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Is the president's budget request important?

National Debt Glossary: Key terms for understanding America's financial crisis

This budget request, developed by the president's Office of Management and Budget (OMB), plays three important roles.

First, it tells Congress what the president recommends for overall federal fiscal policy, as established by three main components: (1) how much money the federal government should spend on public purposes; (2) how much it should take in as tax revenues; and (3) how much of a deficit (or surplus) the federal government should run, which is simply the difference between (1) and (2). In most years, federal spending exceeds tax revenues and the resulting deficit is financed through borrowing.

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Second, the budget request lays out the president's relative priorities for federal programs — how much he believes should be spent on defense, agriculture, education, health and so on. The president's budget is very specific, and recommends funding levels for individual federal programs or small groups of programs called "budget accounts." The budget typically sketches out fiscal policy and budget priorities not only for the coming year but for the next five years or more. It is also accompanied by historical tables that set out past budget figures.

The third role that the president's budget plays is to signal to Congress what spending and tax policy changes the president recommends. The president does not need to propose legislative changes for those parts of the budget that are governed by permanent law if he feels none are necessary. Nearly all of the federal tax code is set in permanent law, and will not expire. Similarly, more than one-half of federal spending — including the three largest entitlement programs (Medicare, Medicaid and Social Security) — is also permanently enacted. Interest paid on the national debt is also paid automatically, with no need for specific legislation. (There is, however, a separate "debt ceiling," which limits how much the Treasury can borrow. The debt ceiling is raised as necessary through separate legislation.)  

Source: Center on Budget and Policy Priorities

See also: President's budget


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