Congress and the budget

The Budget and Accounting Act (1921) established the modern budgeting process, involving the president.
The Office of Management and Budget (OMB) assists the president in setting spending priorities since 1970.

Congressional committees review the proposed budget according to the Congressional Budget and Impoundment Control Act (1974).
The fiscal year starts in October; the president submits a budget proposal by February.
The budget proposal carries political weight but not constitutional weight.
Mandatory Spending includes entitlement programs like Social Security and Medicare, consuming a significant portion of the budget.
Discretionary Spending includes areas like defense, representing a smaller fraction of overall spending.

Congress generates a budget resolution outlining federal spending.
House and Senate Appropriations Committees manage budgets for departments and submit resolutions to the president for approval.

The Sixteenth Amendment (1913) allowed federal income tax.
Budget Surplus: Government takes in more money than spent.
Budget Deficit: Government spends more than it takes in, leading to deficit spending and increased national debt.
Deficit spending often financed by government bonds.

The Social Security Act (1935) established support programs like Unemployment Insurance and Old Age Assistance.
Social Security primarily provides old-age insurance.
By October 2023, average benefits were $1,827 monthly, with a max of $3,627 for full retirement age.
Payment system relies on current payees, not individual savings accounts.

Growing number of retirees (e.g., Baby Boomers) stressing the system.
Estimates indicate a decline in the worker-to-beneficiary ratio from 2.7 to 2.3 by 2035.
If unchanged, only 75% of promised benefits projected to be paid.

Social Security tax rate (2025): 6.2% for employees and employers, up to $176,100.
Self-employed individuals pay 12.4% but can deduct employer-equivalent taxes.
Medicare tax: 1.45% each for employees and employers, with no limit.
Additional Medicare tax: 0.9% on earnings over $200,000 for singles or $250,000 for married couples.

Reducing current benefits faces political backlash.
Raising payroll taxes has public support (73%).
Allowing private investment accounts proposed as an alternative, though debated due to risks involved.