda by better understanding the federal budget process. That way you can better communicate what’s important to you. NPP’s Jasmine Tucker in our interview: “These are our federal tax dollars, people should have a say in how that money is spent.”

What are your priorities?

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* HTE would like to thank Jasmine Tucker with National Priorities Project for speaking to HTE and being a great resource for this story. 

 

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