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GLOSSARY OF BUDGET TERMS

By The Issue Wonk

 

 

Appropriation Act:  Legislation that provides budget authority for federal programs or agencies.  Generally, 13 regular appropriation acts are considered annually to fund the operations of the federal government.  Congress may also consider supplemental or continuing appropriation acts.  (See CBO Glossary)

 

Authorization Act:  Legislation under the jurisdiction of a committee other than the appropriations committees that establishes or continues the operation of a federal program or agency.  Any funding is usually done in another appropriation act but sometimes the authorization may provide budget authority.  (See CBO Glossary)

 

Balanced Budget and Emergency Deficit Control Act of 1985 (Public Law 99-177): Frequently called the Deficit Control Act, it was originally known as Gramm-Rudman-Hollings.  The law made many changes to the budget process, the mostly notable of which was specific targets to reduce spending.  The Act has been amended and extended several times, the most significant of which was the Budget Enforcement Act of 1990, which established the pay-as-you-go procedure.  On September 30, 2002, the discretionary spending limits and the procedure to enforce the spending caps expired, and the Office of Management and Budget (OMB) and Congressional Budget Office (CBO) were no longer required to report the 5-year effects of legislation affecting direct spending or revenues. (See CBO Glossary)

 

Baseline:  The basis for the CBO budget, it is a benchmark for measuring the budgetary effects of proposed changes in federal revenues or spending.  The baseline is the projection of current-year levels of new budget authority, outlays, revenues, and the deficit or surplus into the budget year and out-years based on current laws and policies.  (See CBO Glossary)

 

Budget authority:  Authority provided by law to incur financial obligations that will result in immediate or future outlays of federal government funds.  Budget authority may be provided in an appropriation act or authorization act and may take the form of borrowing authority, contract authority, entitlement authority, or authority to obligate and expend offsetting collections or receipts.  Offsetting collections and receipts are classified as negative budget authority.  (See CBO Glossary)

 

Budget function:  One of 20 general subject categories into which budgetary resources are grouped so that all budget authority and outlays can be presented according to the national interests being addressed.  There are 17 broad budget functions, including national defense, international affairs, energy, agriculture, health, income security, and general government.  Three other functions -- net interest, allowances, and undistributed offsetting receipts -- are included to complete the budget.  (See CBO Glossary)

 

Budget resolution:  A concurrent resolution, adopted by the Senate and the House that sets forth a Congressional budget plan for the budget year and at least four out-years.  The plan consists of spending and revenue targets with which subsequent appropriation acts and authorization acts that affect revenues and direct spending are expected to comply.  The targets established in the budget resolution are enforced in each House of Congress through procedural mechanisms set forth in law and in the rules of each House.  (See CBO Glossary)

 

Consumer price index (CPI):  An index of the cost of living commonly used to measure inflation.  The Bureau of Labor Statistics publishes the CPI-U (an index of consumer prices based on the typical market basket of goods and services consumed by all urban consumers during a base period) and the CPI-W (an index of consumer prices based on the typical market basket of goods and services consumed by urban wage earners and clerical workers during a base period).  (See CBO Glossary)

 

Debt:   The total value of outstanding securities issued by the federal government is referred to as federal debt or gross debt.  It has two components: debt held by the public (federal debt held by nonfederal investors, including the Federal Reserve System) and debt held by government accounts (federal debt held by federal government trust funds, deposit insurance funds, and other federal accounts).  Debt subject to limit is federal debt that is subject to a statutory limit on its issuance.  The current limit applies to almost all gross debt, except a small portion of the debt issued by the Department of the Treasury and the small amount of debt issued by other federal agencies (primarily the Tennessee Valley Authority and the Postal Service).  Unavailable debt is debt that is not available for redemption, or the amount of debt that would remain outstanding even if surpluses were large enough to redeem it.  Such debt includes securities that have not yet matured (and will be unavailable for repurchase) and nonmarketable securities, such as savings bonds.   (See CBO Glossary)

 

Debt service:  Payment of scheduled interest obligations on outstanding debt.  As used in CBO's Budget and Economic Outlook, debt service refers to a change in interest payments resulting from a change in estimates of the deficit or surplus.  (See CBO Glossary)

 

Deficit:  The amount by which the federal government's total outlays exceed its total revenues in a given period, typically a fiscal year.  (See CBO Glossary)

 

Direct spending:  The same thing as mandatory spending, direct spending is budget authority provided and controlled by laws other than appropriation acts and the outlays that result from that budget authority.  (See CBO Glossary)

 

Discretionary spending:  Budget authority that is provided and controlled by appropriation acts and the outlays that result from that budget authority.  Discretionary spending refers to the outlays that result from budget authority provided in appropriation acts.  (See CBO Glossary)

 

Discretionary spending limits (or caps):   Statutory ceilings imposed on the amount of budget authority provided in appropriation acts in a fiscal year and on the outlays that are made in that fiscal year.  The limits were first established in the Budget Enforcement Act of 1990.  On September 30, 2002, all discretionary spending limits, and the process to enforce them, expired.  (See CBO Glossary)

 

Economic Growth and Tax Relief Reconciliation Act of 2001 (Public Law 107-16): This law significantly reduces tax liabilities (the amount of tax owed) over the 2001-2010 period by cutting individual income tax rates, increasing the child tax credit, repealing estate taxes, raising deductions for married couples, increasing tax benefits for pensions and individual retirement accounts, and creating additional tax benefits for education. The law phases in many of those changes over time, including some that are not fully effective until 2010.  Although one provision has been made permanent, the rest of the law's provisions are scheduled to expire on or before December 31, 2010.  (See CBO Glossary)

 

Entitlement:  A legal obligation of the federal government to make payments to a person, group of people, business, unit of government, or similar entity that is not controlled by the level of budget authority provided in an appropriation act.  The Congress generally controls spending for entitlement programs by setting eligibility criteria and benefit or payment rules.  The source of funding may be provided in either the authorization act that created the entitlement or a subsequent appropriation act.  The best-known entitlements are the major benefit programs, such as Social Security and Medicare.  (See CBO Glossary)

 

Excise tax:  A tax levied on the purchase of a specific type of good or service, such as tobacco products or telephone services.  (See CBO Glossary)

 

Federal funds:  In the federal accounting structure, federal funds are all accounts through which collections of money and expenditures are recorded, except those classified by law as trust funds.  Federal funds include several types of funds, one of which is the general fund.  (See CBO Glossary)

 

Fiscal policy:  The government's tax and spending programs, which influence the amount and maturity of government debt as well as the level, composition, and distribution of national output and income.  Many summary indicators of fiscal policy exist.  Some, such as the budget deficit or surplus, are narrowly budgetary.  Others attempt to reflect aspects of how fiscal policy affects the economy.  For example, a decrease in the standardized-budget surplus (or increase in the standardized-budget deficit) measures the short-term effect on demand that results from higher spending or lower taxes.  The fiscal gap measures whether current fiscal policy implies a budget that is close enough to balance to be sustainable over the long term.  The fiscal gap represents the amount by which taxes would have to be raised, or spending cut, to keep the ratio of debt to GDP from rising forever.  Other important measures of fiscal policy include the ratios of total taxes and total spending to GDP.  (See CBO Glossary and Fiscal Policy)

 

Fiscal year:  The yearly accounting period which begins October 1st  and ends September 30th.  Fiscal years are designated by the calendar years in which they end.  For example, fiscal year 2006 will begin on October 1, 2005, and end on September 30, 2006.  The budget year is the fiscal year for which the budget is being considered.  An out-year is a fiscal year following the budget year.  The current year is the fiscal year in progress.  (See CBO Glossary)

 

Foreign direct investment:  Financial investment by which a person or an entity acquires a lasting interest in, and a degree of influence over, the management of a business enterprise in a foreign country.  (See CBO Glossary)

 

Forward funding:  The provision of budget authority that becomes available for obligation in the last quarter of a fiscal year and remains available during the following fiscal year.  This form of funding typically finances ongoing education grant programs.  (See CBO Glossary)

 

General fund:  One category of federal funds in the government's accounting structure.  The general fund records all revenues and offsetting receipts not earmarked by law for a specific purpose and all spending financed by those revenues and receipts.  (See CBO Glossary)

 

Grants:  Transfer payments from the federal government to state and local governments or other recipients to help fund projects or activities that do not involve substantial federal participation.  (See CBO Glossary)

 

Grants-in-aid:  Grants from the federal government to state and local governments to help provide for programs of assistance or service to the public.  (See CBO Glossary)

 

Gross domestic product (GDP):  The total market value of goods and services produced domestically during a given period.  The components of GDP are consumption (both household and government), gross investment (both private and government), and net exports.  (See CBO Glossary and Gross Domestic Policy)

 

Gross national product (GNP):  The total market value of goods and services produced during a given period by labor and capital supplied by residents of a country, regardless of where the labor and capital are located.  GNP differs from GDP primarily by including the capital income that residents earn from investments abroad and excluding the capital income that nonresidents earn from domestic investment.  (See CBO Glossary)

 

Inflation:  Growth in a general measure of prices, usually expressed as an annual rate of change.  (See CBO Glossary)

 

Infrastructure:  Capital goods that provide services to the public, usually with benefits to the community at large as well as to the direct user.  Examples include schools, roads, bridges, dams, harbors, and public buildings.  (See CBO Glossary)

 

Line Item Veto:  The authority of the President to reject specific items in a bill without rejecting the entire piece of legislation.  (See Wikipedia)

 

Monetary policy:  The strategy of influencing movements of the money supply and interest rates to affect output and inflation.  An "easy" monetary policy suggests faster growth of the money supply and initially lower short-term interest rates in an attempt to increase aggregate demand, but it may lead to higher inflation.  A "tight" monetary policy suggests slower growth of the money supply and higher interest rates in the near term in an attempt to reduce inflationary pressure by lowering aggregate demand.  The Federal Reserve System conducts monetary policy in the United States.  (See CBO Glossary and Monetary Policy)

 

Off-budget:  Spending or revenues excluded from the budget totals by law.  The revenues and outlays of the two Social Security trust funds (the Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund) and the transactions of the Postal Service are off-budget.  As a result, they are excluded from the totals and other amounts in the budget resolution and from any calculations necessary under the Deficit Control Act.  (See CBO Glossary)

 

Reconciliation:  A special Congressional procedure often used to implement the revenue and spending targets established in the budget resolution.  The budget resolution may contain reconciliation instructions, which direct Congressional committees to make changes in revenues or direct spending laws under their jurisdictions to achieve a specified budgetary result.  The legislation to implement those instructions is usually combined into one comprehensive reconciliation bill, which is then considered under special rules.  Reconciliation affects revenues, direct spending, and offsetting receipts but usually not discretionary spending.  (See CBO Glossary)

 

Revenues:  Funds collected from the public that arise from the government's exercise of its sovereign or governmental powers.  Federal revenues consist of individual and corporate income taxes, excise taxes, and estate and gift taxes; contributions to social insurance programs (such as Social Security and Medicare); customs duties; fees and fines; and miscellaneous receipts, such as earnings of the Federal Reserve System, gifts, and contributions.  Federal revenues are also known as federal governmental receipts.  (See CBO Glossary)

 

State of the Union:  The speech delivered by the President to a joint session of Congress outlining the presidentís agenda and the general state of the nation.  (See Wikipedia)

 

Trust funds:  In the federal accounting structure, trust funds are accounts designated by law as trust funds (regardless of any other meaning of that term).  Trust funds record the revenues, offsetting receipts, or offsetting collections earmarked for the purpose of the fund, and budget authority and outlays of that fund financed by those revenues or receipts.  The federal government has more than 200 trust funds.  The largest and best known are those that finance major benefit programs (including Social Security and Medicare) and infrastructure spending (the Highway and the Airport and Airway Trust Funds.  (See CBO Glossary)

 

 

© The Issue Wonk, 2006 

 

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