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The federal budget is a source of great argument and passion in politics, and there's a good reason for that: 82% of the government's income is taken directly from the American people (the remaining 18% comes from corporate taxes and various minor sources like tariffs and earnings on assets held). It's been that way since 1913, when the passing of the Sixteenth Amendment ushered in the first federal income tax in the nation's history. Prior to that, import tariffs – an almost negligible revenue stream today – brought in virtually all of the government's money. This was possible because the government itself was much smaller and less expensive to operate back then; in fact, federal budgets before 1913 were often planned without any deficit spending, and frequently the nation held no debt at all.

These days it's different. The people overwhelmingly pay for their government directly, and there's a lot more of it. That makes the budget a hot issue, and the process for determining it is carefully watched and regulated. It's a process that is fluid and has changed considerably since the nation's founding – the Constitution does not specifically mandate the steps to be taken – but it has a definite, current form today.

Budget Process
The federal government may not spend one dime without specific congressional authorization. This much is constitutionally mandated – the so-called “Power of the Purse” rests with the legislative branch. In fact, part of the budget process involves the passing of “authorization bills”, or official permission to actually use the money allocated in the budget. The division (or appropriation) of funds – spelled out in what are called “appropriations bills” - must be passed by Congress every year, though authorization bills are often good for years at a time when passed.

The sequence of events really begins with the president, who receives allocations requests from the various federal agencies (the Department of Defense, Department of Agriculture, Department of Education, and so on) based on their assessments of their financial needs. Taking all of these into account, the president then drafts a “budget request” for the federal government, and submits it to Congress. As the name implies, this draft is merely a request. The president has no authority to force passing of a specific budget, and Congress is quite free to ignore his or her wishes if they so deign.

Once the president has registered the desired budget, the House of Representatives and the Senate each draft, debate, and pass their own budgets, called “budget resolutions”. In practice, these are generally influenced and informed (to whatever degree) by the president's request, but in theory, as previously stated, they do not have to be. Once the Appropriations Committees in the House and Senate have devised their respective allocation of funds, each bill goes to a floor vote in the chamber that wrote it. Finally, the House and Senate confer with each other for “reconciliation”, or the addressing of differences between the bills that they have passed.

When the two houses agree on a single combined compromise bill with which both are satisfied, the budget's final stop is the president's desk. This is essentially the only part of the process over which the president has real authority, as he or she now faces the decision of whether to sign the congressionally submitted budget. If the president does so, it becomes law and the government's allocation of funds is set for the next fiscal year. If the president returns the bill unsigned, however, then it is vetoed. The House and Senate are then required to reconsider the legislation, taking the president's concerns (which must be provided) into account. Upon a two-thirds majority vote of support in each chamber, however, the budget passes into law over the president's direct objection.

It should be noted that the above steps apply only to the allocation of what is called “discretionary” spending. In reality, most of the government's expenditures are “mandatory”, meaning that they must be undertaken. These expenses include required payments on programs such as Social Security, Medicare, and retirement benefits for veterans. Such spending requires only the permission of an authorization bill and not an appropriations bill – largely because there is nothing to appropriate. The precise amount of money needed to make these payments is easily calculable, and failure to pay would be equivalent to defaulting on a debt (indeed, financing of the national debt is included in this category). Many people are surprised to learn that most federal spending is, in fact, mandatory.

Ideally, Congress should pass its budget and receive presidential approval (or contend with his or her veto, though historically, bills are vetoed by the president only about 10% of the time) by October 1 – the beginning of the fiscal year. Realistically, however, this almost never happens, and Congress usually passes “continuing resolutions” - temporary funding for discretionary agencies and programs – until a final budget is decided. Failure to pass a continuing resolution or completed budget by the October deadline – generally a result of intense political bickering between Republicans and Democrats in one or both divided chambers – results in what is known as a “government shutdown”. This term is somewhat misleading, however: as previously mentioned, most federal spending is mandatory and not subject to this process at all, and additionally, essential agencies such as military and law enforcement (though technically considered discretionary) continue to operate during any such period. Effectively, less than 10% of the government actually “shuts down” during a government shutdown.

Federal Spending
The federal government used to spend a great deal less money per year than it does now. Round about the beginning of the nineteenth century, federal spending averaged about 2% of the Gross Domestic Product, or GDP. The Civil War holds the dubious honor of bringing about the first major spike in government spending in the nation's history, when the federal budget took up 13% of GDP. It slipped back below 4% after the end of that conflict, then soared to around 24% as a result of the Great War – later to be known as World War I. Though it declined again through most of the 1920's, the Crash of 1929 sent it rocketing up once more. This continued throughout the 30's, then finally, in the depths of World War II, the budget peaked at a stratospheric 48% of GDP – by far the highest it has ever been.

Federal spending has leveled off since then, but with the advent of social entitlement programs, agricultural subsidies, and other discretionary expenditures, it has never come close to the tiny fraction of GDP seen around the nation's founding. With some fluctuations, it has sat around 20% since the end of World War II, while the effects of the recent recession still have it in the 25% range.

Central Issues
The federal budget is a rich source of political controversy, with congressional Republicans and Democrats often arguing bitterly over how to spend the nation's income. Generally speaking, those on the right of the political spectrum favor limiting government spending as much as possible (though there are exceptions to this attitude, as conservatives tend to favor a high defense budget), while the left supports a more robust, active government.

Tax Policies
The Internal Revenue Service, or IRS, is charged with overseeing and enforcing the tax code of the United States. The body of laws governing taxation is complex (and it is common for politicians to call for their simplification, with varying degrees of details offered), but the US generally follows a graduated tax model that makes due a larger proportion of an individual's earnings as their income grows higher – with those living below the poverty line paying no federal income tax at all. Speaking quite broadly, this system is favored by the existing government of the United States, with conservatives seeking to lower overall taxes (and commensurately reduce spending) and liberals willing to tolerate higher rates – particularly on the wealthy - in order to fund social programs.

Alternative models include a flat tax, in which all income brackets pay the same percentage of their earnings, and the proposed “Fair Tax”, which would eliminate most existing federal taxation and replace it with a national consumption tax on retail sales. These systems – especially the Fair Tax – tend to be popular among those on the political right.

As discussed earlier, it is the duty of Congress to appropriate national funds for the use of various government agencies. Earmarks are essentially this process taken a (highly controversial) step forward, constituting attachments to an appropriations bill that mandates a certain portion of funding be spent on a particular project. The distinction is fine, but history has shown the implications to be immense.

Many people oppose congressional earmarks or at least favor severely restricting them. They argue that earmarks can result in political “backscratching” favors for corporate interests or wealthy individuals (who may have donated generously to the sponsoring politician's campaign), and in facts rules have been passed in Congress aimed at preventing this. Furthermore, as of the 110th United State Congress, any representative requesting an earmark must sign a letter declaring that neither he or she, nor their spouse, has any personal financial interest in the proposal or in the beneficiary project..

Defenders of earmarks say that the congressional act of breaking down allocated spending money by project is inherently democratic – more so than the alternative. They worry that if Congress – the elected legislative branch of government - does not direct agencies in how to spend the money directed to them, then the agencies themselves – or unelected members of the executive branch – are ipso facto empowered to make such decisions on their own. Additionally, they argue, because executive agencies are less beholden to the public than members of Congress, the head agents of the former are more likely to attempt to use public funds to benefit friends or attack enemies.

In any case, earmark spending is quite small. In the 2010 federal budget, it was responsible for less than 1% of government spending – that number itself down from 1.1% in 2006.

Fraud and Waste
Wasted money has always been a problem, but since the government began funding discretionary programs, the specter of fraud has haunted federal spending. For instance, farmers are eligible for agricultural subsidy compensation when their crops are ruined by natural disasters such as floods and heavy storms, while the poor (those earning below a specified threshold annual income and owning less than a given level of assets) can be allotted benefits under the Supplemental Nutrition Assistance Program – food stamps. Worries over such claims being made improperly for personal profit have long fueled arguments against allowing these and other programs to become too robust, or in some cases, against their existence at all.

Supporters of these programs (generally to be found left of center, while opponents are usually on the right) argue that the amount of fraud committed is small, and far outweighed by the benefits. In the case of SNAP (the food stamps program), for example, they speak of the needs of impoverished individuals and families to acquire food, while when it comes to farm subsidies, fears have been raised that farmers may not be able to survive without them at all. Conservatives typically call for harsh crackdowns on entitlement abuse, and for cutbacks in the programs to ensure that only the neediest have access to that in the first place.

Candidates' Positions on the Federal Budget

Hillary Clinton
Gary Johnson
Jill Stein
Donald Trump


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