Does the US Have a Budget? Understanding America’s Fiscal Framework

When you ask, “Does the US have a budget?” the answer may seem obvious—yes, of course. But the reality is far more complex than a simple affirmation. The United States operates under an annual federal budget process, but persistent deficits, political gridlock, continuing resolutions, and increasing national debt often give the impression that budgeting is inconsistent or even broken. This article explores the U.S. federal budget in depth—how it’s created, how it functions, and why it often appears that the country doesn’t truly “have a budget” in the way individuals or businesses manage their finances.

We’ll unravel the mechanisms behind congressional appropriations, the role of the White House, the impact of mandatory and discretionary spending, and the consequences of not passing timely budgets. By the end, you’ll have a clearer picture of the American fiscal system and its challenges.

What Is the U.S. Federal Budget?

The U.S. federal budget is the government’s financial blueprint for how it plans to raise revenue (primarily through taxes) and allocate that money over a fiscal year, which runs from October 1 to September 30. It includes:

• Federal tax collections (individual, corporate, payroll taxes, etc.)
• Spending on national defense, healthcare, Social Security, and more
• Investments in infrastructure, research, and education
• Debt interest payments and other mandatory obligations

The Office of Management and Budget (OMB), an executive agency that serves the President, plays a major role in preparing the budget each year. However, the final version must be approved by Congress, making it a product of negotiation, compromise, and political maneuvering.

The Process of Creating a Federal Budget

The U.S. budget process begins roughly 18 months before the start of a fiscal year. While legally the budget is supposed to be passed by April 15, in practice, the timeline is frequently missed. The formal process includes several key stages.

1. Presidential Budget Proposal

Every February or March, the President submits a budget proposal to Congress. This proposal outlines administration priorities, including spending increases for certain programs and tax policy changes. It reflects the President’s vision but is ultimately non-binding—the real power of the purse lies with Congress.

For example, President Biden’s Fiscal Year (FY) 2024 budget request included $6.9 trillion in spending—up from $6.3 trillion in FY2023—with heightened investments in clean energy and healthcare.

2. Congressional Budget Resolution

Congress, through the House and Senate Budget Committees, drafts a budget resolution that sets overall spending and revenue levels. This resolution is a concurrent resolution—meaning it doesn’t become law but guides the appropriations process. It’s also supposed to include reconciliation instructions, enabling certain bills to bypass the Senate filibuster.

However, this resolution is often not passed—or delayed indefinitely. In recent decades, Congress has frequently failed to pass a bipartisan budget resolution, leading to a fragmented appropriations process.

3. Appropriations Bills

Twelve separate appropriations bills must be passed by Congress each year to fund government agencies and operations. These cover departments like Defense, Health and Human Services, and Transportation. They must be signed into law by the President.

When Congress fails to pass all 12 bills on time, it often enacts a continuing resolution (CR), which temporarily funds the government at previous year’s levels. This stopgap tactic can last for months, creating uncertainty for government programs and contractors.

Example: Continuing Resolutions in Recent Years

Sources: Congressional Research Service, U.S. Government Publishing Office

The frequent reliance on CRs illustrates how routine budget deadlines are routinely ignored, undermining effective long-term planning.

The State of the U.S. Budget: Reality vs. Intent

While the U.S. does technically have a budget at the end of most fiscal years—often cobbled together through CRs and last-minute deals—the structure is far from ideal. Let’s examine the forces that complicate the process.

Political Gridlock and Partisan Disagreements

One of the biggest hurdles to a timely and coherent federal budget is political polarization. With control of Congress often split between parties, and the presidency occupied by the opposing party, budget negotiations become highly contentious.

Disagreements often center on:

• Tax policy (e.g., raising taxes on corporations vs. cutting them)
• Spending levels for social programs (Medicaid, SNAP, housing)
• National defense expenditures
• Entitlement reforms (Social Security, Medicare)

These ideological divides delay or prevent the passage of appropriations bills, leading to government shutdowns or reliance on temporary funding.

Entitlement Spending: The Budget’s Anchor

A significant portion of federal spending is legally mandated and grows automatically each year. These are known as mandatory programs, and they include:

• Social Security
• Medicare
• Medicaid
• Federal retirement programs
• Interest on the national debt

These programs account for nearly two-thirds of total federal spending. For FY2023, mandatory spending totaled about $4 trillion—over $2 trillion more than discretionary spending. Because these programs don’t require annual approval, Congress has far less control over them, making comprehensive budget adjustments difficult.

Discretionary Spending: Where Congress Holds Power

The remaining portion of the budget—discretionary spending—is subject to annual appropriations. This includes:

• National defense (the largest chunk)
• Education
• Transportation infrastructure
• Scientific research (e.g., NIH, NASA)
• Foreign aid

In FY2023, discretionary spending was approximately $1.6 trillion, or about 30% of the total budget.

While Congress has the authority to adjust these figures each year, budget caps set under legislation like the Budget Control Act of 2011 often limit flexibility. Additionally, defense spending frequently dominates the discretionary pie, leaving less room for other priorities.

The U.S. Budget in Practice: Chronic Deficits and Debt Growth

One of the most telling signs that the budget process is dysfunctional is the persistent deficit—the amount the government spends beyond its revenue in any given year.

Budget Deficits: A Long-Term Trend

Since 2001, the U.S. has run a budget deficit in all but four years. Even during periods of economic growth, deficits have remained high due to tax cuts, increased spending, and rising debt obligations.

In FY2023, the federal deficit was $1.7 trillion, with total expenditures reaching $6.13 trillion and revenues at $4.42 trillion. This deficit-to-GDP ratio stood at around 6.3%, higher than most peer nations.

The National Debt: A Mounting Concern

As deficits accumulate, so too does the national debt. As of early 2024, the U.S. national debt exceeds $34 trillion, surpassing the size of the entire U.S. economy (GDP).

This level of debt raises long-term concerns:

• Higher interest payments (over $890 billion in FY2023 alone)
• Reduced fiscal flexibility during crises
• Potential upward pressure on interest rates
• Intergenerational burden on future taxpayers

Some economists warn that continued high debt levels could threaten economic stability, particularly if interest rates remain elevated.

Why the U.S. Budget System Is Often Ineffective

Despite having a detailed legal framework for budgeting, several structural issues contribute to a system that often falters.

Outdated Budgeting Timeline

The federal budget process follows a timeline established in the 1974 Congressional Budget and Impoundment Control Act. However, that schedule assumes cooperation and predictability that no longer exist. Budgets are routinely passed months late, if at all.

As a result, agencies operate without long-term clarity, businesses dependent on federal contracts face uncertainty, and Congress loses leverage over spending efficiency.

Lack of Spending Discipline

Many lawmakers prefer to avoid tough budget choices—such as cutting popular programs or raising taxes—until forced to do so. Instead, they rely on borrowing to fund current operations.

This can be politically expedient, but it undermines fiscal responsibility. The U.S. government spends more than it collects in revenue, and this imbalance is not sustainable in the long run.

Failure to Reform Entitlements

With Social Security, Medicare, and Medicaid growing as the population ages, pressures on the budget will only increase. These programs are projected to consume a larger share of the budget over the next 20 years.

Yet, meaningful reform efforts—such as adjusting retirement ages or changing benefit formulas—have repeatedly failed due to political resistance.

The Impact of a Flawed Budget on the American People

When the federal budget process is chaotic or delayed, everyday Americans feel the effects—sometimes subtly, sometimes directly.

Government Shutdowns

When Congress fails to pass appropriations or a continuing resolution before the fiscal year starts, non-essential federal services shut down. This has happened several times in recent history:

• 2018–2019: 35-day shutdown, the longest in history
• 2013: 16-day shutdown over Affordable Care Act disputes
• 2011: 3-day shutdown

During such periods, hundreds of thousands of federal employees are furloughed or forced to work without pay, national parks close, and critical services are interrupted.

Uncertainty for Federal Contractors and Grantees

Businesses and nonprofits that rely on federal funds—such as construction firms, research labs, and social service providers—often operate year-to-year. Continuing resolutions and delayed budgets make long-term planning difficult, affecting jobs and innovation.

For example, delays in NASA funding can stall critical space missions, while medical research grants from NIH may be postponed, slowing scientific progress.

Erosion of Public Trust

Repeated budget dysfunction feeds a public perception that Washington is broken. Surveys consistently show that Americans have little confidence in Congress’s ability to manage the country’s finances responsibly.

A 2023 Pew Research study found that only 23% of Americans trusted the federal government to do what is right “just about always” or “most of the time.” Budget chaos is a key contributor to this low approval.

Efforts to Improve the U.S. Budget Process

Despite its flaws, the federal budget process can be reformed. Several ideas have been proposed to increase predictability and accountability.

Biennial Budgeting

Some experts suggest shifting from annual to biennial budgeting—passing budgets every two years instead of every 12 months. This would reduce the frequency of high-stakes negotiations and allow agencies more time for planning.

States like Texas and Wisconsin already use biennial budgets successfully, and pilot efforts in Congress have shown promise.

Automatic Continuing Resolutions

To prevent shutdowns, some lawmakers propose automatic CRs that would temporarily fund the government at the previous year’s level if no new budget is passed. This would reduce last-minute brinkmanship while giving Congress extra time to negotiate.

Strengthening the Budget Resolution Process

Currently, the congressional budget resolution is non-binding and can be ignored. Some reformers advocate for making it enforceable, requiring all appropriations to align with the adopted resolution or face procedural penalties.

Debt and Deficit Targets

Countries like Germany and Sweden have implemented constitutional or legislative debt brakes to limit borrowing. While the U.S. has had debt ceilings, they are routinely raised and lack enforceability.

A more robust rule—such as a balanced budget amendment or statutory deficit limits—could instill more discipline, though it would require bipartisan agreement and flexibility during recessions.

The Global Perspective: How the U.S. Compares

The United States is not alone in facing budget challenges, but its scale of spending and debt is unique among developed nations.

Debt-to-GDP Ratio Comparisons

Source: International Monetary Fund

While U.S. debt is high, other nations like Japan manage even higher ratios—albeit with unique economic circumstances. Still, economists caution that sustained high debt limits policy options and increases vulnerability to financial shocks.

Conclusion: Yes, But With Major Caveats

So, does the U.S. have a budget? The answer is yes—the United States does have a federal budget process, annual appropriations, and defined revenue and spending levels. However, the system is plagued by chronic delays, political dysfunction, and structural constraints that prevent it from functioning effectively.

The reliance on continuing resolutions, failure to pass budget resolutions, ever-growing deficits, and swelling national debt illustrate a deeper problem: the U.S. may technically have a budget, but it lacks consistent, responsible, long-term fiscal planning.

Reform is possible—from biennial budgeting to automatic funding mechanisms—but it requires political will and cooperation across party lines. In an era of rising global challenges, economic uncertainty, and demographic pressures, a more functional budget process is not just a bureaucratic improvement. It’s an urgent necessity.

Understanding the U.S. budget isn’t just about reading numbers—it’s about grasping how America plans (or fails to plan) for its future. And until meaningful reforms are enacted, the question “Does the U.S. have a budget?” will remain complicated, contentious, and critical.

What is the federal budget in the United States?

The federal budget in the United States is an annual financial plan that outlines the government’s projected revenues and planned expenditures for the upcoming fiscal year, which runs from October 1 to September 30. It details how much the government expects to collect in taxes and other income, and how it intends to allocate those funds across various programs and services, including defense, healthcare, education, infrastructure, and social security. The budget serves as both a policy document reflecting national priorities and a tool for economic management.

Developed by the President’s Office of Management and Budget (OMB), the federal budget proposal is submitted to Congress each year, typically in February. However, Congress holds the constitutional power of the purse and must pass appropriations bills to authorize spending. The process often involves negotiation, amendments, and political compromise, meaning the final enacted budget may differ significantly from the initial proposal. While the budget is meant to provide fiscal discipline, it is frequently subject to delays, continuing resolutions, and occasional government shutdowns when consensus isn’t reached.

Does the U.S. government always operate within its budget?

No, the U.S. government does not always operate within its budget, and in recent decades, it has regularly spent more than it collects in revenue, resulting in budget deficits. A deficit occurs when expenditures exceed revenues in a given fiscal year, and these annual deficits accumulate into the national debt over time. The U.S. has run deficits in most years since the mid-20th century, particularly during periods of economic downturn, war, or major legislative initiatives like tax cuts or stimulus programs.

The government funds these deficits by borrowing money through the sale of Treasury securities, such as bonds, bills, and notes. While some level of deficit spending can be used strategically to stimulate the economy during recessions, persistent deficits raise concerns about long-term fiscal sustainability and the burden of debt servicing. Although there have been occasional budget surpluses, such as in the late 1990s under President Clinton, balancing the budget remains a complex political and economic challenge due to competing priorities and entrenched spending commitments.

Who is responsible for creating the U.S. federal budget?

The creation of the U.S. federal budget is a shared responsibility between the executive and legislative branches. The President, through the Office of Management and Budget (OMB), develops the initial budget proposal based on policy goals and agency funding requests. This comprehensive document is submitted to Congress and includes detailed spending plans and revenue forecasts for the upcoming fiscal year. The President’s budget reflects administration priorities but does not have the force of law.

Once the proposal is delivered, Congress takes the lead in crafting the actual budget. The House and Senate Budget Committees draft a concurrent budget resolution that sets overall spending and revenue limits. Then, various appropriations committees determine funding levels for specific government departments and programs. Ultimately, Congress must pass appropriations bills, which the President signs into law. This collaborative—and often contentious—process ensures that both branches have significant influence over fiscal policy, embodying the system of checks and balances in American governance.

What are the main sources of revenue for the U.S. federal budget?

The primary sources of revenue for the U.S. federal budget are individual income taxes, payroll taxes, corporate income taxes, and other smaller revenue streams. Individual income taxes are the largest single source, accounting for roughly half of all federal revenues. These taxes are progressive, meaning tax rates increase with income, and they are collected through a withholding system during the year. Payroll taxes, which fund Social Security and Medicare, are the second-largest source and are collected from both employees and employers on wages.

Other significant revenue sources include corporate income taxes, which are levied on business profits, and various excise, estate, and customs duties. Additionally, the government earns revenue from fees (e.g., passport fees), fines, and earnings from the Federal Reserve’s operations. While the U.S. does not rely heavily on value-added taxes (VAT) or sales taxes at the federal level, some lawmakers have occasionally proposed such mechanisms to diversify income streams. Overall, tax policy decisions directly impact the government’s fiscal capacity and influence debates about equity and economic growth.

What are mandatory and discretionary spending in the federal budget?

Mandatory spending refers to federal expenditures required by existing laws and not subject to annual appropriation decisions. This category includes major entitlement programs such as Social Security, Medicare, and Medicaid, which make up a significant portion—over half—of the federal budget. These programs automatically pay benefits to eligible individuals, and their funding levels are driven by eligibility rules and benefit formulas set by Congress. As populations age and healthcare costs rise, mandatory spending tends to grow over time without new legislation.

In contrast, discretionary spending is determined annually through the appropriations process and includes areas like defense, education, transportation, scientific research, and foreign aid. Congress sets funding limits each fiscal year, allowing for more direct control and flexibility. Defense spending constitutes the largest portion of discretionary spending, though non-defense discretionary programs are also vital for public services. Because mandatory spending is largely on autopilot, efforts to control long-term deficits often focus on reforms to these large entitlement programs.

How does the U.S. national debt relate to the federal budget?

The U.S. national debt is the cumulative total of all past budget deficits minus any surpluses. Whenever the federal government spends more than it collects in a fiscal year, it must borrow to cover the difference, adding to the national debt. This debt consists of both publicly held debt—treasury securities held by investors, foreign governments, and the Federal Reserve—and intragovernmental debt, which represents money the government owes to itself, such as funds borrowed from the Social Security trust.

As of recent years, the national debt has surpassed $30 trillion, raising concerns about interest payments, economic stability, and future fiscal flexibility. While some debt is considered manageable if it grows slower than the economy, high debt levels can increase borrowing costs and limit Congress’s ability to respond to future crises. The debt-to-GDP ratio is a key metric used by economists to assess whether the debt burden is sustainable over the long term.

What happens if Congress fails to pass a budget on time?

When Congress fails to pass a full budget or appropriations bills by the start of the fiscal year on October 1, it often resorts to passing a continuing resolution (CR). A CR temporarily extends funding for federal agencies at current or slightly adjusted levels, allowing the government to keep operating while negotiations continue. These stopgap measures prevent immediate shutdowns but can hinder long-term planning, as agencies cannot start new programs or adjust spending based on new priorities.

If Congress cannot agree on either a CR or final appropriations, a government shutdown may occur. During a shutdown, non-essential federal services cease, and many government employees are furloughed. Essential personnel, such as military members and air traffic controllers, typically continue working, though they may not receive pay until funding is restored. Shutdowns disrupt public services, damage economic confidence, and are often the result of political disagreements over spending levels or policy riders attached to budget bills.