The 2013 United States federal budget is the
budget
A budget is a calculation play, usually but not always financial, for a defined period, often one year or a month. A budget may include anticipated sales volumes and revenues, resource quantities including time, costs and expenses, environmenta ...
to fund
government operations
Government spending or expenditure includes all government consumption, investment, and transfer payments. In national income accounting, the acquisition by governments of goods and services for current use, to directly satisfy the individual o ...
for the
fiscal year
A fiscal year (or financial year, or sometimes budget year) is used in government accounting, which varies between countries, and for budget purposes. It is also used for financial reporting by businesses and other organizations. Laws in many ...
2013, which began on October 1, 2012, and ended on September 30, 2013. The original spending request was issued by
President
President most commonly refers to:
*President (corporate title)
*President (education), a leader of a college or university
*President (government title)
President may also refer to:
Automobiles
* Nissan President, a 1966–2010 Japanese ful ...
Barack Obama
Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, Obama was the first African-American president of the U ...
in February 2012.
The
Budget Control Act of 2011
The Budget Control Act of 2011 () is a federal statute enacted by the 112th United States Congress and signed into law by US President Barack Obama on August 2, 2011. The Act brought conclusion to the 2011 US debt-ceiling crisis.
The law inv ...
mandates caps on discretionary spending, which under current law will be lowered beginning in January 2013 to remove $1.2 trillion of spending over the following ten years. In addition, several temporary tax cuts were scheduled to expire at the beginning of the 2013 calendar year, including the 2001 and 2003
Bush tax cuts
The phrase Bush tax cuts refers to changes to the United States tax code passed originally during the presidency of George W. Bush and extended during the presidency of Barack Obama, through:
* Economic Growth and Tax Relief Reconciliation Act o ...
on
income
Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. For ...
,
capital gains
Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares.
...
, and
estate tax
An inheritance tax is a tax paid by a person who inherits money or property of a person who has died, whereas an estate tax is a levy on the estate (money and property) of a person who has died.
International tax law distinguishes between an es ...
, which had been extended in a
2010 tax deal, as well as a
payroll tax
Payroll taxes are taxes imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their employees. By law, some payroll taxes are the responsibility of the employee and others fall on the em ...
cut that began as a result of the 2010 deal and had been most recently extended in an
early 2012 tax deal. The combination of sudden spending cuts and tax increases has
led to concerns about significant negative effects on the economy in the wake of the weak recovery from the
recession that began in 2007.
The government was initially funded through a single temporary
continuing resolution
In the United States, a continuing resolution (often abbreviated to CR) is a type of appropriations legislation. An appropriations bill is a bill that appropriates (gives to, sets aside for) money to specific federal government departments, ag ...
. Final funding for the government was enacted on March 26, 2013, as the
Consolidated and Further Continuing Appropriations Act, 2013
Consolidated and Further Continuing Appropriations Act, 2013 () was a bill passed by the United States House of Representatives of the 113th United States Congress. The bill prevented a government shutdown and funded the federal government throug ...
, which contained funding bills for the
Department of Defense Department of Defence or Department of Defense may refer to:
Current departments of defence
* Department of Defence (Australia)
* Department of National Defence (Canada)
* Department of Defence (Ireland)
* Department of National Defense (Philipp ...
and
Department of Veterans Affairs
The United States Department of Veterans Affairs (VA) is a Cabinet-level executive branch department of the federal government charged with providing life-long healthcare services to eligible military veterans at the 170 VA medical centers an ...
, with a full-year continuing resolution for all other departments and agencies.
Background
The Budget Control Act of 2011 was passed in August 2011 as a resolution to the
debt-ceiling crisis. The
fiscal year
A fiscal year (or financial year, or sometimes budget year) is used in government accounting, which varies between countries, and for budget purposes. It is also used for financial reporting by businesses and other organizations. Laws in many ...
(abbreviated as FY) 2013 budget is the first to be affected by the second of two rounds of budget cuts specified in the act. (The first round of cuts has already been applied to the ten years beginning in FY2012.) For this second round of cuts, the Budget Control Act had formed the
, sometimes referred to as the "supercommittee", to identify at least $1.2 trillion in cuts over the ten years beginning with FY2013, and specified automatic across-the-board cuts of the same amount, equally split between security and non-security programs, if no such budget reduction legislation was passed by Congress.
On November 21, 2011, the Joint Select Committee on Deficit Reduction announced that it did not reach a deal on the budget-cutting legislation, raising the possibility that the automatic cuts would be activated if the full Congress could not enact its own deficit reduction legislation by December 23, 2011. The supercommittee's lack of an agreement was attributed to the refusal of Republicans to consider any tax increases, combined with Democratic insistence on including these revenue increases such as the expiration of the
Bush tax cuts
The phrase Bush tax cuts refers to changes to the United States tax code passed originally during the presidency of George W. Bush and extended during the presidency of Barack Obama, through:
* Economic Growth and Tax Relief Reconciliation Act o ...
, which under current law expire at the end of 2012.
Budget proposals
President Obama's February 2012 budget message to Congress addressed themes of economic crisis and response, an updated defense strategy, taxation fairness, income equality, fiscal responsibility, and investments in education and research to help the U.S. compete economically. He wrote: "The way to rebuild our economy and strengthen the middle class is to make sure that everyone in America gets a fair shot at success. Instead of lowering our standards and our sights, we need to win a race to the top for good jobs that pay well and offer security for the middle class. To succeed and thrive in the global, high-tech economy, we need America to be a place with the highest-skilled, highest-educated workers; the most advanced transportation and communication networks; and the strongest commitment to research and technology in the world. This Budget makes investments that can help America win this race, create good jobs, and lead in the world economy."
Key elements of the President's budget for fiscal year (FY) 2013 included expiration of a variety of tax cuts for couples earning over $250,000 ($200,000 if single), short-term stimulus measures to support job growth, and targeted tax cuts for families and businesses. The budget included 2013 revenues of $2.9 trillion or 17.8%
GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
(up from $2.5 trillion or 15.8% GDP in 2012) and spending of $3.8 trillion or 23.3% GDP (similar to the prior year in dollar terms but below the 24.3% GDP in 2012). The projected 2013 deficit was $900 billion (5.5% GDP), down from the 2012 deficit of $1.3 trillion (8.5% GDP).
Over the 2013-2022 period, the budget essentially freezes defense and non-defense discretionary spending in dollar terms, such that these categories shrink relative to a growing economy, from 8.7% GDP to 5.9% GDP. Mandatory spending (e.g., Medicare, Medicaid, Social Security, and other safety net programs) remain around 14% GDP. Net interest rises from 1.5% GDP to 3.3% GDP. Revenues rise steadily during the period from 17.8% GDP to 20.1% GDP, averaging 19.2% GDP. Debt held by the public rises from $12.6 trillion to $18.7 trillion, but remains flat around 77% GDP during the period.
On May 16, 2012, the
United States Senate
The United States Senate is the upper chamber of the United States Congress, with the House of Representatives being the lower chamber. Together they compose the national bicameral legislature of the United States.
The composition and pow ...
voted on a 52-page budget amendment billed as a summary of the nearly 2,000 pages in the Obama administration's 2013 budget proposal. The amendment was defeated by a unanimous 99–0 vote, which paralleled the
House of Representatives
House of Representatives is the name of legislative bodies in many countries and sub-national entitles. In many countries, the House of Representatives is the lower house of a bicameral legislature, with the corresponding upper house often c ...
having voted a similar rejection in March by a count of 414–0. Those defeats of the amendments marked the second year in a row such summary bills met unanimous opposition. In explaining their votes against, Congressional Democrats disputed whether the Republican summary accurately represented the Obama budget proposal; by contrast, Congressional Republicans claimed that their amendment included ample data taken directly from said budget.
Legislation
On July 31, 2012, a tentative deal was announced to fund the government from October 2012 through March 2013 through a
continuing resolution
In the United States, a continuing resolution (often abbreviated to CR) is a type of appropriations legislation. An appropriations bill is a bill that appropriates (gives to, sets aside for) money to specific federal government departments, ag ...
, with spending rates slightly higher than the FY2012 levels. The deal was reached because Republicans were eager to avoid a prolonged dispute that could threaten a government shutdown just before the upcoming
2012 general elections. The bill, the
Continuing Appropriations Resolution, 2013
The Continuing Appropriations Resolution, 2013 () is a US federal enactment, namely a temporary spending bill to fund the government for six months until March 27, 2013, in order to prevent an October 1, 2012 government shutdown.
Legislative hist ...
, was passed in the House 329–91, passed in the Senate 62–30, and signed by President Obama on September 28, 2012.
On August 1, 2012, the House and Senate passed competing bills on the extension of the Bush tax cuts. The House bill would extend all the tax cuts for one year, while the Senate version would allow taxes to rise on incomes over $250,000. The passage of the bills was reported as being intended as political cover; progress on tax legislation was not expected until after the November elections.
In late December, the Republican House leadership proposed legislation that would allow tax cuts to rise relative to 2012 levels only for annual income over $1,000,000. The proposal was known as "Plan B", and was intended to force the Senate and the Obama administration to pass it and delay further negotiations until the following month, when Republicans were expected to use the reaching of the federal
debt limit
A debt limit or debt ceiling is a legislative mechanism restricting the total amount that a country can borrow or how much debt it can be permitted to take on. Several countries have debt limitation restrictions.
Description
A debt limit is a l ...
as leverage. However, the House vote on the plan was abruptly cancelled on December 20, 2012, after it became clear that the bill did not have enough support to pass, due to conservative members of the House who would not support any legislation that would raise taxes without also cutting spending.
On December 28, 2012, the Senate passed the
Disaster Relief Appropriations Act, 2013
Public Law 113-2 (), containing Division A: Disaster Relief Appropriations Act, 2013 and Division B: Sandy Recovery Improvement Act of 2013 is a U.S. appropriations bill authorizing $60 billion for disaster relief agencies. The Budget Control A ...
to provide for $60.4 billion in additional spending to cover recovery costs from
Hurricane Sandy
Hurricane Sandy (unofficially referred to as ''Superstorm Sandy'') was an extremely destructive and strong Atlantic hurricane, as well as the largest Atlantic hurricane on record as measured by diameter, with tropical-storm-force winds spann ...
, which had hit the northeastern United States in late October. The bill passed the Senate 62–32, but faced uncertain prospects in the House. The bill was not passed by the House before the end of the
112th United States Congress
The 112th United States Congress was a meeting of the legislative branch of the United States federal government, from January 3, 2011, until January 3, 2013. It convened in Washington, D.C. on January 3, 2011, and ended on January 3, 2013, 17 ...
, but it was reintroduced in the
113th United States Congress
The 113th United States Congress was a meeting of the legislative branch of the United States federal government, from January 3, 2013, to January 3, 2015, during the fifth and sixth years of Presidency of Barack Obama, Barack Obama's presiden ...
and became first two acts of that Congress. A bill increasing the borrowing authority of FEMA was enacted on January 6, 2013, and the appropriations bill was enacted on January 29, 2013.
At around 2 a.m. on January 1, 2013, the Senate passed a compromise bill, the
American Taxpayer Relief Act of 2012
The American Taxpayer Relief Act of 2012 (ATRA) was enacted and passed by the United States Congress on January 1, 2013, and was signed into law by US President Barack Obama the next day. ATRA gave permanence to the lower rates of much of the "Bu ...
, by a margin of 89–8. The bill would delay the budget sequestration by two months, and bill includes $600 billion over ten years in new tax revenue relative to extending 2012 levels, which is about one-fifth of the revenue that would have been raised had no legislation been passed. The revenue would come from increased marginal income and capital gains tax rates relative to their 2012 levels for annual income over $400,000 for individuals and $450,000 for couples; a phase-out of certain tax deductions and credits for those with incomes over $250,000 for individuals and $300,000 for couples, an increase in estate taxes relative to 2012 levels on estates over $5 million, and expiration of the two-year-old cut to payroll taxes, which is applied to income under the
Social Security Wage Base
For the Old Age, Survivors and Disability Insurance (OASDI) tax or Social Security tax in the United States, the Social Security Wage Base (SSWB) is the maximum earned gross income or upper threshold on which a wage earner's Social Security tax may ...
, which was $110,100 in 2012. All these changes would all be made permanent.
House Speaker
John Boehner
John Andrew Boehner ( ; born , 1949) is an American retired politician who served as the 53rd speaker of the United States House of Representatives from 2011 to 2015. A member of the Republican Party, he served 13 terms as the U.S. represe ...
promised a prompt vote on the Senate bill, but the prospect of the House passing an amended bill raised the prospect that legislation might not be enacted by the end of the 112th Congress at noon on January 3.
The House passed the bill without amendments by a margin of 257–167 at about 11 p. m. EST on January 1, 2013.
85 Republicans and 172 Democrats voted in favor while 151 Republicans and 16 Democrats were opposed.
The spending bill for the remainder of the fiscal year, the
Consolidated and Further Continuing Appropriations Act, 2013
Consolidated and Further Continuing Appropriations Act, 2013 () was a bill passed by the United States House of Representatives of the 113th United States Congress. The bill prevented a government shutdown and funded the federal government throug ...
, was passed by the Senate 73–26 on March 20, 2013, by the House the following day in a 318–109 vote, and signed by President Obama on March 26, 2013.
The legislation shifted some money between programs within the previously legislated sequestration caps.
Analysis
Implications of the Budget Control Act
The automatic cuts of $1.2 trillion resulting from the absence of a deal from the supercommittee over ten years would be split equally between security and non-security programs, and include $500 billion in cuts to the
Department of Defense Department of Defence or Department of Defense may refer to:
Current departments of defence
* Department of Defence (Australia)
* Department of National Defence (Canada)
* Department of Defence (Ireland)
* Department of National Defense (Philipp ...
. The FY2013 defense budget would be reduced 11%, from $525 billion to $472 billion, after already having been cut from $571 billion in the first installment of cuts in the Budget Control Act. Secretary of Defense
Leon Panetta
Leon Edward Panetta (born June 28, 1938) is an American Democratic Party politician who has served in several different public office positions, including Secretary of Defense, CIA Director, White House Chief of Staff, Director of the Office of ...
initially gave the total cut figure as 23%.
The planned cuts include reductions in troop levels, a modest limit in pay raises for soldiers starting in 2015, an increase in health fees for veterans, delays in the construction of new naval ships and in the purchasing of new fighter aircraft such as the
F-35
The Lockheed Martin F-35 Lightning II is an American family of single-seat, single-engine, all-weather stealth multirole combat aircraft that is intended to perform both air superiority and strike missions. It is also able to provide elect ...
, and the possibility of a round of base closings within the United States, but cuts to
special operations
Special operations (S.O.) are military activities conducted, according to NATO, by "specially designated, organized, selected, trained, and equipped forces using unconventional techniques and modes of employment". Special operations may include ...
,
cyberwarfare
Cyberwarfare is the use of cyber attacks against an enemy state, causing comparable harm to actual warfare and/or disrupting vital computer systems. Some intended outcomes could be espionage, sabotage, propaganda, manipulation or economic war ...
, and intelligence programs were avoided. Initial reports had also suggested that the number of
carrier battle group
A carrier battle group (CVBG) is a naval fleet consisting of an aircraft carrier capital ship and its large number of escorts, together defining the group. The ''CV'' in ''CVBG'' is the United States Navy hull classification code for an airc ...
s might be reduced from 11 to 10,
although it was later determined that the number of aircraft carriers would not in fact be cut. Some Republicans in Congress advocated reversing the cuts to the military, citing the effect on national security, and Secretary Panetta has opposed the cuts, calling them "devastating" and raising "substantial risk of not being able to meet our defense needs." President Obama has promised to veto any legislation seeking to avoid the cuts, and House Speaker
John Boehner
John Andrew Boehner ( ; born , 1949) is an American retired politician who served as the 53rd speaker of the United States House of Representatives from 2011 to 2015. A member of the Republican Party, he served 13 terms as the U.S. represe ...
also indicated his commitment to following the cuts in the Budget Control Act.
According to the
Center for American Progress
The Center for American Progress (CAP) is a public policy research and advocacy organization which presents a liberal viewpoint on economic and social issues. It has its headquarters in Washington, D.C.
The president and chief executive officer ...
, several Presidents have significantly reduced defense spending after wars, without compromising national security. Defense spending in 2011 remained high by historical standards, adjusted for inflation.
The Budget Control Act also specifies automatic cuts of 7.8% to domestic programs and 2% to
Medicare, while
Medicaid
Medicaid in the United States is a federal and state program that helps with healthcare costs for some people with limited income and resources. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and pers ...
and
Social Security
Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specificall ...
will be unaffected. These entitlement programs were protected from cuts in return for the absence of new revenues in the Budget Control Act.
The automatic cuts to domestic programs would include cuts of up to 11% to
science research and development agencies such as the
National Institutes of Health
The National Institutes of Health, commonly referred to as NIH (with each letter pronounced individually), is the primary agency of the United States government responsible for biomedical and public health research. It was founded in the late ...
,
NASA
The National Aeronautics and Space Administration (NASA ) is an independent agency of the US federal government responsible for the civil space program, aeronautics research, and space research.
NASA was established in 1958, succeeding t ...
, and the
U. S. National Laboratories run by the
Department of Energy A Ministry of Energy or Department of Energy is a government department in some countries that typically oversees the production of fuel and electricity; in the United States, however, it manages nuclear weapons development and conducts energy-rel ...
. It is anticipated that this could cause
federal grant
In the United States, federal grants are economic aid issued by the United States government out of the general federal revenue. A federal grant is an award of financial assistance from a federal agency to a recipient to carry out a public purp ...
acceptance levels to fall into the single digits, a consequence which has been called catastrophic for academic institutions by
Michael Lubell
Michael S. Lubell is an American physicist. He is the Mark W. Zemansky Professor of Physics at the City College of New York.
Biography
Lubell received his B.A. from Columbia University and his M.S. and Ph.D. from Yale University. He taught at ...
of the
American Physical Society
The American Physical Society (APS) is a not-for-profit membership organization of professionals in physics and related disciplines, comprising nearly fifty divisions, sections, and other units. Its mission is the advancement and diffusion of k ...
. The cuts could also endanger politically controversial research such as climate change research programs in NASA and
National Oceanic and Atmospheric Administration
The National Oceanic and Atmospheric Administration (abbreviated as NOAA ) is an United States scientific and regulatory agency within the United States Department of Commerce that forecasts weather, monitors oceanic and atmospheric conditio ...
. Due to the role of scientific research in economic growth and job creation, and given international competition in this field, the cuts have been opposed by professional and academic organizations, and federal support of research and development has been called "an area of U.S. investment too critical to be cut" by the
American Association for the Advancement of Science
The American Association for the Advancement of Science (AAAS) is an American international non-profit organization with the stated goals of promoting cooperation among scientists, defending scientific freedom, encouraging scientific respons ...
.
Ten-year projections
Annual
rates of increase in major revenue categories budgeted for the 2012-2022 period were:
* Individual income taxes: 8.4%
* Corporation income taxes: 8.2%
* Social insurance (mainly payroll) taxes: 6.6%
* ''Total tax revenues'': 7.6%
Annual rates of increase in major spending categories budgeted for the 2012-2022 period were:
* Defense: 1.8%
* Non-defense discretionary: 1.6%
* Social Security: 5.8%
* Medicare: 6.6%
* Medicaid: 8.5%
* Net interest: 14.2%
* ''Total spending'': 5.0%
Changes in revenues primarily represent a return to the long-run average. Tax revenues historically have averaged around 18% GDP. The
subprime mortgage crisis
The United States subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the Financial crisis of 2007–2008, 2007–2008 global financial crisis. It was triggered by a large decline ...
resulted in significant declines in revenues, with revenue falling to a record low 15% GDP. President Obama's budget preserves the Bush income tax cuts for couples earning below $250,000, while eliminating some tax exemptions and deductions (tax expenditures).
[CBO-Long Term Economic Outlook-January 2012](_blank)
/ref>
Defense and non-defense discretionary expenses are essentially frozen in real dollar terms for the 2013-2022 period, growing at or below the rate of inflation. Department of Defense spending rose at an annual rate of 8% between 2000 and 2011; this amount includes both the baseline and war spending. Non-defense discretionary spending rose at an annual rate of 6.6% between 2000 and 2011. Mandatory spending is mainly driven by demographic changes (i.e., an aging population, with fewer workers per retiree), healthcare cost increases per capita, and Social Security cost of living adjustments. Interest costs represent a return to more typical interest rates as the economy recovers along with the growing public debt.
Total revenues and spending
The Obama administration's February 2012 budget request contained $1 trillion in receipts and $200 billion in outlays, for a deficit of $400 billion. The budget projects a reduction in the deficit to $575 billion by 2018 before rising to $704 billion by 2022.
Total receipts
''(in billions of dollars)''
References
Further reading
*
External links
Status of Appropriations Legislation for Fiscal Year 2013
{{US federal budget
2013
File:2013 Events Collage V2.png, From left, clockwise: Edward Snowden becomes internationally famous for leaking classified NSA wiretapping information; Typhoon Haiyan kills over 6,000 in the Philippines and Southeast Asia; The Dhaka garment fact ...
Federal budget
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...