The federal budget is central to Congress's ability to exercise its "power of the purse." Federal budget decisions also express Congress's priorities and reinforce Congress's influence on federal policies. Making budgetary decisions for the federal government is a complex process and requires balancing competing goals. Recent economic turmoil put a strain on the federal budget due to declining revenues and increasing spending levels. Subsequently, policies enacted to restrain spending, along with a recovering economy, have improved the budget outlook, at least in the near term. In August 2011, budget negotiations resulted in the enactment of the Budget Control Act of 2011 (BCA; P.L. 112-25 ), which contained provisions to reduce the budget deficit by about $2 trillion over the next decade. Since that time, various legislative changes to the law have lessened the impact on certain types of federal spending. In addition, the long-term costs of federal health care programs and the effects of the baby boom generation's retirement continue to put pressure on the federal budget and have yet to be addressed. Operating these programs in their current form may pass on substantial economic burdens to future generations. Congress and the President may consider proposals for additional deficit reduction as fiscal issues may remain a key component of the legislative agenda. This report will provide an overview of federal budget issues, focusing on recent fiscal policy changes. It will also discuss the major policy proposals contained in the President's FY2015 budget and the House and Senate budget resolutions. Finally, it also addresses major short- and long-term fiscal challenges. This report will track legislative events related to the federal budget and will be updated as budgetary legislation moves through Congress. Each fiscal year Congress and the President undertake a variety of steps intended to set levels of spending and revenue and to make policy decisions. This section provides a brief summary of the budget cycle along with an explanation of how budget baselines are constructed. Budget baselines are used to measure how legislative changes affect the budget outlook and are integral to making these policy choices. A single year's budget cycle takes roughly three calendar years from initial formation by the Office of Management and Budget (OMB) until final audit. The executive agencies begin the budget process by compiling detailed budget requests in the calendar year before the President's budget submission. Many agencies start working on their budgets during the spring and summer—about a year and a half before the fiscal year begins. OMB oversees the development of these agency requests. The President submits a budget to Congress, which is based on work by OMB and federal agencies, typically around the first Monday in February or about eight months before the fiscal year begins. Congress typically begins formal consideration of the budget resolution once the President submits his budget request. The budget resolution sets out a plan, agreed to by the House and Senate, that establishes the framework for subsequent budgetary legislation. Because the budget resolution is a concurrent resolution, it is not sent to the President for approval. Congress does not always complete action on a budget resolution. In years when Congress is late in adopting, or does not adopt, a budget resolution, the House and Senate independently may adopt "deeming resolution" provisions for the purpose of enforcing certain budget levels. The last time the House and Senate agreed to a budget resolution was for FY2010. The FY2010 budget resolution was agreed to on April 29, 2009. House and Senate Appropriations Committees and their subcommittees typically begin reporting discretionary spending bills after the budget resolution is agreed upon. Appropriations Committees review agency funding requests and propose levels of budget authority (BA). Appropriations acts passed by Congress set the amount of BA available for specific programs and activities. Authorizing committees, which control mandatory spending, and committees with jurisdiction over revenues also play important roles in budget decision making. During the fiscal year, which begins on October 1, Congress and OMB oversee the execution of the budget. Once the fiscal year ends on the following September 30, the Treasury Department and the Government Accountability Office (GAO) begin year-end audits. Budget baseline projections are used to measure how future legislation would affect the budget picture. They are not meant to be predictions of the future budget outlook. Due to the nature of projections, slight changes in assumptions can lead to large effects in outyear totals. Therefore, it is important to understand what projections include and the assumptions on which they are based. Baseline projections are included in both the President's budget and the congressional budget resolution. The Congressional Budget Office (CBO) computes current law baseline projections using assumptions set out in budget enforcement legislation. Since Congress and the President have resolved certain questions related to expiring tax policy and have enacted specific policies set to control discretionary spending over the next decade, there are fewer policy uncertainties affecting the baseline levels under current law. More specifically, the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ; see additional discussion below) permanently set into law many individual tax rates and tax policy provisions. On the spending side, baseline discretionary spending levels are largely constrained by the caps and automatic spending reductions enacted as part of the Budget Control Act of 2011 (BCA; P.L. 112-25 ) and further modified by the Bipartisan Budget Act (BBA; P.L. 113-67 ; see additional discussion below). In addition to these current law assumptions, macroeconomic assumptions, specifically of gross domestic product (GDP) growth, inflation, and interest rates, will also affect the baseline estimates and projections. However, the CBO baseline also incorporates certain assumptions currently in law, but that have historically been revised prior to the policy change actually taking effect. Specifically, the CBO baseline assumes that sharp reductions in Medicare's payment rates for physician services will take effect as scheduled in April 2015 and that certain expired and expiring tax provisions will not be extended. The projections in the baseline also contain additional uncertainty, particularly as it relates to future federal borrowing and healthcare costs. Minor changes in the economic or technical assumptions that are used to project the baseline also could result in significant changes in the outyear deficit levels. Current baseline projections show continued reductions in the budget deficit over the next several years, from 4.1% of GDP in FY2013 to 2.6% of GDP in FY2015, and roughly similar deficits as a percentage of GDP through FY2018. These declining deficit figures, relative to the past few fiscal years, are primarily due to continued improvements in the economy, restraints on discretionary spending, and certain assumptions used in constructing the baseline (i.e., certain tax provisions will expire as scheduled under current law). This would result in budget deficits that slightly reduce the level of debt held by the public as a percentage of GDP through FY2018. In other words, these budget deficits would be fiscally sustainable. However, after FY2018, deficit levels are projected to rise again, reaching 4.2% of GDP by FY2022 and 4.0% of GDP by FY2024. Under the baseline assumptions, budget deficits are projected to average 3.5% of GDP over the FY2015 to FY2024 period. (See Table 1 below.) CBO also provides projections based on alternative policy assumptions, which illustrate the levels of spending and revenue if current policies continue, rather than expire as scheduled under current law. If Medicare payment rates for physician services remain the same, expiring tax provisions are extended, and the provisions of the Budget Control Act's automatic spending reduction process do not remain in effect for FY2015 and beyond, CBO projects a cumulative increase in the budget deficit by more than $2.3 trillion relative to the current law baseline, including increased debt service costs, over the FY2015 to FY2024 period. Beyond the 10-year forecast window, federal deficits are expected to grow unless major policy changes are made. This is a result of increased outlays largely attributable to health care costs and baby boomer retirements. Over the last four decades, on average, federal spending accounted for approximately 20% of the economy (as measured by gross domestic product), while federal revenues averaged roughly 17% of GDP. Since FY2002, spending exceeded revenue in each fiscal year resulting in budget deficits. Over the last several fiscal years, spending and revenue have deviated significantly from historical averages primarily as a result of the economic downturn and policies enacted in response to financial turmoil. As the economy recovers, the budget deficit continues to fall. In FY2013, the U.S. government spent $3.5 trillion and collected $2.8 trillion in revenue resulting in a budget deficit of 4.1% of GDP, the lowest imbalance in five years. The trends in revenues and outlays between FY1970 and FY2013 are shown in Figure 1 . Federal outlays are often divided into the broad categories of discretionary and mandatory spending, and net interest. Discretionary spending is controlled by annual congressional appropriations acts. Mandatory spending encompasses spending on entitlement programs and spending controlled by laws other than annual appropriation acts. Entitlement programs such as Social Security, Medicare, and Medicaid make up the bulk of mandatory spending. Congress sets eligibility requirements and benefits for entitlement programs, rather than appropriating a fixed sum each year. Therefore, if the eligibility requirements are met for a specific mandatory program, outlays are made automatically. Net interest comprises the government's interest payments on the debt held by the public, offset by small amounts of interest income the government receives from certain loans and investments. In FY2000, total outlays equaled 18.2% of GDP. In FY2009, outlays peaked at 24.4% of GDP. Outlays have fallen since then, but remain at levels above the historical average. In FY2013, total outlays were 20.8% of GDP. Under the CBO baseline, total outlays are projected to be 22.4% of GDP in FY2024.