The federal government operates on a fiscal year, beginning October 1 and lasting through September 30 of the next calendar year. At one time, the federal fiscal year ran from July 1 to June 30. Lawmakers pushed the date back to October 1 to give themselves more time to set funding levels for that coming year. Congress now routinely misses the October 1 start date. It does so by passing what are called “continuing resolutions,” or “CRs,” that simply extend the expiring fiscal year’s spending levels to some point beyond October 1 to buy more time to finalize the new fiscal year’s spending. If it fails to do so, or if the president refuses to go along, the federal government “shuts down”: all but essential programs are unable to function. Some uninformed individuals think that shutting the government limits federal spending. It doesn’t. The disruption actually costs the federal government more, and opens it up to all sorts of lawsuits from the private sector for missing contract obligations, etc.
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As an aside, Congress must regularly pass and the president must sign legislation lifting the federal government’s statutory debt limit, or “debt ceiling.” Again, the uniformed think that refusing to increase the debt limit will somehow reduce spending. It does not. The nation’s debt – that the limit limits – is what the government owes for borrowing to provide previous spending. Failing to honor the nation’s full faith and credit will cause international financial crisis and would dramatically increase the cost the U.S. government must pay to borrow money to pay for its future spending. Some in Congress wish to get rid of the debt limit permanently, because it really serves no useful purpose, and only causes confusion in the public and tough votes for lawmakers.
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Under our Constitution, Congress controls the nation’s purse strings. Each year, the Executive Branch – in this case, the president – submits a request to Congress to fund federal spending. This is the president’s budget proposal. In most years, Congress follows much, if not most, of the budget minutia, but sometimes disagrees, often on high-profile matters. Congress then examines the president’s request and drafts its own congressional budget resolution that sets for the Legislative Branch aggregate revenues and spending. That document guides how Congress will put funding come the new fiscal year. That’s what is correctly called the “budget.” (Many people use that word to mean spending. That is wrong. See below.)
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The federal government has basically two kinds of funding: direct (or “mandatory” or “entitlement”) and discretionary. Direct spending is allowed by some underlying law. For example, the law authorizing Medicare says once you reach a certain age you are eligible for the program. Once you begin participating, the cost of the program goes up ever so slightly. Direct spending is the largest slice of the federal spending pie.
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Discretionary spending, which Congress must pass each year through the 12 yearly regular appropriations bills, covers pretty much everything else you think of when you consider federal government: highways, bridges, fighter jets, federal courts, Head Start, etc. (Every other year or so, the Executive Branch will ask for a supplemental appropriations bill to fund unexpected needs, like natural disaster relief.) For years now, Congress has been unable to pass these 12 bills individually, forcing leaders to group them into packages of three or four bills that the Hill calls – colloquially – “mini-buses,” or to combine all twelve in one large package called an “omnibus.” Late last year, Congress passed and the former president signed into law legislation that combined an omnibus of regular spending and a coronavirus supplemental package. That legislation was (mostly) appropriations. Spending. No doubt some uninformed souls called it the budget. Wrong, wrong, wrong. It was appropriations.
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In closing, President Biden will submit his FY22 budget proposal to Congress in late April or early May. Congress will consider it and draft its congressional budget resolution by the end of May. That document will tell the congressional appropriations committees how much money they have to spread around in their 12 regular spending bills. By June, the House and Senate Appropriations Committees will start writing their FY22 bills. Should regular order return, each body will pass their respective 12 bills and will then meet in a House-Senate “conference committee” to hammer out compromise legislation that each chamber would then pass. The measures will then go to the White House for signature and enactment into law. All by September 30. A very tall order. Not impossible, but not likely.
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