WEBVTT 00:00:00.000 --> 00:00:02.759 Have you ever wondered how the trillions of dollars 00:00:02.759 --> 00:00:06.000 in your government actually get allocated? It's 00:00:06.000 --> 00:00:08.339 it's a question most people avoid thinking about, 00:00:08.439 --> 00:00:10.560 honestly. Right. You track the policy debates, 00:00:10.740 --> 00:00:13.339 the campaign promises and the headline grabbing 00:00:13.339 --> 00:00:16.120 legislative battles. But underneath all that 00:00:16.120 --> 00:00:20.140 political theater lies the actual machinery of 00:00:20.140 --> 00:00:22.559 the United States government. So today we are 00:00:22.559 --> 00:00:25.039 taking a deep dive into the federal appropriations 00:00:25.039 --> 00:00:28.539 process. Exactly. And we are using a comprehensive 00:00:28.539 --> 00:00:32.359 Wikipedia overview of the U .S. federal appropriations 00:00:32.359 --> 00:00:35.280 process as our source material today. And look, 00:00:35.359 --> 00:00:37.520 I know what you're thinking. Bureaucracy. Math. 00:00:37.960 --> 00:00:40.100 But you really should care about this. This isn't 00:00:40.100 --> 00:00:42.479 just dry procedure. You know, this is the literal 00:00:42.479 --> 00:00:44.939 engine of the country. Yeah, it dictates everything 00:00:44.939 --> 00:00:47.200 from national defense to the taxes coming out 00:00:47.200 --> 00:00:48.799 of your paycheck. Absolutely. And if you look 00:00:48.799 --> 00:00:51.119 closely at the mechanics behind all the seemingly 00:00:51.119 --> 00:00:54.140 boring bureaucratic terms like subcommittees 00:00:54.140 --> 00:00:57.000 and budget resolutions, there's this fascinating 00:00:57.000 --> 00:00:59.200 story. It's really about constitutional power, 00:00:59.479 --> 00:01:03.399 political strategy and these incredibly high 00:01:03.399 --> 00:01:06.540 stakes deadlines. OK, let's unpack this because 00:01:06.540 --> 00:01:08.519 the Constitution. foundation for all of this 00:01:08.519 --> 00:01:11.239 is actually pretty simple. It's rooted in Article 00:01:11.239 --> 00:01:14.739 1, Section 9. Right. No money shall be drawn 00:01:14.739 --> 00:01:17.819 from the treasury, but in consequence of appropriations 00:01:17.819 --> 00:01:20.299 made by law. Just a single sentence. Just one 00:01:20.299 --> 00:01:22.500 sentence, but it gives Congress the ultimate 00:01:22.500 --> 00:01:24.599 power of the purse. They hold the checkbook. 00:01:24.760 --> 00:01:26.620 But reading through the source material, I was 00:01:26.620 --> 00:01:29.060 actually shocked by the history here. Because 00:01:29.060 --> 00:01:31.879 the modern system we have now... It's surprisingly 00:01:31.879 --> 00:01:35.459 recent. It is. Up until 1974, Congress mostly 00:01:35.459 --> 00:01:37.739 just followed the president's lead. Which is 00:01:37.739 --> 00:01:40.379 wild to think about today. Yeah, they were operating 00:01:40.379 --> 00:01:43.840 under a 1921 law where the executive branch essentially 00:01:43.840 --> 00:01:46.939 drove the budget process. But the dynamic shifted 00:01:46.939 --> 00:01:49.280 dramatically in the early 70s. During the Nixon 00:01:49.280 --> 00:01:51.859 administration, right? Exactly. So under Nixon, 00:01:51.920 --> 00:01:54.700 something called presidential impoundments became 00:01:54.700 --> 00:01:57.480 a massive issue. Impoundments. What does that 00:01:57.480 --> 00:02:00.140 actually mean in practice? well congress would 00:02:00.140 --> 00:02:02.659 pass a law appropriating funds for a specific 00:02:02.659 --> 00:02:06.450 program often uh a program the Nixon administration 00:02:06.450 --> 00:02:09.189 didn't like politically. And the president would 00:02:09.189 --> 00:02:11.530 simply refuse to spend the money. He just wanted 00:02:11.530 --> 00:02:13.770 to write the checks. Right. He would impound 00:02:13.770 --> 00:02:16.189 the funds, claiming it was for fiscal management. 00:02:16.550 --> 00:02:19.389 So Nixon was effectively vetoing specific spending 00:02:19.389 --> 00:02:23.210 without actually using a veto. Exactly. And Congress 00:02:23.210 --> 00:02:25.990 absolutely rebelled. They saw this as a direct 00:02:25.990 --> 00:02:28.590 attack on their constitutional authority. So 00:02:28.590 --> 00:02:30.810 they passed the Congressional Budget and Impoundment 00:02:30.810 --> 00:02:34.469 Control Act of 1974. Which changed everything. 00:02:34.569 --> 00:02:37.610 It was the ultimate aha moment for Congress. 00:02:37.830 --> 00:02:40.569 The 1974 act gave them their own independent 00:02:40.569 --> 00:02:44.050 brain. The Congressional Budget Office, the CBO. 00:02:44.270 --> 00:02:46.509 Yes, the CBO, along with the House and Senate 00:02:46.509 --> 00:02:49.189 budget committees. Before this, Congress really 00:02:49.189 --> 00:02:51.009 couldn't analyze the numbers themselves. They 00:02:51.009 --> 00:02:53.409 had to rely on the president's math. And the 00:02:53.409 --> 00:02:55.050 president's math is always going to favor the 00:02:55.050 --> 00:02:57.069 president's goal. Exactly. Giving Congress the 00:02:57.069 --> 00:02:59.530 CBO meant they could scrutinize the data independently. 00:03:00.240 --> 00:03:02.280 Okay, so that sets the stage for the modern era. 00:03:02.419 --> 00:03:04.319 Let's walk through the actual step -by -step 00:03:04.319 --> 00:03:07.860 process, the annual dance. Step one officially 00:03:07.860 --> 00:03:11.120 kicks off on the first Monday in February. That's 00:03:11.120 --> 00:03:13.199 when the president submits this massive budget 00:03:13.199 --> 00:03:15.419 request, assisted by the Office of Management 00:03:15.419 --> 00:03:19.360 and Budget, or the OMB. Right, but it's important 00:03:19.360 --> 00:03:22.050 to remember this request is basically just a 00:03:22.050 --> 00:03:24.870 highly detailed wish list. Right. It outlines 00:03:24.870 --> 00:03:27.050 their revenue and spending plans, but it's not 00:03:27.050 --> 00:03:30.050 binding. It's the opening bid. Opening bid. I 00:03:30.050 --> 00:03:32.330 like that. So then we move to step two, usually 00:03:32.330 --> 00:03:35.250 in April. And here's where it gets really interesting. 00:03:35.449 --> 00:03:38.310 Congress passes a budget resolution based on 00:03:38.310 --> 00:03:40.449 that wish list. Right. But this resolution is 00:03:40.449 --> 00:03:42.370 not a law. It doesn't even go to the president's 00:03:42.370 --> 00:03:44.669 desk for his signature. No, it operates strictly 00:03:44.669 --> 00:03:47.030 as an internal blueprint for Congress itself. 00:03:47.389 --> 00:03:49.689 So how do they figure out the numbers for this 00:03:49.689 --> 00:03:51.849 blueprint? That's where the CBO comes back in. 00:03:51.930 --> 00:03:54.889 In March, right before the resolution, the CBO 00:03:54.889 --> 00:03:57.550 publishes a detailed analysis projecting 10 -year 00:03:57.550 --> 00:04:00.580 baselines. Assuming no new laws are passed. Exactly. 00:04:00.780 --> 00:04:03.419 And the scale of these projections is staggering. 00:04:03.800 --> 00:04:07.039 The source material notes CBO projections showing 00:04:07.039 --> 00:04:10.780 the baseline growing from $4 .1 trillion in 2018 00:04:10.780 --> 00:04:16.279 up to $7 .0 trillion in 2028. Trillions. With 00:04:16.279 --> 00:04:18.759 a T. It's a massive amount of money to organize. 00:04:19.019 --> 00:04:22.689 Which brings us to step three. Slicing the pie. 00:04:22.829 --> 00:04:25.290 Slicing the pie. So Congress takes this internal 00:04:25.290 --> 00:04:28.329 blueprint and they establish the 302A allocation. 00:04:28.629 --> 00:04:31.629 Right. The 302A is the absolute total amount 00:04:31.629 --> 00:04:34.329 of money available to spend. The hard ceiling. 00:04:34.490 --> 00:04:35.910 And once they have the total, they divide it 00:04:35.910 --> 00:04:39.610 up into 302B allocations. Exactly. The 302B allocations 00:04:39.610 --> 00:04:42.250 dictate how that total pie is divided among the 00:04:42.250 --> 00:04:44.389 various subcommittees. And to make sense of everything. 00:04:44.879 --> 00:04:46.920 The resolution organizes the government into 00:04:46.920 --> 00:04:49.620 19 distinct budget functions. Because you can't 00:04:49.620 --> 00:04:51.860 just categorize by agency. It's too messy. Right. 00:04:51.939 --> 00:04:54.060 You have to categorize by what the money is actually 00:04:54.060 --> 00:04:56.259 doing. So, for example, function 050 is national 00:04:56.259 --> 00:04:58.899 defense. Function 250 is general science, space, 00:04:59.079 --> 00:05:01.449 and technology. Then there's function 900. which 00:05:01.449 --> 00:05:03.089 is just net interest, just paying the interest 00:05:03.089 --> 00:05:05.410 on the debt. It's a way for lawmakers to look 00:05:05.410 --> 00:05:07.850 at the macro level priorities before they get 00:05:07.850 --> 00:05:10.209 into the weeds. Which is crucial because getting 00:05:10.209 --> 00:05:12.870 into the weeds means understanding a really important 00:05:12.870 --> 00:05:15.629 difference. The difference between authorizing 00:05:15.629 --> 00:05:18.670 a program and appropriating funds for it. This 00:05:18.670 --> 00:05:22.029 confuses people all the time. Right. So tell 00:05:22.029 --> 00:05:24.709 us how that works. Authorizing a program basically 00:05:24.709 --> 00:05:27.769 gives it permission to exist. It sets the rules 00:05:27.769 --> 00:05:31.089 and says, we think this is a good idea. But it 00:05:31.089 --> 00:05:33.310 doesn't give the program a single cent. It's 00:05:33.310 --> 00:05:35.970 an unfunded mandate. Exactly. To actually give 00:05:35.970 --> 00:05:38.350 them money, federal agencies must be given budget 00:05:38.350 --> 00:05:41.850 authority through appropriations bills. Appropriating 00:05:41.850 --> 00:05:44.269 is writing the check. And there are 12 of these 00:05:44.269 --> 00:05:46.670 specific appropriations bills passed each year. 00:05:46.769 --> 00:05:49.089 This is the discretionary spending. Right. The 00:05:49.089 --> 00:05:51.310 12 bills cover the discretionary side of the 00:05:51.310 --> 00:05:53.269 government. And looking at the numbers for fiscal 00:05:53.269 --> 00:05:55.970 year 2025 really puts this into perspective for 00:05:55.970 --> 00:06:01.420 you. Defense was at $831 .5 billion. A huge portion 00:06:01.420 --> 00:06:04.379 of the pie. Massive. Meanwhile, the bill covering 00:06:04.379 --> 00:06:06.360 labor, health and human services and education 00:06:06.360 --> 00:06:10.860 was $198 .2 billion. And then you have the legislative 00:06:10.860 --> 00:06:13.600 branch itself, which was just $6 .7 billion. 00:06:14.019 --> 00:06:16.199 So you have these subcommittees fighting over 00:06:16.199 --> 00:06:18.980 every line item in these 12 bills. They debate, 00:06:19.160 --> 00:06:21.740 they do markups, and they have to reconcile the 00:06:21.740 --> 00:06:23.800 House version with the Senate version. And they 00:06:23.800 --> 00:06:26.279 have to do all of this before October 1st. Yes. 00:06:26.459 --> 00:06:28.980 October 1st is the start of the federal fiscal 00:06:28.980 --> 00:06:31.819 year. That is the hard deadline. But what happens 00:06:31.819 --> 00:06:34.430 if they miss it? Because we see this on the news 00:06:34.430 --> 00:06:37.310 all the time. If they miss it, the budget authority 00:06:37.310 --> 00:06:40.410 simply vanishes. The agencies legally cannot 00:06:40.410 --> 00:06:42.430 spend money. Which means a government shutdown. 00:06:43.000 --> 00:06:45.860 Exactly. The lights go out. To prevent that, 00:06:45.939 --> 00:06:48.180 Congress will usually pass a continuing resolution 00:06:48.180 --> 00:06:51.220 or a CR. Which is just a temporary fix, right? 00:06:51.339 --> 00:06:54.240 Right. A CR keeps the lights on by funding agencies 00:06:54.240 --> 00:06:56.920 at the previous year's levels. But it's an administrative 00:06:56.920 --> 00:06:59.920 nightmare because agencies are stuck. They can't 00:06:59.920 --> 00:07:02.420 start new programs or adapt to new threats. They're 00:07:02.420 --> 00:07:06.439 frozen in time. Yes. Or, alternatively, instead 00:07:06.439 --> 00:07:09.420 of passing 12 separate bills, Congress will just 00:07:09.420 --> 00:07:12.720 pack everything into one giant... thousands of 00:07:12.720 --> 00:07:15.160 pages long piece of legislation. An omnibus bill. 00:07:15.259 --> 00:07:19.139 The omnibus. It forces a single massive up or 00:07:19.139 --> 00:07:22.220 down vote on the entire government, usually right 00:07:22.220 --> 00:07:25.000 before a shutdown deadline. It's high drama every 00:07:25.000 --> 00:07:28.500 single year. But here's the crazy part. All of 00:07:28.500 --> 00:07:32.040 that drama, the 12 bills, the CRs, the omnibus 00:07:32.040 --> 00:07:35.720 packages, the shutdowns, that is. only for discretionary 00:07:35.720 --> 00:07:37.759 spending. Right. It's actually the smaller part 00:07:37.759 --> 00:07:39.860 of the budget. There is an entire other side 00:07:39.860 --> 00:07:41.899 of the ledger called mandatory spending. Yeah. 00:07:41.959 --> 00:07:44.339 Or direct spending. And mandatory spending doesn't 00:07:44.339 --> 00:07:47.019 need annual bills. It runs on auto pay. So contrast 00:07:47.019 --> 00:07:48.939 that for us. Discretionary is an annual fight. 00:07:49.079 --> 00:07:51.680 Mandatory is what? Mandatory spending is enacted 00:07:51.680 --> 00:07:54.160 by permanent law programs like Social Security 00:07:54.160 --> 00:07:56.439 and Medicare. Congress doesn't have to vote to 00:07:56.439 --> 00:07:58.660 fund them every year. The Treasury is legally 00:07:58.660 --> 00:08:01.199 obligated to cut those checks automatically based 00:08:01.199 --> 00:08:03.540 on who is eligible. It's like your automatic 00:08:03.540 --> 00:08:06.120 monthly subscriptions versus your daily spending. 00:08:06.540 --> 00:08:09.259 You debate whether to buy a coffee today. That's 00:08:09.259 --> 00:08:12.199 discretionary. But your electric bill is on auto 00:08:12.199 --> 00:08:14.879 pay. That's mandatory. That's a great analogy. 00:08:15.079 --> 00:08:17.139 And the numbers for the auto pay are staggering. 00:08:17.540 --> 00:08:19.800 Yeah, the source gave us the fiscal year 2026 00:08:19.800 --> 00:08:23.949 data. Social Security is projected at 268. billion. 00:08:24.230 --> 00:08:27.810 Just for one year? And Medicare is at $176 billion. 00:08:28.189 --> 00:08:31.829 And that money flows automatically unless Congress 00:08:31.829 --> 00:08:35.450 passes a new law to change the underlying structure 00:08:35.450 --> 00:08:37.850 of those programs. Which brings us to the cheat 00:08:37.850 --> 00:08:42.250 code. Ah, yes. Reconciliation. Right. Because 00:08:42.250 --> 00:08:44.190 if you want to change those massive permanent 00:08:44.190 --> 00:08:46.570 structures or change the tax code, you normally 00:08:46.570 --> 00:08:48.889 need a 60 -vote supermajority in the Senate to 00:08:48.889 --> 00:08:51.809 overcome a filibuster. Usually, yes. But reconciliation 00:08:51.809 --> 00:08:54.570 bills are special. They are a unique legislative 00:08:54.570 --> 00:08:57.269 tool. Explain how this works. Why is it so powerful? 00:08:57.669 --> 00:08:59.730 Reconciliation allows Congress to make changes 00:08:59.730 --> 00:09:02.330 to mandatory spending, revenues, and the debt 00:09:02.330 --> 00:09:04.549 limit with only a simple majority in the Senate. 00:09:04.710 --> 00:09:08.269 Just 51 votes. Just 51 votes. There is no threat 00:09:08.269 --> 00:09:10.730 of a filibuster whatsoever. And there is a strict 00:09:10.730 --> 00:09:13.970 20 -hour limit on debate. Wow. So they can just 00:09:13.970 --> 00:09:16.590 fast -track massive changes. Exactly. It removes 00:09:16.590 --> 00:09:19.009 the minority party's ability to stall the legislation. 00:09:19.759 --> 00:09:21.659 So what does this all mean for the average person 00:09:21.659 --> 00:09:24.360 watching the news? It means that if one party 00:09:24.360 --> 00:09:26.799 controls the House, the Senate and the presidency, 00:09:27.120 --> 00:09:30.740 even by razor thin margins, reconciliation is 00:09:30.740 --> 00:09:33.379 their primary mechanism for enacting sweeping 00:09:33.379 --> 00:09:37.279 fiscal policy. It's an incredibly valuable procedural 00:09:37.279 --> 00:09:40.399 shortcut. Of course, there are rules. Yeah. The 00:09:40.399 --> 00:09:42.940 Byrd rule prevents them from just attaching random 00:09:42.940 --> 00:09:46.159 laws to a budget reconciliation bill. It has 00:09:46.159 --> 00:09:47.960 to actually impact the budget. Right. It has 00:09:47.960 --> 00:09:50.379 to directly affect spending. or revenues. But 00:09:50.379 --> 00:09:52.279 within those rules, it's the ultimate power play. 00:09:52.419 --> 00:09:54.720 OK, we have covered so much ground here. Let's 00:09:54.720 --> 00:09:56.840 briefly recap the journey of a federal dollar 00:09:56.840 --> 00:09:59.220 for you. It's a long journey. It really is. It 00:09:59.220 --> 00:10:01.179 starts way back in February with the president 00:10:01.179 --> 00:10:03.840 proposing that massive wish list. Then Congress 00:10:03.840 --> 00:10:06.700 takes the wheel. They use the CBO to run the 00:10:06.700 --> 00:10:09.620 numbers and draft their internal blueprint in 00:10:09.620 --> 00:10:12.419 April. The budget resolution. Right. Then they 00:10:12.419 --> 00:10:15.110 slice up the pie. They assign it subcommittees 00:10:15.110 --> 00:10:18.690 who draft 12 specific appropriations bills to 00:10:18.690 --> 00:10:21.190 fund the discretionary side. Assuming they don't 00:10:21.190 --> 00:10:23.330 hit a wall and rely on continuing resolutions 00:10:23.330 --> 00:10:26.789 or an omnibus. Exactly. And all the while, the 00:10:26.789 --> 00:10:29.429 mandatory spending, the Social Security and Medicare 00:10:29.429 --> 00:10:32.009 auto pay just keeps flowing in the background 00:10:32.009 --> 00:10:35.149 until it all eventually gets back to the president's 00:10:35.149 --> 00:10:38.399 desk to be signed into law. It's a complex, continuous 00:10:38.399 --> 00:10:41.620 cycle. It is. But before we wrap up, there was 00:10:41.620 --> 00:10:43.639 one detail in the source material about the CBO 00:10:43.639 --> 00:10:45.639 that really stood out. Oh, the current policy 00:10:45.639 --> 00:10:48.360 baseline? Yes. So we talked about how the CBO 00:10:48.360 --> 00:10:50.500 calculates a baseline assuming no laws change. 00:10:51.039 --> 00:10:53.559 But the source notes they also calculate a... 00:10:53.799 --> 00:10:56.779 current policy baseline. Right. And to do that, 00:10:56.779 --> 00:10:59.019 the CBO has to make assumptions about future 00:10:59.019 --> 00:11:01.120 events. Exactly. They have to guess how politicians 00:11:01.120 --> 00:11:03.860 will vote on things like tax cuts, sunset provisions 00:11:03.860 --> 00:11:06.240 in the future. Because some tax cuts are written 00:11:06.240 --> 00:11:08.899 to expire after a few years and the CBO has to 00:11:08.899 --> 00:11:11.440 predict. Will Congress let them expire or will 00:11:11.440 --> 00:11:13.659 they extend them? Right. We think of the federal 00:11:13.659 --> 00:11:17.720 budget as hard math, strict accounting. But fundamentally, 00:11:17.960 --> 00:11:20.980 these multi trillion dollar 10 year projections 00:11:20.980 --> 00:11:25.059 rely on. guessing future human behavior. Predicting 00:11:25.059 --> 00:11:27.419 the political moods of people who might not even 00:11:27.419 --> 00:11:29.840 be elected yet. It really leaves you with something 00:11:29.840 --> 00:11:33.240 to mull over. How stable is a financial foundation 00:11:33.240 --> 00:11:35.779 if it requires predicting what future politicians 00:11:35.779 --> 00:11:38.580 might do years before they actually vote? It's 00:11:38.580 --> 00:11:41.039 a house built on mathematical probabilities of 00:11:41.039 --> 00:11:43.779 human behavior. It really is. Well, to everyone 00:11:43.779 --> 00:11:45.840 listening, thank you so much for joining us on 00:11:45.840 --> 00:11:48.039 this deep dive into the federal appropriations 00:11:48.039 --> 00:11:50.340 process. We hope it demystified things a bit. 00:11:50.759 --> 00:11:53.419 Absolutely. So the next time you hear about a 00:11:53.419 --> 00:11:56.039 looming continuing resolution or an omnibus package 00:11:56.039 --> 00:11:58.759 or budget reconciliation on the news, you'll 00:11:58.759 --> 00:12:00.799 actually know the strategic machinery operating 00:12:00.799 --> 00:12:03.940 behind the scenes. Until next time, keep exploring, 00:12:04.120 --> 00:12:06.740 keep analyzing, and always keep questioning the 00:12:06.740 --> 00:12:07.580 world around you.