Latest Budget News and Federal Budget Overview


Significant Upcoming Dates


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Recent Budget News (see Chron for news archives):

  • Mar. 13, 2024:  CBO released a cost estimate for H.R. 3230, which would expand the scope of the Unfunded Mandates Reform Act, to cover major rules in addition to legislation.
  • Mar. 11, 2024:  President’s Budget released.  See the complete budget at: GovBudget.com/presidents-budget/Analyses of the Budget: Roll Call  WashPost  CNN  AP  Bloomberg  NYTimes  WSJournal  The Hill
  • Mar. 8, 2024: See Appropriations.com for complete details on passage of the 6-bill appropriations minibus.
  • Mar. 7, 2024: House Budget Committee marked up an FY 2025 budget resolution.  Text  R-Summ  D-SummPresident’s State of the Union address foreshadowing some of the budget proposals to be released on Monday, March 11.
  • Feb. 16, 2024: CBO — How Changes in Revenues and Outlays Would Affect Debt-Service Costs, Deficits, and Debt
  • Feb. 14, 2024:  Testimony of CBO Director Swagel on The Budget and Economic Outlook: 2024 to 2034
  • Feb. 7, 2024:  The nonpartisan Congressional Budget Office its Budget and Economic Outlook for 2024 to 2034.  “In CBO’s projections, federal budget deficits total $20 trillion over the 2025–2034 period and federal debt held by the public reaches 116 percent of GDP. Economic growth slows to 1.5 percent in 2024 and then continues at a moderate pace.
  • Jan. 31, 2024: House Budget Committee hearing on CBO.
  • Jan. 18, 2024: House Budget Committee voted 22-12 to report HR 5779, the Fiscal Commission Act of 2023, legislation establishing a bipartisan fiscal commission. CBO Estimate. The Commission would be charged to “identify policies to improve the fiscal situation in the medium term and to achieve a sustainable debt-to-GDP ratio of the long term, and for any recommendations related to Federal programs for which a Federal trust fund exists, to improve solvency for a period of at least 75 years.” The bill would create a 16-member bicameral, bipartisan Commission with 6 Senators, 6 Representives and 4 nonvoting members from outside Congress; each of the 4 congressional leaders would appoint 3 members and 1 outside member. The Commission would be charged with proposing legislation by Dec. 12, 2024, with an optional extension date of May 15, 2025. Expedited consideration in the House and Senate — without amendment — would be required, although Senate passage would require 60 votes (the same threshold for cloture). Approving a legislative proposal would require a majority with at least two Democrats and two Republicans. House Budget Chairman Jodey Arrington (R-TX) said he would like to attach the measure to an FY 2024 appropriations bill.  All but three Democrats on the Committee opposed the measure arguing it could open the door to Social Security cuts.
  • Jan. 12, 2024: CBO releases annual report on Expired and Expiring Authorizations

FEDERAL BUDGET OVERVIEW:

The federal budget divides more than $6.5 trillion in annual federal spending into three broad categories as displayed below:

  1. discretionary spending;
  2. direct spending (Social Security, Medicare, Medicaid and other mandatory spending); and
  3. net interest payments on the debt.

 

Data Source: Congressional Budget Office, Budget and Economic Outlook (Feb. 2024)


Discretionary Spending: 27% of the Budget: 

  • About 27% of federal spending is called “discretionary spending,” because the amount of spending flows from annual discretionary funding decisions by the House and Senate Appropriations Committees.
  • Defense discretionary spending is $822 billion in projected outlays for FY 2024, or 13% of total outlays. It is funded by the Defense Appropriations bill and other appropriation bills that fund military construction and atomic energy.
  • Non-defense discretionary (NDD) spending is $917 billion in projected outlays for FY 2024 or 14% of total outlays. NDD is funded by the 11 non-defense appropriations bills. Non-defense discretionary spending has been trending downward, except for temporary increases due to the Great Recession and COVID-19 response efforts.  As a percent of GDP, non-defense discretionary spending was 4.4 percent in FY 2010 and fell to 3.1 percent of GDP by FY 2019. Due to the COVID-19 pandemic response, NDD rose to 4.4 percent of GDP in FY 2020, but fell to 4.0 percent in FY 2021, 3.8 percent in FY 2022, and 3.6 percent of GDP in FY 2023.

Direct (Mandatory) Spending: 60% of the Budget

  • The largest block of federal spending— about 60% and $3.908 trillion in FY 2024—is called “direct spending” because the outlays flow directly from legal obligations of the federal government established in authorizing laws. Direct spending is also referred to as “mandatory spending” because it is mandated by legal obligations written into law (such as Social Security benefits).
  • Most direct spending is comprised of “entitlement programs”—where eligibility rules, benefit formulas and inflation adjustments enacted in permanent law determine annual outlays. Consequently, entitlements and other direct spending programs are on “auto-pilot” until underlying laws are changed.
  • The three largest entitlement programs, together comprising 45% of the budget, are Social Security, Medicare and Medicaid.
  • Social Security: nearly $1.5 trillion in outlays and 22% of the budget, pays old-age, survivors, and disability benefits from payroll tax receipts and trust fund reserves.
  • Medicare: nearly $900 billion and 14% of the budget is the national health insurance program administered by the federal government for seniors and disabled adults, and financed by payroll taxes, premiums, copayments, and general tax revenues.
  • Medicaid: more than $550 billion in outlays and 9% of the budget, is the major health and long-term care program for low-income children, families, and seniors—financed jointly by the federal and state governments and administered by the states.

Net Interest Payments on the Debt: 13% of the Budget and Rising

  • The third category of federal spending is “net interest,” projected to be $870 billion in FY 2024, more than 13% of total federal outlays.
  • Because of the rapidly rising public debt, net interest is projected to become the fastest growing portion of the federal budget, reaching $1 trillion per year by FY 2026 according to the Congressional Budget Office.   


As displayed in the figure below, federal revenues consist of governmental receipts from the individual income tax, payroll taxes, corporate income tax, federal reserve remittances, excise taxes, custom duties, and the estate and gift tax. Revenues in FY 2024 are projected to be $4.9 trillion.


  Data Source: Congressional Budget Office, Budget and Economic Outlook (Feb. 2024)