Federal Budget 101, Part 1 of 5: Budget Overview and Process

Federal Budget 101, Part 1 of 5: Budget Overview and Process

Understanding the Federal Budget: The Process, Revenue, Expenditures, Deficits

Part 1: The Budget Overview and Process (this page)
Part 2: Revenue
Part 3: Expenditures
Part 4: Putting it all Together
Part 5: Deficits and the Debt

Part 1 of a 5-part Series: The Budget Overview and Process

This is part 1 of a 5-part series on the federal budget. Part 1 explains the annual budget process.


This flow chart provides an overview of the federal budget process. The first thing to note is that the budget is a legislative process. The president does not own the budget; the president does not force the budget on the country.

The Constitution gives Congress the power to set budget items, but does not specify the process. The process that is currently used today was developed by Congress over the years.

Note that the role of Congress (the steps colored green in the flowchart) begins after the president submits a budget proposal. The role of the president (the steps colored orange in the flowchart) is limited to submitting a budget proposal and then signing the final budget that comes out of the congressional process.

The Constitution does not require the president to begin this process by submitting a budget proposal – Congress has declared that this is the process that will be used, although each house of Congress has at times created its own proposal. Congress would have been within the constitutional guidelines if it had declared that the original budget proposal come from the House of Representatives rather than from the president. But Congress has chosen to require the president to submit a budget proposal for Congress to work from. The president’s budget proposal is compiled by the Office of Management and Budget (OMB), working through various federal agencies.

Once Congress has the president’s proposal, the budget goes through various review processes in each house of Congress. After each house produces its own version of a budget, using the president’s proposal as a template, then a conference committee is convened in order to work out the differences in the two versions. The process at this point is the same as in any other bill that goes through Congress. The conference committee produces a final budget proposal, usually in the form of a compromise between the House and Senate versions. This budget is returned to each house for an up or down vote, with no amendments. Once the budget passes each house, it is finally sent to the president to sign into law.

Line-Item Veto

Several presidents (most famously, Ronald Reagan and Bill Clinton) have asked for line-item veto power in order to disallow specific spending items that he disagrees with. The argument for this power is usually in the form of “to cut wasteful spending by Congress”. Without this power, the president can claim helplessness over questionable spending projects and deficits resulting from something that he has signed into law. Keep in mind, though, that the budget process has gone through many different steps, and many separate items are the result of compromises relating to other items. With a line-item veto power, the president can undermine all of the compromises that went into producing the budget. He can okay items on a partisan basis, giving his party more power over the budget. The entire process could be undermined, and the executive branch would end up effectively creating a budget that the Constitution says only Congress can create.

Congress did pass the Line Item Veto Act of 1996, giving Bill Clinton line-item veto power. But the Supreme Court struck down this law as unconstitutional in 1998.

Next up: Part 2: Revenue

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Jerry Wyant