Omar Bennett
The Constitution grants Congress the authority to create and collect taxes, borrow money, and approve spending, giving it the power of the purse. The Constitution does not specify how Congress should exercise these powers, how to spend or raise money, or where the money should go. The Office of Management and Budget (OMB) is the policy-setting entity involved with the federal budget process. The President proposes annual budget guidelines, which are considered and amended by House and Senate committees. Congress invariably resolves conflicts of laws by raising the debt limit or suspending it for a specified period.
| Characteristics | Values |
|---|---|
| Country | United States |
| Federal level | Congress has the power of the purse and is in charge of the budget, with the authority to create and collect taxes, borrow money, and approve spending. |
| The President proposes annual budget guidelines, which are considered and amended by House and Senate committees. | |
| The Office of Management and Budget (OMB) is the policy-setting entity involved with the federal budget process, providing guidance to agencies on budget preparation and execution. | |
| The Fiscal Service assists federal entities in setting up agency location codes and accessing relevant financial reporting systems. | |
| State level | The Governor submits a budget to the Legislature annually by January 10, with the Director of Finance as the chief financial advisor. |
| The Senate Budget and Fiscal Review Committee and the Assembly Budget Committee hear the Budget Bills, assigning them to subcommittees for budget hearings. | |
| Departments are responsible for operating within budgeted levels and complying with restrictions or limitations enacted by the Legislature. |
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What You'll Learn
The role of Congress
The U.S. Constitution grants Congress the "power of the purse", giving it the authority to make spending and tax decisions. This includes the ability to collect taxes, borrow money, and approve spending. The Constitution does not specify how Congress should exercise these powers or where the money should go, but it does establish that "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by law".
Congress passes two types of laws that set the budget for the country: mandatory and discretionary spending. Discretionary spending refers to the amount Congress sets annually for all other programs and agencies. The Office of Management and Budget (OMB) oversees the performance of federal agencies and administers the federal budget, providing guidance and support to agencies in developing their budget proposals.
Congress has also established statutory budget-control mechanisms, such as the 1990 Budget Enforcement Act (BEA) and the 2011 Budget Control Act (BCA), which impose temporary limits or "caps" on the level of discretionary appropriations. Additionally, Congress has the power to amend the budget proposed by the President and work out differences between appropriations bills.
The House and Senate both have Appropriations Committees that are made up of members of Congress. These committees are responsible for determining the precise levels of budget authority or allowed discretionary spending for all discretionary programs in the federal budget. The committees are broken down into smaller appropriations subcommittees, each responsible for creating an appropriations bill for different areas of the federal government, such as military spending or energy and water.
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The role of the President
The President proposes annual budget guidelines, which are then considered and amended by House and Senate committees. The President's budget is prepared by the Office of Management and Budget (OMB), which also provides guidance to federal agencies for their budget proposals. The OMB issues apportionments once the budget laws have been passed.
The President's budget is typically prepared in the spring or earlier, at least nine months before it is submitted to Congress on the first Monday in February. The President requests annual appropriations in their budget, which are supported by agencies that submit justification materials to the House and Senate Appropriations Committees. These materials provide more detail than the President's budget and are used to support agency testimony during Appropriations subcommittee hearings.
The Constitution does not require the President to make recommendations concerning the revenues and spending of the federal government, and the President does not have the power of appropriation. However, the Budget and Accounting Act of 1921 established the executive budget process, requiring the President to submit budget recommendations to Congress each year. This Act also established the OMB to assist the President in preparing and implementing the executive budget.
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The role of the House of Representatives
The U.S. Constitution grants Congress the "power of the purse", giving it the authority to make budget decisions. This includes the House of Representatives, which plays a crucial role in the budget-making process.
The House of Representatives, as part of Congress, is responsible for passing spending and tax legislation. This includes enacting annual appropriations bills that authorize federal agencies to incur obligations and make payments for designated purposes. The House also has the power to create and collect taxes, borrow money, and approve spending.
The House of Representatives works closely with the Senate to reconcile their respective budget proposals. The House and Senate each have Appropriations Committees made up of members of Congress, which are responsible for determining the precise levels of budget authority and allowed discretionary spending. These committees propose and amend the President's budget, and their members meet to work out differences between appropriations bills.
In addition to annual appropriations, the House of Representatives also considers supplemental appropriations to address emergency spending, such as during the COVID-19 pandemic or in response to natural disasters.
The House's role in the budget-making process is a key aspect of its legislative duties, ensuring responsible financial decision-making and accountability in government spending.
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The role of the Senate
The U.S. Constitution grants Congress the "power of the purse", giving it the authority to make spending and tax decisions, create and collect taxes, borrow money, and approve spending. However, the Constitution does not specify how Congress should exercise these powers or how to raise and spend money.
The Senate plays a crucial role in the budget-making process, alongside the House of Representatives. The Senate has an Appropriations Committee, which is responsible for determining the precise levels of budget authority or allowed discretionary spending for all discretionary programs in the federal budget. The Senate Appropriations Committee receives justification materials from agencies to support the President's appropriations requests. These materials provide more detail than the President's budget and are used to support agency testimony during Appropriations subcommittee hearings on the President's budget.
The Senate Appropriations Committee is broken down into 12 smaller appropriations subcommittees, each responsible for creating an appropriations bill. These subcommittees cover different areas of the federal government, such as military spending and energy and water. The Senate also has the power to amend the President's proposed budget.
In addition to its direct role in the budget-making process, the Senate can also influence fiscal policy through the reconciliation process. The Senate has a rule, known as the Byrd Rule, which provides a point of order against any provision of (or amendment to) a reconciliation bill that is deemed "extraneous" to the purpose of amending spending or tax law. This makes it difficult to include policy changes in a reconciliation bill unless they have direct and significant fiscal implications.
Overall, the Senate's role in the budget-making process is essential for shaping and approving the federal budget, ensuring that it aligns with the needs and priorities of the nation.
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The role of the Office of Management and Budget (OMB)
The Office of Management and Budget (OMB) is the largest office within the Executive Office of the President of the United States (EOP). Its most prominent function is to produce the president's budget proposal to Congress. The OMB also examines agency programs, policies, and procedures to evaluate their effectiveness and ensure compliance with the president's policies. It coordinates inter-agency policy initiatives and sets funding priorities.
The OMB plays a crucial role in the budget-making process by preparing the president's budget proposal, which is then considered and amended by House and Senate committees. The OMB ensures that the budget proposal is consistent with the president's policies and administration policies. It also oversees the performance of federal agencies and manages their financials, paperwork, and IT. The OMB is made up of career-appointed staff who provide continuity across changes in the White House.
The OMB's predecessor, the Bureau of the Budget, was established in 1921 as part of the Department of the Treasury. It was moved to the Executive Office of the President in 1939 and played a significant role in the government's rapid expansion of spending during World War II. In 1970, during the Nixon administration, the bureau was reorganized into the Office of Management and Budget.
The OMB is composed of several key positions, including the director, deputy director, deputy director for management, and administrators of various offices. The current director of the OMB is Russell Vought, who assumed the role in February 2025.
In summary, the OMB plays a vital role in the budget-making process by preparing the president's budget proposal, overseeing federal agencies, and ensuring coordination and compliance with the president's policies. Its functions contribute to the effective development and execution of the federal budget.
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Frequently asked questions
The US Constitution grants Congress the authority to create and collect taxes, borrow money, and spend it. The Office of Management and Budget (OMB) is the policy-setting entity involved with the federal budget process.
The President proposes annual budget guidelines. The proposed budget is then considered and amended by House and Senate committees.
The House and Senate have Appropriations Committees that are made up of members of Congress. These committees determine the precise levels of budget authority or allowed discretionary spending for all discretionary programs in the federal budget.
