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Fiscal Policy: All You Need To Know About the Federal Budget Process

by Elaine Schwartz    •    Sep 27, 2013    •    2326 Views

The story of a government shutdown is really all about a budget process. We have a President who submits a budget to the Congress each year. We have a Congress that has to agree on 12 appropriations bills that establish spending priorities and fund federal agencies. Eventually, the President’s plans and whatever the Congress decides have to agree. But what happens when they don’t?

A continuing resolution (CR) or a  shutdown.

Why can’t agencies just keep spending until they get their appropriations? Article I, Section 9 of the Constitution is one reason. “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” Furthermore, Congress passed the Antideficiency Act that details the impact of a funding gap. Nonessential government activities have to stop.

There is a temporary solution called a Continuing Resolution (CR) which perpetuates funding until a new CR, a specific funding act, or the budget is passed. The problem is that the existing CR expires September 30th. Currently, we have neither a budget agreement nor a new CR.

As a result, nonessential government activities will have to stop unless the Congress acts before midnight on September 30th.

What is essential? Nonessential?

More tomorrow.

For now, though, here is how the budget process is supposed to unfold:

From: National Priorities Project

From: National Priorities Project


Sources and resources: To see more on how fiscal policy works through the budget process and the source of the above flowchart, I recommend looking at articles from the National Priorities Project. Meanwhile, the Congressional Research Service provides all of the detail and explanation you might ever want to know about the budget process here and here.


Please note that several several sentences from this entry have appeared previously in econlife.


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