The 2013 prelim Federal Budget

Today’s post is on the Obama’s recently released Federal Government Budget proposal for 2013.  You're going to hear plenty about this document in the news over the next few weeks.  But why get all your info second hand?

You can get your own copy of the proposal here.  Its organized into "chapters," by Federal department.  Pick a branch of the Federal Government that interests you personally, or one you’d like to know more about.  The Dept of Agriculture, NASA, Homeland Security, the EPA, whatever.  Then go to that branch’s “chapter” in the Budget document, and check out Obama’s plans for its funding!

Its real civic involvement that doesn’t even require you to get out of your chair!

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         Well, its February.  Our New Year's hangovers have cleared up, we've polished off the last carton of eggnog in the fridge, and we're all just now getting around to giving up on our resolutions.

So do you know what time it is!?  Its time for the Federal Government to start developing a budget for 2013!

That's right, folks.  Around this time each year, the Federal Government starts off the process of putting together a spending plan for the year upcoming.  2012 is only a few weeks old, but its already old news!  The budget debates that will be kicking off in the next few weeks are all about spending 12 months from now.

Here's the procedure:

Step 1 - The president makes a "Budget Proposal" for 2013 

Now, keep in mind, the president doesn’t have a ton of procedural power when it comes to the Federal spending.  The final Budget has to be approved by him.  But the president doesn't play an active role in bashing out an actual plan.  

He does get to start off the negotiations, however, by writing a prelim "Budget Proposal," which Congress uses as a starting point for the actual budget talks.

So Obama says "hey Congress, here's what I'd like for next years budget to look like," and submits to them a detailed written plan.  Obama released his vision for the budget on 2/13/2012 (you can download a PDF of it here), and Congress is reviewing it now.  After they look it over, it’s on to Step 2...

Step 2 - Congress starts negotiating a budget plan for 2013

Using the president's proposal as a jumping off point, Congressmen of all stripes will launch into a series of speeches about "fiscal responsibility," "restoring America's promise," and "run-away government spending."  Then they'll all meet in tiny rooms in the Capitol and do what they do best: fight. 

The Republican's will declare the Democratic suggestions for the budget ludicrous and untenable - and then offer virtually identical counterproposals.  Democrats will recess to talk amongst themselves, then come back with an "updated" offer - which will be the same thing that they wanted in the first place.

Now, in theory, the negotiations should be done by April or May.  Congress is supposed to have a final budget for 2013 ready to go by late spring 2012.  These things are SUPPOSED to get squared off almost a year in advance.

But if this round of negotiations is anything like the last few, Congress will actually never agree on a new Federal spending plan and end up just carrying over spending plans from last year. 

Not to be a party-pooper or anything...but over the last few years, Federal Budget negotiations have come to be a kind of ritualized failure.  This being an election year, chances are it will be even uglier.

But let's ignore that for the moment.  For now, pretend that everything goes swimmingly, and by April/May the parties have agreed on a plan everyone is happy with.  They send if off to the president. 

The president can pass the budget or veto it – but his veto can be overridden by Congress.  Let’s say he approves it.  We then can move on to...

Step 3 - The 2013 budget passes, and the different arms of the Federal Government adopt to any changes that may have been made to their funding

Ok, IF - and its a big if - Congress can agree on a  budget by April/May, it will go into effect in October 2012.   That budget would be good for 12 months.  5 months in (which will be Feb of 2013), the whole process starts over again, for putting together the 2014 Budget.

SO DON'T GET CONFUSED HERE!  Note that "2013 Budget" is kind of a misnomer.  The Budget currently being discussed is called the "2013 Federal Government Budget" (sometimes the "2013 National Budget", same thing).  HOWEVER, it is a spending plan that will run from Oct 2012 to Oct 2013.  I know.  It's weird.

Click here for a more detailed description of how the US Federal Govt develops and passes Budgets.

ANYWAY, I've just cooked up a couple charts and graphs sketching out Obama's proposed budget for you guys to browse. 

DON'T GET TOO ATTACHED TO THESE FIGURES!!!  REMEMBER, AS OF THIS MOMENT THESE ARE ONLY TENTATIVE SUGGESTIONS.  There’s a great deal of Congressional rehashing that happens before this stuff is finalized.

OBAMA'S BUDGET PROPOSAL FOR "2013"

(where "2013" is actually Oct 12 - Oct 13)

Click here to enlarge

Ok, so if you tally all that up, that's $3.8 trillion in spending called for in the new budget.  The obvious follow up question is, of course, where is the Fed going to get $3.8 trillion?
     

Government spending is funded through taxes.  Income taxes paid by individuals and the corporate taxes paid by companies make up the bulk of the government's income, but there's quite a few other sources as well.

Amounts in the below again are in millions.  One million millions = one trillion, so the bar marked "Individual income tax" indicates "$1.359 trillion."

I don’t know if you were keeping score or not while looking over the figures above.  But in case you missed it, I want to point out something to you... This plan calls for $3.8 trillion in spending.  But it only accounts for $2.9 trillion in revenues (and by “revenues” I mean “collected taxes”).

The $900 billion difference (3.8 trillion - 2.9 trillion = 900 billion) will have to be borrowed to "close the gap" in the budget.  That $900 billion is called the “Deficit,” and the borrowed amount will be added to the “National Debt” - which right now is about $15 trillion.

BIG IMPORTANT THING!!!!  As I mentioned in my last post, the National Debt IS NOT all just money that “America” owes to “other countries.”  It’s mostly money that the US govt owes other Americans.

Of our $15 trillion debt, a little less than $5 trillion is owed abroad (and about $4 trillion is owed to us by foreign entities.  So that’s kind of a wash.)

           The other $10 trillion is money that American individuals, companies, cities, towns, institutions, other governments, etc. have lent to the Federal government over the years.

Remember, “paying off the national debt” isn’t really an activity that burns “America’s” wealth.  It just redistributes it.  Since most of the nation’s debt is money owed to American citizens and organizations, “paying off” the debt is by and large just shifting money around internally.

Now, I know a $900 billion deficit sounds big.  But the last two years have seen deficits of $1,300 billion, so in the grand scheme of things, 2013 is starting off as a fairly "on-budget" year.

I think the most interesting item I’ve seen in this budget is a big bump for the Dept of Transportation.  Looks like Obama is pushing for a nation-wide infrastructure update, which will be funded through the DoT. 

Nothing too fancy or comprehensive, but the goal seems to be to put people to work fixing up highways, bridges, railways, airports and so on.  It’s being toted as a “two birds one stone” maneuver: a way of fighting unemployment while simultaneously investing in America's physical assets.

I have yet to find a budget item in there to fill the pot-holes on my block, but I’m still hopeful.  But this puppy’s 250 pages long, and I’ve only been looking at it since Tuesday, so it’s too early for me to give up hope.
 

Again, you can get a copy of the budget here.  I strongly encourage you to browse through it.  It’s surprisingly easy to read, and pleasantly nontechnical. 

It's arranged in 5 - 10 page long sections, each dedicated to one specific arm of the Federal Government.  Pick a department that interests you personally, and check out Obama's plan for it! 

        Maybe you want to know more about the Department of Defense.  Or NASA.  Or maybe you decided you want to know more about this DoT budget boost. 

        Then go find that section in the budget document and get the scoop!  Find out for yourself what the White House plans to do with your favorite department's funding in 2013!  You paid your taxes!  Aren't you curious where that money winds up?