August 12, 2019

The current national debt has passed the $22 trillion mark and it keeps growing. The debt is the result of annual budgets that weren't balanced and resulted in the government incurring a deficit. Let's take a closer look at how the federal budget process works, where the money goes and why the national debt keeps growing.

Breaking down the federal budget

Federal spending can be divided into three categories:

  • The government's spending.
    Mandatory spending. That category includes Society Security, Medicare and safety net programs, such as the Supplemental Nutritional Assistance Program. Mandatory spending is dictated by how many people quality for those programs.
  • Discretionary spending. That category describes funding for different agencies and programs through appropriation bills. You will find funding for the Department of Defense in that category as well as funding for Homeland Security, the Department of Health & Human Services or NASA.
  • Interest on debt. Debt has been accumulating and the government has to pay interest on it. The current $22 trillion debt has made interest the fastest growing expense.

What does the 2020 budget look like?

In March 2019, President Trump released a budget request for 2020. Here is what the current budget request looks like:

  • The proposed budget adds up to $4.746 trillion.
  • Revenues are estimated at $3.645 trillion.
  • Funding for Social Security, Medicare and Medicaid accounts for 60% of the budget.
  • $479 billion will go toward paying interest on debt.
  • The budget includes a proposed $1.426 trillion in discretionary spending.
  • The budget for military spending accounts for more than half of that amount.
  • The request would result in a $1.101 trillion deficit for 2020.

How does the federal budget process work?

Congressmen discuss the federal budget.

The process begins with the president submitting a budget request for the following fiscal year. That request includes funding amounts for different discretionary programs and sometimes recommendations for policy changes.

House and Senate budget committees review that proposal and prepare a concurrent resolution. Appropriations committees look at spending for each program at a more detailed level.

Congress creates a concurrent budget resolution that serves as a roadmap for the next five to ten years. That resolution includes targets for spending, revenues and deficits. Congress can then begin passing annual bills to fund different programs.

Where does the money come from?

Tax tiles and money.

Taxes are the main source of revenues for the government. The federal government can also borrow money through bonds and other securities issued by the Treasury or borrow from existing trust funds.

The total amount of debt the government can accrue by borrowing through securities and trust funds is limited by the debt ceiling. The Bipartisan Budget Act of 2018 temporarily suspended the debt ceiling, but it has been reinstated at $22 trillion in March 2019. Congress can also limit spending by instating spending caps for different programs.

The Treasury Department can use extraordinary measures to keep funding the government once the debt ceiling is reached. However, it has to stop issuing securities.

Rising interest, the current debt ceiling and the 2020 budget with the proposed $1 trillion deficit highlight the need for better fiscal policies. Congress is currently passing appropriations bills for 2020, and it looks like the federal debt will keep growing in 2020.

It's Up to Us has been drawing attention to the current fiscal challenge. You can help by getting involved in a competition or campus event.