POLSC232: American Government

The Congressional budget process refers to the step-by-step process Congress follows to create, adopt and approve its budget for the upcoming year. This is where it will decide how much money to appropriate for various government spending initiatives.

In February of each year, the president begins the process by submitting a budget request to Congress, which outlines the president's policy goals and spending priorities for the next fiscal year, which begins on October 1. The respective budget committees in the House and the Senate will study the president's request with help from the Congressional Budget Office, the bipartisan research service Congress created in 1974, to calculate how much each budget item will cost.

In May, each of the respective House and Senate budget committees prepares and adopts their budget resolutions, with the appropriate spending levels or ceilings for each budget item. During the summer, the relevant House and Senate appropriation committees sort out the differences before bringing their respective bills to the House and Senate floor for a vote. In September, the two houses pass a second budget resolution that reconciles the previously-established ceilings and appropriations. They send their final resolution to the president to sign before the October 1 deadline.

In reality, the timeline depends on the length of reconciliation between the two houses of Congress and the president. For example, if the president vetoes the legislation, which can occur during a divided government, the reconciliation process must continue, and the government faces the threat of a government shutdown. The approval deadline is October 1, the start of the new fiscal year.

A government deficit occurs when Congress brings in less revenue (taxes and other income) than it spends during the budget year. If the government raises more revenue than it spends, it achieves a budget surplus. Government debt refers to the total amount of money the government owes other entities, such as individual and institutional investors and foreign countries, due to the accumulated debt over the years. Congress may institute a debt ceiling to cap or put a ceiling on the government debt the U.S. treasury can incur. When the government reaches this ceiling, it no longer has the authority to borrow money.

Economic policy refers to matters that relate to the federal budget. Of the two primary categories of economic policy: monetary policy refers to policies that may manipulate the country's money supply, while fiscal policy refers to policies that involve government spending and taxation. Four economic theories about economic policy have dominated U.S. debate.

Laissez-faire economics is often associated with Adam Smith (1723–1790), the Scottish economist who wrote The Wealth of Nations (1776). Smith believed that the economy performs best when government leaves it alone, and market forces have the opportunity to reach equilibrium: rational self-interest and competition among businesses eventually lead to economic prosperity. This theory was popular during the 1800s – during the period of industrialization until the stock market crashed in 1929. Many blamed the crash on a lack of government oversight and unfettered capitalism.

John Maynard Keynes (1883–1946), the British economist, argued for strategic government intervention in the economy. For example, Keynesian economists say governments should intervene during economic downturns, such as by increasing domestic spending. Government initiatives might support public work programs to boost employment, invest in public infrastructure, or offer financial support for small businesses. During times of economic prosperity, legislators should decrease spending, raise taxes to curb inflation, and prepare for the next economic downturn, which may require future government investment.

Monetary theory, or monetarism, argues that government can boost the economy by controlling the amount of money in circulation, such as by adjusting the interest rates banks offer investors and businesses through the U.S. Federal Reserve. This policy gained popularity during the rampant inflation of the 1970s, but opponents argued that, although it did help curb inflation, the focus on monetary policy eventually led to a recession.

Supporters of supply-side economics argue that economic growth can be achieved by promoting business production. Proponents advocate for decreasing tax rates for wealthy individuals and businesses and eliminating business regulations that they argued hindered innovation and profits. This policy was a cornerstone of the Reagan administration (1981–1989). However, critics argued that while it seemed to lower inflation and unemployment, the policy also increased income disparity and led to a surge in the federal deficit as government income fell due to the decreased tax rate. The wealthy individuals who benefited from the lower tax rate failed to invest their windfall in U.S. businesses and the economy.

Federal tax policy falls within the purview of fiscal policy. Taxation is a primary way the government raises revenue to fund programs. Proponents of laissez-faire economics and Adam Smith would argue that a lower tax rate leaves individuals and businesses with more disposable income to invest in the economy. They oppose higher tax rates. A Keynesian would argue that government spending funded by higher taxes can stimulate economic activity by investing in programs that lead to future business growth. Lowering taxes reduces government income, and we cannot guarantee that wealthy beneficiaries of tax cuts will invest in areas that promote economic growth to benefit the general population. They may simply put the money they no longer have to contribute in taxes into their bank account.

Consider how much the government spends on transportation infrastructure or high-speed Internet services in rural areas to allow businesses to deliver their goods more efficiently and communicate with new customers and vendors. These government programs pay for programs that improve the lives of many Americans, but no one individual could possibly afford them.

Taxation can help governments establish and direct priorities in other ways. For example, increasing taxes on gasoline incentivizes people to buy more fuel-efficient cars and invest in alternative energy technologies that will spur economic growth when fossil fuels are no longer plentiful. Taxes that support social programs, such as education and housing programs, not only decrease income inequality but redistribute wealth by supporting communities that may need some initial help to become successful, such as when their children graduate from college and are able to get better jobs.

To review, see:

• The Congressional Appropriations Process
• Government's Financial Condition
• Budgeting and Tax Policy
• Deficit and Debt Ceiling
• Medicare and Medicaid Milestones, 1937 to 2015

Domestic policy refers to a wide range of internal, national, and public policy matters or topics that fall within a country's borders. Social public policy in the United States generally refers to legislation or policies designed to improve the well-being of individual citizens and can cover a range of issues, from healthcare to education. Examples of some major social public policies include the Affordable Care Act, Medicaid, Medicare, the No Child Left Behind Act, Social Security, and the Supplemental Nutrition Assistance Program.

The first major social public policy programs in the United States were the government's pensions to soldiers, widows, and orphans after the Civil War. After so many elderly citizens lost their savings during the stock market crash in 1929, President Franklin Roosevelt and Congress passed the Social Security Act of 1935. This Act established the social security insurance system that provides income to retired workers, benefits for workers and victims of industrial accidents, unemployment insurance, and aid for dependent mothers and children, the blind, and the physically handicapped. In 1965, President Lyndon B. Johnson signed the legislation that led to Medicare and Medicaid, and in 2010 President Barack Obama signed the Affordable Care Act into law.

The federal government has a limited role in education since public schools and colleges fall under the general purview of state and local government. However, the federal government does fund some key programs, such as the school lunch program from the Department of Agriculture, in addition to research, grant funding, and tuition assistance programs from the Department of Education.

The Department of Education has experienced several transformations since Congress and President Andrew Johnson established this Cabinet-level office in 1867. Its role is to set policy for educational initiatives, such as when Congress created a system of public land-grant universities in the 1800s (there are 106 today), began offering tuition assistance to veterans through the GI Bill in 1944, and began administering financial aid programs to help students in 1965.

To review, see History, Medicare Sustainability, and The Federal Role in Education.

Foreign policy, also called defense policy, foreign relations, and foreign affairs, refers to external issues, such as diplomacy, national defense and security, global policy, and war. The Constitution gives the president the authority to lead the country on foreign policy issues by granting the office the power to negotiate treaties, appoint ambassadors, and serve as the commander in chief of the military. The president also depends on advice from members of their executive team when making foreign policy decisions, such as the Department of State, Department of Defense, Department of Homeland Security, the National Security Council, the Central Intelligence Agency, and others.

The amount of influence each of these departments and agencies imparts depends on the proclivities of each individual president. The Senate can also play a key role in making foreign policy since it must approve every treaty the president negotiates and every ambassadorial appointment. Congress can also pass legislation that advocates for certain policies and procedures or approve (or deny) funding for initiatives it wants the president to champion (or stop). Members of the executive branch are free to meet with legislators to discuss options and work together to determine how to shape U.S. foreign policy.

Early American foreign policy focused on the challenges of establishing a new country amidst the threat of European interests in colonial territories on the continent and addressing conflict among the states themselves.

In 1823, President James Monroe issued the Monroe Doctrine, which stated the United States would consider any European acts expanding its colonies in the Americas an act of aggression. At this time, many Americans promoted the idea of Manifest Destiny which claimed that the United States was destined to expand its territory westward across the North American continent. Wars with Native Americans were frequent. In 1898, the United States acquired temporary control of Cuba and new territories in Guam, Puerto Rico, and the Philippines when it defeated Spain in the Spanish-American War. As it entered the 20th century, the United States adopted a more interventionist, imperialist foreign policy and established itself as a world power.

World War I and World War II further solidified America's place as a major world power. After World War II, the Soviet Union was its only real military and political rival. Tensions between the two countries dominated U.S. foreign policy for decades during the Cold War (1945–1991), when these two superpowers competed to influence the government of other countries, such as through destructive and deadly proxy wars in Korea (1950-1953), Vietnam (1955–1975), and the Angolan Civil War (1975–2002).

Since the Cold War officially ended in 1991, several issues have come to the forefront of American foreign policy, such as the country's increasing dependence on foreign oil, human rights concerns, global poverty, and international trade. On Sept. 11. 2001, the Al Qaeda terrorist group led an attack on New York City, which led to wars in Afghanistan and Iraq and a major overhaul of American foreign policy to confront international terrorism.

To review, see:

• Defining Foreign Policy
• Foreign Policy Instruments
• Diplomacy: The U.S. Department of State at Work
• Institutional Relations in Foreign Policy
• Approaches to Foreign Policy