Every year, Congress and the president try to answer a deceptively simple question: how much should the country spend, on what, and how will it pay for it? The process for answering it is long, tangled, and often misunderstood, which is a big reason it so often ends in drama.
This guide walks through how the federal budget process works, step by step, so the next time you hear about a deadline, a stopgap bill, or a shutdown, you know exactly what is happening and why.
Quick answer: The president proposes a budget, but Congress holds the power of the purse. Congress sets overall targets in a budget resolution, then passes appropriations bills to fund agencies for the fiscal year starting October 1. When bills are not finished in time, a continuing resolution can keep things running; if even that fails, a shutdown follows. Roughly two-thirds of spending is mandatory and runs on autopilot under existing laws.
Who Controls the Money? The Constitutional Starting Point
The Constitution gives Congress the power to tax, borrow, and spend. Spending can only happen when Congress passes a law allowing it, and the president signs it (or Congress overrides a veto). That is why the process is often called the “power of the purse.”
This is one example of the checks and balances described in Separation of Powers Explained With Real Examples. The executive branch proposes and carries out the spending. The legislative branch decides it. Neither can fully do the job alone, which is by design.
The federal government’s fiscal year runs from October 1 to September 30. Every budget deadline you hear about is tied to that calendar.
Step 1: The President’s Budget Request
The budget cycle traditionally begins when the president submits a proposed budget to Congress, usually in early the year, though timing varies. It is built over many months by the Office of Management and Budget (OMB), which collects requests from every agency and shapes them around the administration’s priorities.
Think of it as a very detailed wish list and statement of values. It shows what the president wants to fund, cut, or change, and often proposes policy changes as well. But it has no legal force on its own.
Congress is free to adopt parts of it, ignore other parts, or set it aside entirely. Presidents of both parties have seen their requests dramatically rewritten. The request matters mostly because it frames the debate and signals priorities.
Step 2: The Budget Resolution
Next, Congress is supposed to pass a budget resolution. This is a framework, not a spending bill. It sets overall targets for spending and revenue and can guide later legislation.
Two features make it unusual. First, it does not go to the president for a signature, so it is not a law. Second, it can unlock a special shortcut called reconciliation, which allows certain tax and spending bills to pass the Senate with a simple majority rather than facing the supermajority hurdle described in What Is the Filibuster? How It Works and Why It’s Fought Over.
In practice, Congress does not always pass a budget resolution on schedule, and sometimes skips it altogether. The process is guided by law, but it is not always followed to the letter.
The president proposes, but Congress decides. That split is the root of both the system’s safeguards and its standoffs.
Step 3: Appropriations Bills
This is where money actually gets approved. Both the House and Senate have an Appropriations Committee, divided into twelve subcommittees, each covering a slice of the government: defense, agriculture, transportation and housing, and so on.
Each subcommittee drafts a bill funding its area for the coming fiscal year. These bills must pass both chambers in identical form and be signed by the president. That makes twelve separate bills, each one a chance for disagreement. For how a bill moves through each chamber, see How Does a Bill Become a Law? The Real Process, and for how committees and leaders shape the outcome, see How Does Congress Work? Committees, Leaders, Real Power.
Why it so rarely finishes on time
Almost every year, some or all of the twelve bills are not done by October 1. The reasons are structural:
- Divided priorities: Spending is where values meet numbers, so disagreements are real and often deep.
- Tight margins: When majorities are narrow, small factions have large leverage.
- Supermajority rules: In the Senate, most spending bills need 60 votes, so the minority party matters.
- Incentives: Brinkmanship can energize supporters, and deadlines are often the only thing that forces compromise.
Step 4: Continuing Resolutions and Omnibus Bills
When the deadline arrives and the bills are not done, Congress has a few options. The most common is a continuing resolution (CR): a temporary bill that keeps agencies funded, generally at prior-year levels, for a set period such as a few weeks or months.
A CR is a pause button, not a decision. Critics note that it can lock in old priorities and make it hard for agencies to plan. Supporters say it avoids a harsher outcome while negotiations continue. Both points can be true.
Another option is an omnibus bill, which bundles many or all of the twelve appropriations bills into one giant package, or a smaller “minibus” that bundles a few. These are often long, passed under time pressure, and criticized for how little time members have to read them, though they do finish the job.
| Tool | What it does | Common criticism | Common defense |
|---|---|---|---|
| Regular appropriations bills | Fund each area separately for the full year | Rarely all finished on time | Allows detailed, focused debate |
| Continuing resolution | Temporarily extends funding | Delays decisions, blocks new priorities | Prevents shutdowns while talks continue |
| Omnibus or minibus | Packages many bills into one | Too big to read or amend | Gets everything finished at once |
Step 5: When It Fails, a Shutdown
If funding lapses without a CR or a full appropriations bill, the government cannot legally spend money it has not been authorized to spend. The result is a shutdown.
What happens next varies. Agencies follow contingency plans. Some employees are furloughed (sent home without pay for the duration), while others deemed essential keep working, sometimes without immediate paychecks. Many services, including Social Security payments, mail delivery, and much of the military, continue because they run on other funding or are considered essential. Others, like some park services, permits, and inspections, may pause. Details differ by agency and by shutdown, so check current official guidance for specifics.
Congress has typically provided back pay to furloughed federal workers after shutdowns end, but that is a decision made each time, and contractors are often treated differently.
Why do shutdowns happen if almost no one wants them? Often because each side believes the other will blink first, or because a deadline becomes the only available leverage in a larger dispute. Which party or tactic is more responsible in any particular shutdown is a matter of political argument. What is not in dispute is the mechanism: no law, no funds.
A shutdown is not a failure of one villain. It is what happens when a deadline meets a deadlock.
Discretionary vs. Mandatory Spending
Here is the single most useful idea for understanding budget fights. Not all federal spending goes through the annual appropriations process.
Discretionary spending
This is what Congress sets each year through appropriations. It includes defense, most federal agencies’ operations, scientific research, transportation projects, education programs, and many grants to states. It is the part of the budget that a shutdown fight directly affects. Discretionary spending is commonly cited as roughly a quarter to a third of the federal budget, though the share shifts year to year.
Mandatory spending
This is spending driven by existing laws that set who qualifies and how much they receive. Social Security, Medicare, and Medicaid are the largest examples. Because eligibility is written into law, the spending rises or falls with the number of eligible people and costs, not with a yearly vote. Mandatory spending is commonly cited as roughly sixty percent or more of the budget (these are approximate figures, so check current data). To change it, Congress must change the underlying law.
Interest and revenue
Separate from both, the government pays interest on the national debt, a cost that has grown as debt and interest rates have risen. And on the other side of the ledger is revenue, mostly from income taxes, payroll taxes, and other sources. The gap between spending and revenue in a given year is the deficit, and the accumulated total of past deficits is the debt.
Different people draw different conclusions from this structure. Some argue that because most spending runs on autopilot, serious deficit discussions must include entitlement programs. Others argue that these programs are earned benefits that should be protected, and that revenue deserves equal attention. These are value judgments about priorities, and the numbers themselves can support either argument. For how past policy choices shaped who benefits from federal programs, see How Policy Shaped Wealth in America: A Plain Guide.
Where You Can See the Actual Numbers
You do not have to rely on headlines or talking points. The data is public, free, and surprisingly readable once you know where to look.
- Congressional Budget Office (cbo.gov): Nonpartisan projections, analysis of proposals, and the long-term outlook for the budget.
- Office of Management and Budget (whitehouse.gov/omb): The president’s budget documents and agency-level detail.
- USAspending.gov: Searchable data on federal contracts, grants, and loans, including by state and county.
- Treasury Fiscal Data (fiscaldata.treasury.gov): Plain-language explainers on the debt, deficit, revenue, and spending.
- Congress.gov: The text and status of appropriations bills and budget resolutions.
A good habit: when you read a claim about spending, find the original table or report it comes from. Part of this is the skill described in Media Literacy Guide: How News Shapes What You Believe, which is noticing how the same figure can be framed in very different ways.
Federal dollars also flow down to local levels. States, counties, and cities receive grants that shape their own budgets, which is part of how federalism works. If you want to see how money decisions look closer to home, try How Are Local Taxes Decided? Property, Sales, Budgets or our upcoming guide on what county government does.
Think about it: If you could change one thing about how the budget process works, such as the timeline, the supermajority rules, or how mandatory spending is reviewed, what would it be, and what might someone with the opposite view say in response? What would you want to learn from the actual numbers before deciding?
Key takeaways
- The president proposes a budget, but Congress writes and passes the spending laws.
- The fiscal year begins October 1, and twelve appropriations bills are supposed to be finished by then.
- Continuing resolutions are temporary stopgaps; shutdowns happen when funding lapses entirely.
- Discretionary spending is decided yearly; mandatory spending runs on existing law and is the larger share.
- Most disagreements are about priorities and values, and the underlying numbers are public for anyone to check.
- Good conversations start from shared facts, which is where our guide to talking about politics with family can help.
For the bigger picture of how these pieces fit together, start with How Does the US Government Work? A Plain-Language Guide, or browse more in our Civic Foundations section.
Frequently asked questions
Does the president write the federal budget?
Not the final one. The president submits a request, which is a set of priorities and proposals. Congress holds the power of the purse under the Constitution, so Congress writes and passes the spending bills, and the president can sign or veto them.
What is the difference between discretionary and mandatory spending?
Discretionary spending is set each year through appropriations bills, and covers things like defense, federal agencies, research and many grants. Mandatory spending is driven by existing laws that set eligibility rules and benefits, such as Social Security and Medicare, so it continues unless Congress changes those laws.
What is a continuing resolution?
A continuing resolution, or CR, is a temporary spending bill that keeps government funded, usually at roughly the previous year’s levels, while lawmakers keep negotiating. It buys time but leaves the underlying disagreements unresolved.
What actually happens during a government shutdown?
When funding lapses, agencies must stop activities that are not considered essential or otherwise legally funded. Some employees are furloughed, others work without immediate pay, and many services continue. Details vary by agency and by shutdown, so check current official guidance.
Where can I see the actual federal budget numbers?
The Congressional Budget Office (cbo.gov), the Office of Management and Budget (whitehouse.gov/omb), the Treasury Department’s USAspending.gov and its Fiscal Data site (fiscaldata.treasury.gov), and Congress.gov all publish budget documents and spending data for free.