"The Federal budget has two distinct but equally important purposes. The first is to provide a financial measure of federal expenditures, receipts, deficits, and debt levels and their impact on the economy in order to promote economic stability and growth. The second is to provide the means for the Federal Government to efficiently collect and allocate resources to meet national objectives.

The congressional budget process, as set forth in the Budget Act, requires Congress to annually establish the level of total spending and revenues and how total spending should be divided among the 20 major functions of government such as defense, agriculture, and
health."

The Center on Budget and Policy Priorities has a more detailed description of the steps below at http://www.cbpp.org/cms/?fa=view&id=155

 

Step One: President's Budget Proposals

The President submits to Congress a detailed budget request for the fiscal year on or before the first Monday in February. This request tells Congress how much the federal government should spend on public purposes, how much it should take in on tax resources, and how much deficit or surplus the federal government should run.

Developed by the President's Office of Management and Budget (OMB), the detailed budget shows the President's priorities for federal programs such as education, defense, agriculture, and other individual federal programs known as "budget accounts." The President also indicates what kind of spending or tax policy changes should be made.

Each year, he must decide each individual funding amount for discretionary or appropriated programs (defense spending, housing, K-12 education) that make up about one-third of total federal spending. He may also propose making changes to entitlement programs (Social Security, Medicare) and the tax code.

Step Two: Congressional Budget Resolution (Blueprint)

After hearing the President's request, Congress holds its own hearings through the House and Senate Budget Committees to set limits on what each committee can spend or reduce. Once they draft a budget resolution, it goes to the House and Senate floors, where it can be amended by majority vote. Any differences are resolved in a House-Senate conference and a vote passes both houses.

The concurrent congressional resolution requires only a majority vote to pass, and cannot be filibustered in the Senate. If Congress doesn't pass a resolution (which should happen by April 15), the last year's budget remains in effect.

The final budget resolution states how much Congress spends in each budget function and how much revenue the government will collect for at least the next five years (which the Congressional Budget Acts requires though Congress sometimes chooses a 10-year period). The difference between these two numbers—the spending ceiling and revenue floor—provides the deficit or surplus for the year.

The budget resolution states its spending totals in two different ways: the total amount of "budget authority" or the total amount that is to be provided, and the estimated expenditures, or "outlays," which is how much money actually goes out of the treasury during the year.

Step Three: Enforcement of the Resolution in the House and Senate

Any member of the House or Senate can raise a "point of order" on the floor to block legislation that violates the terms of the budget resolution. As pointed out by the Center on Budget and Policy Priorities: "In some recent years, this point of order has not been particularly important in the House because it can be waived by a simple majority vote on a resolution developed by the leadership-appointed Rules Committee, which sets the conditions under which each bill will be considered on the floor. However, the budget point of order is important in the Senate, where any legislation that exceeds a committee's spending allocation — or cuts taxes below the level allowed in the budget resolution — is vulnerable to a budget point of order on the floor that requires 60 votes to waive."

In 2006, Congress adopted the "Pay-As-You-Go" or "PAYGO" rule requiring all entitlement increases and tax cuts to be fully offset. This rule does not apply to discretionary spending which is limited by the annual budget. Again, from the Center on Budget and Policy Priorities: "In order to satisfy the House and Senate PAYGO rules, a bill must be paid for over the first six years (including the current year), and over the first 11 years (including the current year).

The Senate PAYGO rule does not consider the impact of a bill on Social Security and other 'off-budget' items, whereas the House PAYGO rule applies to the "unified budget," which includes Social Security."

Occasionally, Congress uses a special procedure called reconciliation "to facilitate the passage of deficit reduction legislation or other major entitlement or tax legislation."