The Federal Budget: Overview and Issues for FY2017 and Beyond

Summary

The federal budget is a central component of the congressional “power of the purse.” Each fiscal year, Congress and the President engage in a number of practices that influence short- and long-run revenue and expenditure trends. This report offers context for the current budget debate, and tracks legislative events related to the federal budget as they occur.

In recent years, policies enacted to decrease spending, along with a stronger economy, have led to reduced budget deficits. The Budget Control Act of 2011 (BCA; P.L. 112-25) implemented several measures intended to reduce the deficit from FY2012-FY2021. Three subsequent pieces of legislation have modified the BCA since its enactment—the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240), the Bipartisan Budget Act of 2013 (BBA 2013; P.L. 113-67), and the Bipartisan Budget Act of 2015 (BBA 2015; P.L. 114-74). These measures modified the discretionary budget authority levels permitted under the BCA for FY2013 through FY2017. Various deficit reduction measures were included to offset the costs of the changes to spending levels in that legislation, including extensions of the mandatory portion of spending reductions established by the BCA. The BCA will continue to affect spending limits in FY2017 and beyond, and Congress may debate enacting further modifications.

The Obama Administration released its budget for FY2017 on February 9, 2016. If the policies included in the budget proposal are fully implemented, spending (outlays) would total an estimated $4,147 billion (21.5% of GDP) and revenues an estimated $3,644 billion (18.9% of GDP) in FY2017. Over the 10-year window, the proposed budget would decrease the deficit from an estimated 3.3% of GDP in FY2016 to 2.8% of GDP in FY2026, averaging 2.6% of GDP over the next decade.

The President’s budget proposes a small decrease in the FY2017 cap on nondefense discretionary budget authority, followed by larger increases in the defense and nondefense discretionary caps for FY2018 through FY2021. The budget also proposes to eliminate the sequester on mandatory programs through FY2025. Deficit reduction is proposed through various changes to the tax code, immigration reform, and mandatory health programs.

Congressional consideration of the FY2017 budget is underway. The Budget Committees in the House and Senate each develop a budget resolution as they receive information and testimony from a number of sources, including the Administration, the Congressional Budget Office, and congressional committees with jurisdiction over spending and revenues. In February, House Budget Committee Chairman Tom Price (R-GA) and Senate Budget Committee Chairman Mike Enzi (R-WY) began the process of preparing budget resolutions in advance of consideration in the House and Senate. Absent an agreement on a budget resolution conference report for FY2017 by the House and Senate, the BBA 2015 provides that the Senate Budget Committee Chairman submit an allocation for publication in the Congressional Record of FY2017 budgetary resources between April 15, 2016, and May 15, 2016.

Though the federal budget deficit has fallen in recent years, trends resulting from current federal fiscal policies are generally thought by economists to be unsustainable in the long term. Projections suggest that achieving a sustainable long-term trajectory for the federal budget will require deficit reduction. Reductions in deficits could be accomplished through revenue increases, spending reductions, or some combination of the two.