AP Gov Congress and Federal Budget

Fiscal year: October 1st- September 30th

The federal budget outlines how the government will collect and spend money for the upcoming year

Types of spending

Mandatory Spending:

Discretionary Spending: Decided annually

Mandatory spending limits Congress’s ability to quickly change the budget- a key issue in debates about fiscal debates.

President’s Role:

Submits a proposed budget each year through the Office of Management and Budget

reflects the president's policy priorities and political goals

Congress Role:

Budget Committees’ budget resolution sets broad spending and revenue targets

Congress Controls spending (the power of the purse), but the president sets the agenda and can veto appropriations bills

  • Multiple actors (President, Congress, interest groups, agencies) all have competing priorities.

  • Mandatory spending takes up over two-thirds of the budget — leaving little flexibility.

  • Political conflict: parties disagree over taxation, spending priorities, and deficits.

  • Short-term needs (like defense or disaster relief) vs. long-term obligations (like Social Security).

Revenue:

  • Primarily from individual income taxes and payroll taxes.

Spending:

  • Distributed through the budget process.

Key Terms:

  • Surplus: Revenue > Spending

  • Deficit: Spending > Revenue

  • Debt: The accumulation of all past deficits minus surpluses.

AP Concept:
This relates to fiscal policy, the government’s use of taxation and spending to influence the economy.

Current Challenge:
Social Security’s trust fund is projected to face shortfalls as baby boomers retire and fewer workers pay in.

Potential Solutions:

  • Raise the payroll tax rate or income cap.

  • Increase the retirement age for full benefits.

  • Privatization: Allow individuals to invest part of their contributions.

  • Demonstrates a policy challenge created by demographic change.

  • Shows why reforming mandatory spending is politically difficult but fiscally necessary.

  • Highlights tension between individual entitlements and limited government resources, a key concept in fiscal policy and budgeting.