There are three ways Congress can control the statutory budget in order to prevent tax and mandatory spending legislation from increasing the deficit that constricts the discretionary budget. In 2010, the Statutory Pay-As-You Go (PAYGO) Act was passed which maintains that any changes to taxes or mandatory spending, which increase the multi-year deficit must be offset in an equivalent amount through other changes which in turn decrease the deficit. Any violation of this act results in a sequestration across select mandatory programs in order to restore the balance in the budget. The second way Congress may control the budget is through discretionary funding caps. Through the 2011 Budget Control Act (BCA), Congress imposed limits on the amounts …show more content…
Under this mandatory spending, Congress must allocate whatever funds are needed to keep these programs running and cannot reduce the funding for these programs without first changing the laws that cover them. These programs are also not required to go through the annual budget process that governs discretionary spending. The mandatory portion of the budget is simply an estimate of how much will be required to keep these programs running and are determined by the Office of Management and Budget, or OMB. Of the mandatory programs included in the budget process, Social Security and Medicare make up the largest amount of funding required. Also included in the mandatory spending programs are welfare programs such as SNAP, Child Tax Credits, and Child Nutrition programs as well as Supplemental Security for the blind and disabled and unemployment benefits. Each of these programs covered under mandatory spending have eligibility requirements and are not open to the everyone (Federal Spending, …show more content…
Discretionary spending, unlike mandatory spending, goes through a yearly appropriations process which allows Congress and the President to change funding year to year to either expand or contract the economy. There are only two ways that Congress may make changes to the discretionary fiscal policy and that is through the annual budget process or through changes in the tax code. Included in the discretionary spending are programs such as military spending and nearly all other federal departments. To expand the economy, Congress may pass an expansionary fiscal policy which reduces taxes which in theory allows households more disposable income to pump back into the economy. When an expansionary fiscal policy is created, budget deficits are also created because the government is not receiving as much in taxes thus spending more than they are actively receiving. With contractionary fiscal policy taxes are raised to slow the economy's growth meaning less disposable income but more money for the federal government. In a perfect world, discretionary spending would work as a counterweight to the business cycle thus implementing a contractionary fiscal policy during economic booms and expansionary fiscal policy during recessions. This is usually never the case though since politicians are elected on spending money and lowering taxes which is only allowed through an