General Definitions
There are four key principles to understanding the US budget. The first two are that the US Budget has two categories, outlays (aka expenditures) and receipts. The third is that the differences between the two determine whether or not we have a surplus or a deficit. The fourth key principle is that the deficit is tacked onto our publicly held debt which, as you can see by watching our debt clock, is spiraling upwards at an alarming pace.
Outlays: Outlays are payments made (generally through the issuance of checks or disbursement of cash) to liquidate obligations. Outlays during a fiscal year may be for payment of obligations incurred in prior years or in the same year. For example, the money spent for the 2009 portion of the “stimulus” package is an outlay.
Receipts: Collections from the public and from payments by participants in certain social insurance and other Federal programs (like social security). These collections consist primarily of tax revenues and social insurance premiums, but also include receipts from court fines, certain fees, and deposits of earnings by the Federal Reserve System. Total receipts are compared with total outlays in calculating the budget surplus or deficit.
Deficit: The amount by which outlays exceed receipts in a given fiscal period. (A surplus would be the amount by which receipts exceed outlays.) Only 5 times since the 1960's has the US government ran a surplus, and of those 5 times, in one occurrence, the state's ran a great enough deficit to put the entire government in the red.
Publicly held debt: This is the debt we can pay off right now. Cumulative amounts borrowed by the Treasury Department or the Federal Financing Bank from the public or from another fund or account. The public debt does not include agency debt (amounts borrowed by other agencies of the Federal Government). The total public debt is subject to a statutory limit but that limit is trivial because it always is pushed higher.
The Agency debt, like the social security trust fund is a gigantic IOU. Any surplus social security revenue is spent by the government and replaced by government securities. These securities represent money that must either be borrowed or raised when the time comes for payments.
Aside from those four there are other concepts that work together. For example, there are different types of spending that are crucial for a good understanding of how our government spending works.
Entitlement(s): A Federal program or provision of law that requires payments to any person or unit of government that meets the eligibility criteria established by law. Entitlements constitute a binding obligation on the part of the Federal Government, and eligible recipients have legal recourse if the obligation is not fulfilled. Social Security and veterans' compensation and pensions are examples of entitlement programs. These largely constitute:
Mandatory Spending: Spending (budget authority and outlays) controlled by laws other than annual appropriations acts. Mandatory spending works like this. Imagine that Congress has to shut down for a year because the H1N1 flue, aka swine flue, has infected all the members of Congress. Ironies set aside, mandatory spending programs, like social security will be spent anyway even though Congress wasn't even in session. Mandatory spending is just that, mandatory. It represents entitlements made by Congress to their constituents whomever they may be (elderly, single moms, disabled, etc.). 1,000 years from now, without any changes made, these spending programs would still be continuing. Although mandatory spending is now 66% of our budget in 1965 it was only 29% of the budget. It is easier for Congress to spend money through mandatory programs because once they pass, in all cases without a sunset clause, they can never expire without a vote. Taking into account that Democrats and Republicans defend mandatory spending to their constituents with a filibuster it takes 60 votes to change mandatory spending. Politically, getting 60 votes to change any sort of entitlement program is near impossible.
Discretionary Spending: Spending (budget authority and outlays)controlled in annual appropriations acts. “Pork” is in the form of discretionary spending.
Authorization: A statutory provision that obligates funding for a program or agency. An authorization may be effective for one year, a fixed number of years, or an indefinite period. An authorization may be for a definite amount of money or for "such sums as may be necessary." The formal federal spending process consists of two sequential steps: authorization and then appropriation.
Authorizations Act: A law that establishes or continues one or more Federal agencies or programs, establishes the terms and conditions under which they operate, authorizes the enactment of appropriations, and specifies how appropriated funds are to be used. Authorizations acts sometimes provide permanent appropriations. For example, to create a US Department of Peace Congress would need to pass an Authorization Act that established that department.
Appropriation: The provision of funds, through an annual appropriations act or a permanent law, for federal agencies to make payments out of the Treasury for specified purposes.
Supplemental Appropriation: Budget authority provided in an appropriations act in addition to regular or continuing appropriations already provided. Supplemental appropriations generally are made to cover emergencies, such as disaster relief, or other needs deemed too urgent to be postponed until the enactment of next year's regular appropriations act. Hurricane Katrina needed a supplemental appropriation. If California needs a federal bailout out it will be in the form of a supplemental appropriation.
Here are some other important terms that are relevant to the budget:
Baseline: Projection of the receipts, outlays, and other budget amounts that would ensue in the future without any change in existing policy. Baseline projections are used to gauge the extent to which proposed legislation, if enacted into law, would alter current spending and revenue levels. This is an important concept because Congress, historically, likes to spend the baseline amount per year as a minimum level. So any new spending increases are usually not temporary. Even bills that are supposed to be temporary, like the stimulus bill, become part of the baseline and hard to cut back on in the future.
Budget Resolution: Legislation in the form of a concurrent resolution setting forth the congressional budget. The budget resolution establishes various budget totals, divides spending totals into functional categories (e.g., transportation), and may include reconciliation instructions to designated House or Senate committees.
"Christmas Tree" Bill: Informal nomenclature for a bill on the Senate floor that attracts many, often unrelated, floor amendments. The amendments which adorn the bill may provide special benefits to various groups or interests. In other words a bill laden with increased spending to special interests groups ripe with pork and wasteful spending.
Clean Bill: Generally, after a committee has amended legislation, the chairman may be authorized by the panel to assemble the changes and what remains unchanged from the original bill and then reintroduce everything as a clean bill. A clean bill may expedite Senate action by avoiding separate floor consideration of each committee amendment. This is a process in which Christmas Trees pass easier.
Continuing Resolution/Continuing Appropriation: Legislation in the form of a joint resolution enacted by Congress, when the new fiscal year is about to begin or has begun, to provide budget authority for Federal agencies and programs to continue in operation until the regular appropriations acts are enacted. If there is a conflict between the President and Congress over the budget Congress will often pass a continuing resolution or continuing appropriation to fund the federal government at the last fiscal years levels not counting inflation.
Filibuster: Informal term for any attempt to block or delay Senate action on a bill or other matter by debating it at length, by offering numerous procedural motions, or by any other delaying or obstructive actions. The filibuster is used to block major bills. Tax hikes, social welfare reductions are often filibustered and never enacted.
Fiscal Year, US: The fiscal year is the accounting period for the federal government which begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006. Congress passes appropriations legislation to fund the government for every fiscal year.
Off-budget entities: The budget authority, outlays, and receipts of certain Federal entities that have been excluded from budget totals under provisions of law. At present, off-budget entities include the Social Security trust funds and the Postal Service.
Reconciliation Bill: A bill containing changes in law recommended pursuant to reconciliation instructions in a budget resolution. If the instructions pertain to only one committee in a chamber, that committee reports the reconciliation bill. If the instructions pertain to more than one committee, the Budget Committee reports an omnibus reconciliation bill, but it may not make substantive changes in the recommendations of the other committees. The senate uses a reconciliation bill to get around the filibuster because the senate cannot filibuster a budget reconciliation bill.