The House of Representatives has the power to start the process of passing appropriations.
Congress has the power to impose excise taxes in the form of tariffs.
Section 9 prohibits export taxes.
Congress is directed to impose taxes that are equally apportioned.
The income tax is the only direct tax that is levied.
All indirect taxes, such as gasoline, tobacco, and liquor, must be uniform.
The principle of not taxing the federal government was established by the Supreme Court.
The power to borrow money on the credit of the United States is given to Congress.
Congress can only appropriate money that is in the budget.
Key players in the political game are involved in the budget development and passage process.
After January 3rd, the president must submit a budget proposal to Congress.
Each federal agency submits detailed proposals for the next fiscal year for each department.
The budget requests are put together by the Office of Management and Budget after the spending plan is submitted.
The OMB revises many of the recommendations after a budget review and prepares a budget for the president to submit to Congress.
The president's budget is evaluated by the Congressional Budget Office by the middle of February.
The OMB is a staff agency of the president, whereas the CBO is a staff agency of the Congress.
The results of the analysis by each group may be different.
The appropriations committees of each house review the budget and send it to their respective chambers.
Estimates of expenditures and recommendations for revenues are included in these resolutions.
The budget direction must be passed by April 15th.
The following year's budget is based on this.
The fiscal year begins on October 1st and both houses must pass a budget by that date.
If any of these bills are not passed, Congress must pass a continuing resolution to keep the government open.
During the Reagan, Bush, and Clinton administrations, there have been shutdowns.
The 1995-1996 budget battle was significant.
It caused the longest government shutdown and created unique political consequences.
The Republicans assumed control of Congress in 1994 and were spurred on by the "Gingrich Revolution" to pass a balanced budget.
The Republicans' balanced budget, which included major social program reductions and an overall objective of reducing the size and scope of the federal government, would be vetoed by President Clinton by the end of the fiscal year.
The budget battle began after Clinton's veto.
Unless the president agreed in principle to their budgetary demands, the Republicans refused to pass continuing resolutions.
President Clinton, using his bully pulpit in a most effective manner, refused and went on the offensive by suggesting that the Republicans were holding the American people hostage.
The Republicans were forced to pass continuing resolutions and reformulate their budget proposal after the media focused on how the shutdown was affecting government workers.
The budget battle had a longer lasting impact on presidential politics, as well as losing public opinion.
After the defeat in Congress, it reestablished President Clinton's image.
The election issue would carry through the entire 1996 campaign.
Special interest groups, heads of bureaucratic agencies, the media, and the public are all involved in trying to influence the budget.
Lobbyists for the private sector argue for more funding for programs such as entitlements and federal aid, while bureaucratic chiefs attend congressional hearings to fight for their departments.
The media reports on the process.
Through its contacts with legislators, the public gives its opinion on issues such as a tax increase.
President Clinton's first budget was dramatic, as was the final passage of the budget.
He proposed a tax increase for the wealthiest individuals in the country.
The final budget was passed by a slim margin in the House and by a single vote in the Senate, which was a tiebreaker by Vice President Gore.
The problem of a nation going broke was suggested by Ross Perot during the 1992 campaign.
Deficit spending is when expeditures exceed revenues.
The United States has been in debt since the Revolutionary War.
After a domestic or foreign policy crisis, the debt usually increases.
The implementation of Roosevelt's New Deal programs resulted in one of the largest deficits in the country's history.
The extent of the deficit became unsustainable in the 1980's due to its size and the interest on the debt.
Key players face serious problems such as how to reduce the nation's deficit while maintaining social programs.
During World War I, we borrowed $23 billion; during the Depression, another $13 billion, and during World War II, $200 billion.
By the year 2009, the deficit was over $1 trillion.
The federal government is able to borrow more money than it gets.
State budgets have to be balanced.
The interest on the deficit increases the size of the debt.
Even if the government can reduce the size of the debt over time, it still has to repay the interest.
Congress sets limits on the debt because the Constitution doesn't place limits on the extent or method of borrowing.
Since the last time the country showed a surplus in 1969 the limit has been inching upward.
President Clinton assumed the presidency in 1992 and the deficit was reduced by half by 1997.
The 1998 proposed budget reflected a budget surplus because of the Balanced Budget Agreement and an economy that showed high economic growth.
The first decades of the new century were projected to see an increase in the surplus.
The effects of 9/11 and the war on terrorism caused the surplus to disappear and record deficits to return.
Reagan proposed a massive tax decrease that was passed by Congress without a corresponding cut in expenses, which led to the increase in the deficit.
The cost of entitlement programs continued to escalate while the defense budget showed a dramatic increase.
Bush made campaign promises to reduce the deficit but became frustrated with the Congress which refused to cut social programs.
Bush had to backtrack on his "read my lips, no new taxes" pledge in order to get a budget passed.
The country's runaway deficit and debt caused a recession that retarded the rate of economic growth and caused an increase in unemployment.
You can understand why Congress tried to find ways of setting budgetary limits when there is a huge trade deficit.
During the 1990s, President Clinton signed a balanced budget that resulted in a surplus in 2000.
After George W. Bush's election, there was a mild economic recession followed by the events of September 11th and the wars against Afghanistan and Iraq.
George W. Bush signed one of the largest tax cuts into law.
After President Obama took office, he signed an economic bill that he said would help end the economic recession that began in 2008.
The nation's unemployment rate was almost 10 percent and the national debt was over a trillion dollars in 2010 as Congress and the president faced mounting pressure from the American people.
A bipartisan debt commission made a number of recommendations that would have reduced the deficit.
Congress did not vote on these proposals, but leaders of both parties promised to address the economic issues facing the country.
The new Republican majority in the House of Representatives passed legislation decreasing government spending, and President Obama signaled that he was going to submit legislation that would reform the tax system.
Efforts to control the budget began with reforms of the process.
Prior to 1974 Congress had a disorganized budget.
Each house had subcommittees that reviewed every request on an agency-by-agency basis.
There was no certainty as to what the total budget would be until the bottom line was totaled.
Congressional efforts to create an equitable tax structure and reasonable limits on expenditures have been the result of the history of budget reform measures.
The Congressional Budget and Impoundment Control Act was passed in 1974.
Controls were placed on the president's ability to determine allocations without congressional checks.
Before the law was passed, President Nixon used his authority to cut off funds for programs he felt would increase the deficit.
The law that Congress passed placed an additional check on the president.
The president couldn't take previously passed allocations without congressional approval.
The creation of the Congressional Budget Office acted as a check on the OMB.
Congress had to follow a time line of procedural steps in order to pass the budget.
These included the passage of budget resolutions, budget reconciliation aimed at achieving savings from taxes, other revenue adjustments and authorization bills that established discretionary government programs, and finally appropriations bills that covered the budget year and gave final authorization for spending.
Congress was able to understand where revenue was coming from and where money was being allocated because of the fact that it was able to view the entire process from start to finish.
The Gramm-Rudman-Hollings Balanced Budget and Emergency Deficit Control Act of 1985 was passed in response to increased deficit spending.
Phil Gramm of Texas, Warren Rudman of New Hampshire, and Ernest Hollings of South Carolina co-sponsored the law.
The goals were set by the law.
Automatic spending cuts must be ordered by the president if the goals are not met.
Social Security and interest on the national debt were exempt.
Congress approved a budget in 1989.
The 1993 budget had to be balanced by the law.
Congress has used this law as a guide for overall reductions because of the goals and balanced budget requirement.
Attempting to find a way of helping the economy and closing tax loopholes, President Reagan asked Congress to pass the most far-reaching tax reform measure since the income tax was instituted.
The law was supported by Bill Bradley of New Jersey and called for tax code changes that would result in a restructuring of tax brackets and eliminating many tax deductions.
The law was supported by both Democrats and Republicans.
Many Americans received a tax cut.
It was hoped that additional income would offset the loss of revenue from the tax cut received by the middle class.
The law reduced the number of brackets from 15 to 3, slightly increased deductions for individuals and families, and eliminated many other deductions.
The law succeeded in its objectives, but the expense side of the budget was not kept in check and the deficit increased.
The overall deficit went up from 1981 to 1992.
Clinton's deficit reduction programs eliminated the deficit.
The budget was balanced by the year 1998.
There was a political argument as to what should be done with a surplus.
Reducing the national debt, saving Social Security, decreasing tax rates for all Americans, and increasing spending for government programs were some of the suggested uses for the surplus.
The surplus was short lived.
After the economic recession of 2008, the country again faced deficits.
There are some characteristics of recent budgets adopted by Congress.
The budget was over $2 trillion by 2009.
The outcome of the budgetary process can be a result of disagreements between Democrats and Republicans.
The defense budget was a distant second to entitlements in expenditures, but if you add components from other areas, the gap is much smaller.
Why social programs have increased so much was a second issue.
The philosophy of the Democrats to maintain programs passed as part of FDR's New Deal and Johnson's Great Society is part of the answer.
Reagan succeeded in reducing some of the programs when he was president.
They are still the largest area of the budget.
Political scientists and economists felt that the process encouraged the increase in this area.
They pointed to the way in which the previous year's budget is looked upon as a base and therefore the new budget must increase because of inflation and other factors.
Congress still operated using an incremental approach despite attempts at zero-based budgeting, where budget lines start at a ground-floor foundation so that programs can be reviewed.
Because entitlement programs are mandated by law, they are already built into the budget and increase as a result.
The cost of Social Security increased from $33 billion in 1970 to $265 billion in 1991.
The cost of Social Security was $730 billion in 2010.
Projections show that by the second decade of the twenty-first century the system will go broke, and Congress borrowed from the Social Security trust fund.
The creation of a separate Social Security Administrative agency was approved by Congress in 1994.
Major reforms for Social Security, Medicare, and Medicaid were recognized by both Congress and the president in 2010.
A bipartisan commission was appointed by President Barack Obama to make recommendations regarding Social Security.
We need to define some basic terms.
Income distribution is the portion of national income that individuals and groups earn.
There has not been a significant change in income distribution between the lowest and highest fifth of the American population since the 1960's.
From 1980 to 2010, the incomes of the wealthiest Americans increased at a much greater rate than those of the poor.
Whites had a median income of over $50,000 in 2010 while a family living below the poverty level had a median income of over $22 thousand.
A class-based society in America is characterized by a disparity in income and wealth.
The percentage of Americans living below the poverty line has decreased over the past 15 years.
Wealth is what is actually owned, such as stocks, bonds, property, bank accounts, and cars, whereas income is the specific level of money earned over a specific period of time.
The top one percent of the country's rich have more wealth than the rest.
The poverty line has been adopted by the United States Census Bureau.
The Bureau calls it an "austere standard of living" because it shows what a typical family of four would need to spend.
According to the Bureau, the poverty line for a family of four was less in 2010 than it was in 2007.
Poor people who can't find work, have broken families, and lack adequate housing face a hostile environment.
The Bureau of the Census uses a poverty index developed by the Social Security Administration to determine if families are above or below the poverty level.
A disproportionate number of minorities live in cities when compared to the percentage of poor people in each group.
The level and distribution of individuals' income is affected by taxes because of the relative burden they place on people to pay them.
Taxes are the major source of income for federal, state, and local governments.
The only things certain in life are death and taxes, but they are an essential ingredient in the ability of government to provide services to the population.
There are three types of personal taxes.
They affect groups in different ways.
The current federal income tax collects more money from the rich than the poor on a sliding scale.
If the government takes an equal share from everyone, it is a proportional tax.
During the 1992 presidential campaign, former California Governor Jerry Brown suggested a flat tax.
After the 1994 election, many Republicans suggested an alternative tax structure.
A sales tax has the poor paying more than the rich.
The abolition of the Internal Revenue Service as well as the implementation of a flat tax structure was demanded by some Republicans after the 1996 election.
Collection of taxes is the only other way to pay for the services that governments provide.
Social Security is the root of the foundation for these programs.
It requires the employer and employee to make payroll taxes.
Part of the payments go to the Medicare program.
The program is predicated on forced savings, which makes it different from other programs such as public assistance programs.
The problem of income inequality still exists despite all the efforts made by federal, state, and local governments.