HomeBriefings – Foreign Press Centers...Understanding America: The Federal Budget Process

# 									Understanding America: The Federal Budget Process							

FPC Briefing

Marvin Phaup, Ph.D., Lecturer, Schar School of Policy and Government, George Mason University

Monday, May 24, 2021 at 3:00 p.m. EDT

Washington, D.C. 

May 24, 2021

## 								Summary							

        -  Do you sometimes need to report on U.S. budget matters but are uncertain of the approval process? Do you wonder about terms such as “omnibus,” “reconciliation,” “PAYGO,” “earmarks,” “sequestration,” “conference committee” and “continuing resolution?” If the Senate, for example, passes the defense budget, is it final? In advance of the President’s detailed fiscal year (FY) 2022 budget request and Secretary Blinken’s upcoming testimony on the State Department’s FY2022 budget priorities, we host a special briefing designed to aid your reporting by answering those questions.  Marvin Phaup, Ph.D., explains how budget requests move from federal agencies to Congress, the key congressional committees involved, landmark legislation establishing the process, and how a final budget is decided. 

**THE WASHINGTON FOREIGN PRESS CENTER, WASHINGTON, D.C.** (Virtual)

**MODERATOR:**  Good afternoon, everyone.  This is Cheryl Neely.  Most of you know me.  Welcome to the Foreign Press Center’s video conference briefing with Dr. Martin – Marvin – sorry, excuse me – Dr. Marvin Phaup regarding the federal budget process.  Please keep your microphone muted until you are called on to ask a question.  You should be able to record the briefing by clicking on the record button on the menu at the bottom of your screen.  If you do not see the record button, don’t worry, we will record it and post it on our website.  If you have technical problems during the briefing, use the chat feature to email the FPC host and one of my colleagues will try to assist you – rather chat, don’t email.  If the Zoom session fails or disconnects, everybody, please log in again.

And this briefing is part of our Understanding America series, which aims to help you as working journalists understand different aspects of U.S. government and society a little bit better.  So it wasn’t designed for direct reporting, but it is on the record, in case you need to use any quotes in your reporting.

So without any more, I would like to introduce our briefer, Dr. Marvin Phaup, PhD, who is a lecturer at the Schar School at George Mason University, where he teaches microeconomics and federal budget concepts, process, policy, and reform, and he also conducts research and writes for a publication and provides consulting services.  From July 2009 to December 2010, he directed the federal budget reform initiative of the Pew Charitable Trusts, whose objective was to improve federal policy by transforming the federal budget into a more relevant and useful source of fiscal information for decisionmakers and for the public.  Previously, he headed the financial studies and budget process group at the U.S. Congressional Budget Office.  There was a little bit about the Congressional Budget Office in your invitation, if you’d like more information, and you also have Marvin’s full bio attached to the Zoom login information that I sent.

Dr. Phaup will give a brief opening with a PowerPoint presentation and then I will come back on and open the session to question and answers.  Thank you.

**MR PHAUP:**  Well, thank you, Cheryl.  Thank you for the invitation to come and talk about this.  It’s a topic that I’ve spent most of my life – it seems like forever – working on, and I’m happy to share with you what I’ve learned, some of what I’ve learned during that period.

As I understand it, really what the – the reason you asked me in my assignment here today is to try to provide some context about the budget process, the U.S. federal budget process that would facilitate the writing of news reports about the upcoming – on Friday – presentation of the President’s, President Biden’s budget proposal for FY 2022.  And I’m happy to do that.  What I hope is that you will from this brief overview, at least at the beginning of the conversation, you will see where it fits into a much broader process.

So the first thing I would do is to try to provide a brief description of this federal budget process, and I’ve done that here on slide one.  And the bottom line for me is – you can read it yourself – is that the U.S. federal budget process is sharply different from that which many people assume budget – government budgets work, and in fact the way budgets are put together.  In fact, although they are put together in the most simple way in a lot of other places.

For example, you can see for sure right away that the U.S. federal budget process does not consist of the president and his closest advisors getting together, putting together a budget, and sending it over to the Congress and say, “Enact it or else we resign” or something like that, something drastic.  This is, instead, the U.S. budget process is very much more complicated than that.  It’s got many, many steps.  There are an enormous number of players in putting the budget together and involved directly in the budget process.  It’s time-consuming.  It takes – Congress often complains about how much time they spend in putting together the budget, and they’re only a part of it.

And finally, it would be – I have to tell you that for some time, the federal budget process has been regarded as underperforming at best.  Maybe you could – maybe the kinder word is to say suboptimal.  But this is not unknown to the members of Congress, to the President, to budget analysts, and in fact, there are many, many suggestions for how to improve the performance of the budget.  And I’ll talk about what I mean by suboptimal right at the end.

And so the objective, of course, is to produce a budget for a fiscal year, and the one we’re talking about being released on Friday is the budget year – the budget for FY 2022.  And I must say, I was working on the budget process for a long time before I figured how they come up with the date for which they assign a budget.  That is to say, since the Budget Act of 1974, the fiscal year in the U.S. is run from October 1 to September of the following year, and that means that the budget that we’re talking about for 2022 goes from October ’21 to September ’22, and the key to the numbering, to the year assignment is that the fiscal year number corresponds to the year of the January that that period includes.  So clearly we’ve got this – given the period that’s going to be covered by the ’22 budget, it’s clear that the – that January ’22 is included, ergo, this is going to be the 2022 budget.

Now, to persuade you or to provide a few shreds of evidence that my characterization of the U.S. budget process is complex with many steps and players and so on, there just – the simplest way I can think of to do it, to illustrate that, is just to run over quickly major steps in the preparation of a single annual federal budget.  Most of these steps are specified in law in the Budget Act.  The Budget Act, for example, starts off by saying the budget preparation process begins with the first Monday in February.  On that date – on or before that date, the U.S. president is supposed to submit a budget proposal to Congress on that first Monday.  Well, but then there’s an exception to that.  Whenever there’s a new administration, that time is permitted to – it’s permitted to just offer a pro forma budget proposal.  And there’s no penalty if he does something else, but he’s – it’s suggested that he’ll provide a very simply version of a budget somewhere around the first Monday in February with the details to follow later.  But in this case, for a number of reasons, that budget was delayed, that initial budget was delayed until April 9, and then we’re going to get more details the following in May.  Okay.

That’s the first step.  We got that first official step.  But before that happened, way back in May of 2020, in the heart of the COVID pandemic, the budget preparation for 2022 started.  The Office of Management and Budget, which is the president’s office in charge of pulling this budget together, and all the Executive Branch agencies that are covered by it, began doing the prep work for putting that budget together.  It was a tough time to do it.  The uncertainty was enormous.  But the budget preparation actually began there.  So much happened before even the first Monday in February.

The next big thing is that another two players appear: (inaudible) budget process and the U.S. Congressional Budget Office, often referred to just as CBO.  CBO is intended to provide the Congress with the same support and help that OMB provides to the president, sort of similar entities.  And the Congressional Budget Office, in working with the congress, deals first and foremost with two more characters, two more actors, two more players in this process, the House and Senate Budget Committees.

So in the middle of February, right after the president’s supposed to submit his budget, CBO prepares this report.  They publish it.  You can find this year’s, which is the Economic and Budget Outlook.  What that report says is if the Congress takes no action, here’s what the budget will look like next year and the year after that, and that’s based on how the economy behaves, and we’ve got this ticklish two-way interaction between the economy and the budget: the budget affects the economy; the economy affects the budget.  And the CBO is essentially trying to give the budget committees and the Congress a sense of where the budget will end – where the economy will be in the immediate future in the budget year given that the Congress does nothing.

Then there are three things the Congress needs to do.  It needs to adopt its own budget.  Well, it’s own budget is put together after a lot of consultation with the other committees, the budget committees, and voted on in the House and the Senate.  They both have to agree on the same budget resolution.  That budget, which is in fact just a concurrent resolution – it’s not a law – it’s just a – it just sets the parameters – revenues, outlays, the deficit that the Congress is going to operate with.

Then the Congress also needs to decide as it’s putting its budget together whether or not it believes that current policy needs to be changed significantly from existing law.  And if they believe that needs to happen to either save or increase the size of the budget, they can issue instructions to every other committee of jurisdiction telling them that they need to report legislation that would, for example, save X number of dollars, or increase spending by X number of dollars, and they give them some guidance as to how they think they should be put together.

Now, the budget committee doesn’t have authority to compel the committees to do that, but it does have this authority.  If those committees don’t respond with something that roughly corresponds to reconciliation, the budget committees themselves can write new legislation that would be in that committee’s jurisdiction, roll all those proposals together, call it an omnibus reconciliation bill, which receives – will receive in both the House and especially in the Senate expedited consideration: up-or-down vote, and it can’t be filibustered in the House – in the Senate.  Not going to be filibustered in the House anyway.

And finally, the third thing that the Congress needs to do – well, whether that’s one or two is – we can count; they’ve got to put together a budget resolution and decide whether or not they want to include reconciliation in the resolution, and then Congress also needs to complete its annual appropriations.  If it doesn’t – well, never mind if it doesn’t.  No monies may be spent, discretionary funding may be spent, without an appropriation.  And so this is giving the authority to agencies to enter into obligations it’ll enter that will result in outlays.

Now, there’s no penalty ever for congressional inaction.  These are, after all, rules that the Congress has adopted, and if they’ve adopted them, they can pretty much choose whether or not they do them.  But nonetheless, even when they haven’t completed their action, one thing for sure does happen: the calendar rolls – turns over, October 1 arrives, and the fiscal year begins, sometimes with unseemly conditions in place.

I want to do two more things now, two quick slides.  I want to say a little bit more about the President’s budget per se, a little bit more about the congressional budget, and then finally I’m going to close by giving you some sense of what I mean by “underperforming budget process.”

The President’s proposal (inaudible) supposed to be comprehensive of all federal activity, nothing off-budget.  That’s a big principle in budgeting; we want it to be all fiscal action need to be covered by the budget.

Two more things.  All that action consists mostly of spending and revenues, and there are two types of spending that critically have to be distinguished.  One is discretionary.  All administrative expenses when the government is just conducting its ordinary operations – those have to be appropriated in an explicit Appropriations bill.  So that’s called discretionary spending.  In addition, there’s this stuff called mandatory spending.  It includes those things – those activities where the federal government is essentially taxing and sending money to people.  For example, it includes Social Security, Medicare, and Medicaid.  Once those programs are in place and the benefits are defined in law, and eligibility is defined, Congress doesn’t have to take any more action.  The money goes out the door as people become eligible to receive those benefits.  Interest on the debt’s the same way.

Now, two – well, one really key distinction between those:  Congress controls the dollar amount of discretionary spending.  They don’t give – if they don’t give the State Department the money they need to operate, the State Department doesn’t open.  And in fact, if an – Appropriations bills haven’t been completed on time, we get government shutdowns.

Mandatory spending?  Completely different.  It operates without any further action by the Congress, by the appropriators.  It therefore is sometimes called operating on automatic pilot.  It just grows with the number of people who qualify for the eligible benefits.

So in the President’s budget, he is asking for budget authority to be appropriated for discretionary programs.  He’s not really asking for any authority about mandatory spending; they are instead – the budget is just going to show projected spending levels under current law.  And what maybe was surprising to people who don’t pay much attention to the budget, discretionary spending is only about a third of all federal outlays.  Two-thirds is uncontrolled by Appropriations and can only be changed and modified if you change who’s eligible or the benefits they get.

If there’s only one distinction to make in the budget, it’s the difference between discretionary and mandatory spending in terms of the budget process.  The budget – the President’s budget also serves other signals.  It gives – for political purposes, it tells you what his priorities are.  But it doesn’t mean that Congress is going to buy them.  Now – then the President has to go up to the Hill and sell it.  Now, he’s got an easier sale job if his party controls both the House and the Senate as the majority in both cases, as is currently the case.  But even so, even when it’s his own party, they might pick and choose from his budget proposal.  It is, after all, as congressional staffers are fond of saying, “Oh, what’s everybody getting excited about?”  The President’s budget is just a proposal.  Well, it’s a proposal by the President of the United States and that makes it more than “just a,” but it’s – it is still – it is something to be – that doesn’t happen by itself.  Congress has to act to make it happen.

Another point, just to note in passing, is that the President’s budget is multivolume.  It stacks up probably three feet high.  There are a whole number of volumes that come out at the same time.  In addition, I would note that there are – that the budget will give you – if you look in the budget, any of his documents, they’re going to have three years of data: the budget year that’s being planned, the current budget year, and the previous completed budget year.  So you have three years of data; only the third one is proposed, the others in process or essentially completed.

A little bit about the congressional budget:  It’s just a resolution.  It’s just a few pages.  The primary purpose of the congressional budget resolution is just to establish discretionary spending caps for the Appropriations Committee.  That’s its principal function.  Otherwise, it just shows baseline projections of mandatory spending and baseline projections of tax revenues, and the difference is the deficit.  So a very simple declaration of aggregates, almost no detail compared to the President’s.

Another thing about the congressional budget is that it’s often not even adopted.  In 11 out of the last 20 years – 11 rather than 10 – it had – no resolution was adopted.  And if it’s not adopted, then what happens is that the previous year’s resolution, which also had discretionary caps for the next year, become effective.  Or if the Congress wants to change it, they can pass a piece of legislation or a concurrent resolution that says these are the totals that we anticipate being in a budget resolution and we therefore have, quote, “deemed” a budget resolution to have been passed.

Congress has produced this resolution by the due date, April 15th, four times since ’76.  They do it if it’s convenient and if it serves a political purpose, or makes a difference, really.  It may also, as we just said, do reconciliation (inaudible) to change revenues.  That is to say they can require agents – committees to change those mandatory program terms to either spend more money or spend less.

A funny thing happened, as someone’s already asked the question about reconciliation.  It’s in the news a lot.  It was in the news a lot in Fiscal 2021, which means this year, which means in February.  In February, the Congress adopted a budget resolution for F1 – FY21; in other words, for the year that was already in process.  Why did they do that?  I mean, the appropriations acts

had all been completed and everything else.  And in fact, we were operating and spending money.  The reason is, is they wanted a budget resolution that they could put reconciliation in, because we just got a new administration, we just got a majority in the House, and a thin – and what is effectively a majority of one in the Senate.  And they wanted to pass a lot of legislation in one omnibus reconciliation bill, and they succeeded in that.

It also ran into the Byrd rules, which says if you’re going to give expedited consideration to legislation, you – it’s got to be related to the budget.  The majority included in the reconciliation instructions an increase in the minimum wage, the national minimum wage, to $15.  And the parliamentarian said this violates the Byrd rule.  It’s extraneous, it’s only incidental, but it has an effect on the budget, and it came out.  But the rest of the reconciliation was enacted in – as a part of reconciliation for the budget year ’21, the one that was already in place.

Finally, I want to say a little bit about underperformance.  So the U.S. federal budget process, like budget processes everywhere, is carried out by humans.  We don’t have any artificial intelligence way of generating budgets.  Humans, when they’re making financial decisions, often make mistakes.  What do I mean by a mistake?  It’s important to note that a mistake is not something I think is a mistake, but that the maker thinks.  People – human beings – make decisions that are often – and financial decisions especially – inconsistent with what they want to achieve in the long term.  Humans do that.  We knew that for a long time.  What’s happened in recent years is that behavioral studies have been able to identify elements in the budget process or any decision process that generates these errors, so that there is hope that you can revise a decision process and make decisions happen that are more consistent with what the decision makers say they want to happen.

In the U.S., for example, members of Congress always say we want economic stability.  We don’t want to put the country at risk of a default.  And yet, in – for the last 30 years or so, we have been on a trajectory where the U.S. Treasury debt held by the public has been increasing without limit, and under current policy it keeps growing without limit.  That exposes the U.S. Government and economy to a risk that everyone says we don’t want to take.  And yet, the process keeps generating this result.

The good news is that there is an enormous amount of research going on that would help Congress make decisions more consistent with what they say they want – financial stability and efficiency in program choice.  And I personally am very optimistic that some of this work will succeed in improving the budget process, but it is currently, you would have to say, sub-optimal at best.

This – on that, I’ve had my chance.  I would say this is a little bit of evidence to support the notion that my early characterization of the budget process as having these properties is approximately correct.  But enough from me.  Let’s talk about what other people are interested in, Cheryl.  Let’s go on.

**MODERATOR:**  Okay, wonderful.  Thank you so much for that, Marvin.  He asked me to call him Marvin instead of Dr. Phaup, so that’s why I’m calling him Marvin.  There was a little bit of a sound issue just at the beginning of some of your sentences, so I think the transcribers will probably be able to get most of it.  But if there’s anything that you all missed that you have a question about, please feel free to ask.  I will open it up now to questions, and if you would like to stop sharing your screen, Dr. Phaup, then we can see you a little bit better.

**MR PHAUP:**  Oh, sure.  (Inaudible.)  Oh, stop sharing.  Okay, great.

**MODERATOR:**  Okay, now we should be able to see you a little bit better.  And let’s see, to ask a question, please use the raise hand feature in Zoom.  Don’t put your question, please, in chat unless you have no other way to do it.  The raise hand button is at the bottom of your Zoom screen.  I think everybody’s used to Zoom by now.  And we will go ahead with our first question.  Please introduce yourself, give your name, your outlet, and your country, and we’ll go first to you, Pearl.  Unmute yourself.  Yeah.

**QUESTION:**  Thank you very much.  Hello, Dr. Phaup.  Thank you so much for your presentation.  My question’s a two-part question, and so I’d like to just ask if you can explain, number one, going back to Reagan and George H., who contributed to deficits in the budget, and then on to – I guess Bill Clinton had a tough time trying to balance that out.  Even when Obama came in, we still had these issues and the Great Recession.  And then when the – and the Democrats still wanted to take care of those issues that are important to them.  When Trump came in, we then had the 2017 tax cuts issues, which when Biden them came in still – we are dealing with those things, but those are important to Republicans, for example.

Now that Biden is trying to introduce this 1.7 trillion for his transportation plan, which I believe he might be trying to do before Memorial Day and is facing some pressure, can you speak a little bit to how does the United States, given the context of this very complex budget process – and we have seen shutdowns in the past when they don’t agree – how will Biden anticipate balancing a budget, getting everything he wants to do, given the fact that he’s not entirely responsible, perhaps, for the situation he finds himself that was maybe created by Reagan and George H.?  That’s my first part of my question.

My second part is:  As journalists, we hold the United States Government accountable and report on accounting what they purport that they say and do.  So if, for example, I wanted to take a look at a particular Cabinet or a particular department – DOD or whatever – and I want to go and see, okay, this is how they’re spending their money, and I want to hold them to account.  Where do we go and look?  What are your suggestions as to where we can go and begin these types of investigative reporting?  Because our primary job, some of us, is to hold the United States Government accountable, and indeed, Joe Biden.  Thanks.

**MR PHAUP:**Well, those are wonderful questions.  The second one, I’m happy to say, there is a easy answer to.  In an earlier life when I was working on the budget process, I was also a staff support to the Federal Accounting Standards Advisory Board, which was created in 1990.  Today, unbeknownst to most people because the budget gets all the attention, the federal government and its component departments and agencies produce financial statements, a complete set of annual financial statements that includes something that looks like a balance sheet, an income statement – they call it a statement of net cost because there’s no profit to be reported.  But it shows the cost of how much has been spent on – in various categories.  These are standard sort of financial accounting statements that are comparable across agencies.  And if you want to – in fact, they’re called sometimes accountability reports.

So if you go online and ask for, say, annual financial statement for the Department of Defense, it should show up.  It should be available in December after the fiscal year has ended.  But there’s also one put out by the Treasury Fiscal Service for the whole U.S. Government.  Again, the budget is a great source to look at.  I would especially recommend a volume called Analytical Perspectives.  It’s not the budget proposal, but it’s an explanation of the – of what’s really going on in a lot of agencies.  But first, the first – the direct answer to your question, Pearl, is the financial statements of the U.S. Government and agencies, and I think you’ll find that to be useful.  And if you don’t find it to be useful, there’s this board, the Federal Accounting Standards Advisory Board, that can modify the accounting standards and require disclosure of information you’d like to see you don’t see there.

Now, the way I interpreted in the first part of your question is that Republicans that tend to be somewhat fiscally irresponsible with tax cuts.  And it sounded like you weren’t implying quite the same thing about the other party, but sort of, that they were – tended to be sometimes fiscally irresponsible about spending programs.  Now, maybe I’m putting words in your mouth, but —

**QUESTION:**I think you’re correct.  I’m saying that they – each side of the aisle wants to take care of those issues that are important to them, but some of those decisions since Reagan seem to have put the United States budget in a predicament it shouldn’t be in today.

**MR PHAUP:**Well, there’s no question that both tax cuts championed by whatever – by whatever party – tax cuts have increased deficits and the debt.  At the same time, there is no question that we don’t pay for very much in terms of new taxes, of funding increases.  What I would say in trying to be completely as nonpartisan as I possibly can, I would say that budget balance gets – balanced budgets and not increasing the debt gets lip service from both parties.  But it is not honored consistently in terms of the policy choices they make, that deficits and debt have been increased that both parties.

In fact, if you really wanted to be – if you really want to be harsh – and I wouldn’t say this, but I’ve heard people say fiscal irresponsibility is the only thing that the parties really agree on.  Now, that’s slightly funny or slightly sad, depending on your perspective.  But I would say that while people say that they would like to reduce deficits and the growth of debt, it’s very hard for them to do it in the specific instances.  When a bill comes up, the first thing they don’t ask is does this increase the debt or the deficit.  They ask does it give something to a constituency that needs it or would it produce benefits greater than the cost.  And if they get past that, they say well, debt happens.  I’m not sure that’s a satisfactory answer, but it’s the best I can do because – I think I’m agreeing with you.  I’m not sure.  (Laughter.)

**QUESTION:**Thank you.

**MODERATOR:**  Okay, do we have anyone else who would like to raise their hand and ask a question?  I know this is a complex topic.  I don’t see any hands raised, to let me ask you – oh, we just got two more.  But I wanted to ask also, once the President’s budget proposal goes to Congress, can you speak very briefly about how it makes its way through the various committees in Congress?

**MR PHAUP:**  Sure.

**MODERATOR:**  And then we’ll go back to the journalist questions.  Don’t take too long, just what is Appropriations, and Budget, and Ways and Means, and why would there be a hearing in Foreign Affairs, and so forth.

**MR PHAUP:**  Yes, yes.  Well, okay, so there are committees throughout the Congress that have an interest in everything – the State Department, DOD – they have their own names, both authorizing and appropriations.  And so they will be quick to see what priorities, what programs, what changes the President is proposing.  If they are of his party, they are very likely to be reached out to by someone in the administration, and even if not, they will prepare legislation that would accomplish that purpose, that narrow purpose, that specific purpose that’s within their jurisdiction.  They’ll introduce it; it’ll get referred to the appropriate committee – probably to the committee of the person who drafted it – and the committee chair will arrange hearings and they’ll invite proponents to come and defend the policy, and often some critics.

Then, if the committee – a majority of the committee – likes the proposal, they’ll mark it up, making a few changes, and vote it out of committee, and then it can go – it goes to the speaker in the House, for example, who might schedule a vote on that legislation.  Certainly, if he or she endorses that legislation, that’ll happen pretty quickly.  So it’s just a matter of individual members of Congress translating or receiving from the administration some draft legislation and introducing it, getting it referred to committee, having committee hearings, and then reporting back out to the committee as a whole, which is what the whole House and Senate are called.

**MODERATOR:**  Great.  Okay, so next we’ll go to a question from – please forgive me if I pronounce your name – is it Masaki Kondo from JiJi Press, Japan?

**QUESTION:**  Thank you very much for doing that, Professor and Cheryl.  My question is about the debt ceiling.  The debt ceiling will come back in August.  I’m just wondering how it will affect the budget process for the Fiscal Year 2022 particularly.

And then second question will be:  Do you have to have 60 vote in the Senate?  Can you do it in 50 vote?  Thank you very much.

**MR PHAUP:**  Sure.  Okay, so the debt ceiling has been around since about 1920.  The Congress first – originally used to have to approve – every time the Treasury wanted to borrow money, they had to approve an amount to be borrowed, but in the – I think the Second Liberty Bond Act of 1920, right after World War I, they said, “Okay, we’re not going to do that anymore.  We’re just going to say Treasury can manage the debt at its own – in its – at its own – with its own timing.  We’re just going to put a cap on the – on how much debt that can be outstanding.”  And by the way, there’s a special definition for what is covered by the debt ceiling, and it’s not exactly the same.  It’s actually a little bit bigger than debt held by the public.

Okay, so that’s what we’re talking about, the debt ceiling.  And since 1920, the debt ceiling has gone up, up, up, up, up, up.  As far as I can tell, there’s very little evidence that the debt ceiling affects policy, except in the following way:  As the actual debt approaches the debt ceiling, Congress – actually, the majority party, whether it’s Republicans or Democrats, doesn’t matter – the majority party knows that what they need to do is to increase the debt ceiling, because if we hit the debt ceiling and we couldn’t issue any more, one of the things this would mean is we would have to finance all spending, without an increase in borrowing, out of taxes.  And there’s a big gap between what we spend and what we collect in taxes.  It would be a draconian cut and nobody could handle that.  So it’s a nuclear option which no party will accept.

However, the majority usually has to get that debt ceiling increase passed, because they know that it’s catastrophic if they don’t.  Well, this puts the minority in a great political position.  They say, “We’re not in favor of increasing the debt ceiling.”  They really are.  When they were in the majority, they voted to increase it.  But the majority has the responsibility of getting the debt ceiling increased to avoid a crisis.  The – and the minority get the free ride of saying, “We’re fiscally responsible.  We’re voting no.”

It has very little consequence.  It produces great theater.  It’s the great monster of what happens if we don’t get the debt ceiling raised, but it’s in everybody’s interest that it be raised.  It’s too late to control the debt.  It’s like saying – to have a debt ceiling is like having a credit card and spending all the money you want to, and then when they – when you have to borrow the money to pay it back you say, “Well, I’m not paying it back.”  That’s it.  That’s a default.  So I would not expect  anything other than the debt ceiling to be raised in August if we come close to hitting it.  And the Senate will find a way to pass it one way or the other, because you just couldn’t live with not being able to issue more debt.

**MODERATOR:**  Okay.  Thank you.  So next we’ll go to Alex Raufoglu from Turan News in the country of Georgia.  Go ahead, unmute yourself, please.

**QUESTION:**  Yes.  Thank you, Cheryl.  It’s great to see you here.  Such an informative presentation.  I thank you all for putting this together.  I hear you when you say that the president’s budget is just a proposal, so given the process that follows.  But for outsiders, particularly in the foreign policy field, it is also perceived as a statement of values and priorities of the current administration.  Do you think we are reading too much into it?  To put it in the context, let me ask you, like, if any government is in need of, like, more funding from the U.S. aid – foreign aid program, whether due to health care or a national disaster, or in my case, I am from the South Caucasus, due to wars or some other reasons.  Where would you suggest them to go first to ensure the outcome, to the administration or directly to Capitol Hill?

And one more if I may, since we have you here, about budget and policy.  The President’s first budget request, known as the skinny budget, just came out I think last month, and it requires about 64 billion for State Department and other international programs – some, like, 12 percent increase from the last year’s enacted level.  This is a major increase but also very less than what many analysts claim was likely needed.  I’m wondering if you can also help us with translating this into the policy framework and the budget process.  Thanks so much.

**MR PHAUP:**  Yes, absolutely, Alex.  I would agree with you, I would agree wholeheartedly that it’s more than just a proposal.  It is a statement of priorities, a statement of world view, a statement of responsibility, and I believe in every case that it is sincere.  I don’t think it’s just showmanship.  And clearly, this administration is proposing a big – big increases in discretionary spending as well as also in mandatory.  And I think that the increase for the State Department and USAID for assistance to other countries clearly represents something that the President thinks is a high priority.  The – right.

So the whole problem I think with the problem of scarcity, which is one which we deal with in everyday life, we can think of good ways of spending money in excess of the amount we have, and I think that’s a human inclination, but it’s also a problem.  It’s a problem in the sense that if there are more beneficial uses of resources for those dollars than we have dollars, then those choices are pretty hard.  And it’s rare that there’s an easy choice.  If you’ve got five beneficial uses – I don’t want to get specific, but it could be international, could be domestic, could be education, could be whatever – all of those offer some benefits to someone.  And it’s hard and we would prefer not to have to choose between them.  And I think that very impulse – the desire not to have to put children above old people, for example – is one of the reasons that it’s very hard to avoid increasing the deficit when the need, which is always there somewhere, appears great.  But in any case, the one thing I wanted to say is I agree with you completely, it’s more than just a proposal.  It’s a statement of values.  And every country, every nation, every group, every people need those kinds of statements made on their behalf.

**MODERATOR:**  Thank you very much.  And Alex, I accidentally said you were from Georgia.  Your outlet covers Georgia and Armenia but you’re from Azerbaijan.  So I apologize for that.

Let’s see.  So Pearl has another question, but let’s see if we have any from anyone else first.  Okay, Pearl, go ahead.

**QUESTION:**  Thank you, Cheryl.  So I have a follow-up question, and I’m not even sure if there is an answer.  But I’m thinking about the audiences that we are here for, and that for – my outlet is Power FM, and that is Johannesburg, South Africa, southern Africa, predominantly pan-Africans and the continent of Africa.

What they might be thinking and asking themselves is:  Biden has come out with a foreign policy approach which says he’s going to take care of his domestic approach to take – in order to take care of his foreign policy approach.  Perhaps maybe if you could share a little bit about some of those people or entities or spaces around Congress, both the House and the Senate, for example, who might be advising them as they consider whether or not they approve of President Biden’s budget given that – even though Biden has this big infrastructure bill and other things that he personally wants to see happen, he is immediately faced by international – multiple parallel international crises that are happening and will put pressure on him to – on those domestic issues he wants to do.  Israel-Palestine issue we’ve just seen right now; the surge of COVID-19 in India; the genocide and humanitarian crises in the Tigray in Ethiopia, Chad; Mali apparently just had a coup occur today; Mozambique, counterterrorism in – all over the continent of Africa, right?

So how then – or who are those entities and how does that function, those researchers or think-tankers in the Washington space that advise, supposedly, Congress?  Because I don’t believe that every congressman has the necessary individual expertise to understand every nuance of emerging immediate crises on the continent of Africa, for example, that Biden might be facing today – just today alone, just from this morning – which pose pressure as to U.S. trying to accomplish these other domestic issues and how that might play out in terms of what budget or what money the United States – the rest of the world is anticipating the U.S. is going to lead.  It’s going to need resources and money within its budget to lead.  And so how does that kind of link in so that the United – I mean, obviously yes, they – it’s not a bottomless purse.  So how does the United States lead and compete with China when China is – China and Russia are big competitors on the African continent, where the United States doesn’t have endless money.  How does that play out?

**MR PHAUP:**  Well, Pearl, I like your question, because I would like to have it answered too.  But actually, I think it’s fair to say that this is – you’ve got the right people on the line, just the wrong – just the wrong spokesman.  This really sounds like the function of the State Department to provide that kind of information not only to the President, but to the rest of the government and to the country.  And I am certainly no expert on foreign policy, on Africa, or – all I know is what I’ve read in the paper about the issues that you raised.  And I think the State – it’s right in the State Department’s function to inform U.S. policy on those questions.  And as far as I know, I don’t have any evidence that they aren’t energetic, intellectual, competent, and on the case.  I know it was no answer.

**QUESTION:**  Okay.  So Congress legally, in the budget process, would lean – the people that would inform them in the budget process would just be the subcommittee – the committees and subcommittees?  Who’s informing them so that they can make the decisions in this budget?

**MR PHAUP:**  I think a lot —

**MODERATOR:**  And I would say and —

**MR PHAUP:**  Oh, sorry —

**MODERATOR:**  I would just add and also their constituencies, people in their district, different – there might be diaspora communities in a congressman’s district, for example, that might be meeting with them about certain issues.  So that’s another way that it happens.

Dr. Phaup, go ahead.

**QUESTION:**Thank you.

**MR PHAUP:**  No, back to you.  Back to Cheryl.  I think this is – this isn’t the right place to get an answer.  (Laughter.)  I’m not it.

**MODERATOR:**  All right.  And I apologize, Pearl.  I was looking for a couple of resources and I didn’t hear all of your question, but if you want to send a follow-up we’ll see if we can get —

**QUESTION:**  Sure, thanks.

**MODERATOR:**  — get it answered, whoever it needs to be answered by.

Okay, let’s see.  I don’t see any other hands raised at this point.  Do we have any final questions?

(No response.)

Okay.  Well, I’m going to share my screen for a moment.  I had not planned to do this but I think it would be helpful.  I am going to send out links or attachments to a couple of resources that will give you some additional information about the budget process, and I’m going to share my screen and go ahead and show you just a couple of those, if I can do this successfully.

(Interruption.)

One site that I linked in your RSVP confirmation was USA.gov/budget, and I already sent this link to everybody, but this is a very simple, simple overview of the budget process.  And it’s got – basically it’s in an infographic form, so it’s very easy to get just this very, very basic overview.  Here’s the fiscal year that Dr. Phaup mentioned.  How does the government get its money?  It comes from borrowing it.  He talked a lot about the debt and taxes and revenue, and then what you spend money on.  So he covered this as well very well – creating the budget step by step, the Appropriations Committee, the different chambers voting on the bills, the President signing the budget bill into law, and there’s a little bit of a more detailed breakdown here.

So you already have that link.  I will resend it, and then Dr. Phaup also mentioned to me another resource that is quite good as well.  This is from a think tank that has a certain policy agenda, but the overview of the budget process – it’s a little more detailed than the one I just showed you, but it is very simple and easy to follow as well.  It’s in a narrative form.  And this one is a very general introduction.  Even though the think tank itself is focused on certain priorities and topics, this is just a very basic background introduction to how the process works.  And as you see, it’s a little more detailed but still very easy to follow.  So I’ll send this link to you as well.

And then third, we have a Congressional Research Service report, which is – my computer’s wanting me to do something before I look at it, but it is very detailed.  This is from the Library of Congress.  Of course it’s giving me a hard time trying to open it, but if I had not closed my screen a moment ago, I would have it for you.  But anyway, I’ll send it to you as well.  It is from the Library of Congress, but it goes much further kind of in the details in 42 pages.  So I definitely would not recommend reading it first, but if you really want to read a little more information about what we talked about, then you can certainly use that as a resource.

Now let me stop sharing my screen and navigate back.  And do we have any final questions before we close?  We’re just about out of time.  Okay, we have one more from Masaki Kondo.  Do you have time for —

**QUESTION:**  Yeah, just quickly, thank you very much.  Professor, I just did not get an answer from you.  Do we actually need 60 vote to pass the budget in the Senate?  Can we do fifties instead?  Thank you.

**MR PHAUP:**  If you’re just talking about – okay, so if it’s all rolled into reconciliation and there’s no reason to prevent it – it’s just that everything has to be germane to – it either has to raise taxes or reduce spending or increase spending or lower taxes.  It has to be directly budget-related.  If it’s done through reconciliation and there’s no reason – in fact, there will be reconciliation in this 2022 budget resolution, if we get one – of course do it through reconciliation.  And then, in that case, 50 votes – you’re going to need 51 votes to do it and the Democrats have that alone if they can all vote together, with the Vice President casting the tiebreaking vote.

The reason I’m hesitating at all is you ask about passing the budget, and passing the budget doesn’t really happen.  You can get a budget resolution with a majority of votes, but that’s only affecting the rules.  We don’t really pass the budget, right?  The President proposes a budget, we get a congressional budget resolution and that’s got the aggregates, just the totals, but just the totals is not enough.  Then you need legislation to enact everything that makes up that total, and that, unless it’s in reconciliation, requires – in the Senate it will require 60 votes unless – and maybe you can get 60 votes, but yes, it will require more votes as you do the detailed legislating that is required to execute a budget even after you’ve got a budget resolution, unless you do it in reconciliation.  That gets expedited treatment.

I know that’s a complicated answer, but it’s a tough question, and we don’t just approve the budget.  We approve the pieces one at a time for the most part.

**QUESTION:**  Thank you.

**MODERATOR:**  Okay.  Well, thank you so much, Dr. Phaup, for being with us today.  We really appreciate your time.  If anyone has follow-up questions or you think of questions the next couple of days, please email them to dcfpc@state.gov and we will send those to Dr. Phaup and see if he’s available to answer any of those questions.  A transcript of the briefing will probably not be posted to our website this afternoon.  It will probably be tomorrow morning, and the video will be posted at the same time.  Also I will send out those handout links that I discussed probably tonight or tomorrow morning, and I just want to thank everyone for attending.  That concludes our briefing for today, and again, I thank everyone.  Bye-bye.

Tags

Budget ReportDistrict of ColumbiaForeign Press CentersForeign Press CentersNew York

Back to Top