The National Budget System

Report Outline
The National Budget System
Preparation of the Budget
The Budget in Congress
Control of Federal Expenditures
Proposed Changes in the Budget System
Special Focus

The National Budget System

Financial Procedure Prior to 1921

The federal budget for the fiscal year 1932, opening July 1, 1931, will be transmitted to Congress by President Hoover on December 3, 1930. This budget will be the tenth submitted to Congress during the life of the national budget system, which was born in the Budget and Accounting Act of June 10, 1921.

Nine and one-half years' experience with a national budget system and, incidentally, the possibility of a federal deficit in the current fiscal year, 1931, present the occasion for a description of the executive budget, its formulation, legislative modification, and execution; an estimate of how successfully the system has worked since its adoption in 1921; and a review of suggestions for its improvement.

Prior to the passage of the Budget and Accounting Act of 1921 the revenues and expenditures of the federal government were not formulated on the basis of a balanced budget. No agency existed to prepare a single, consolidated statement of federal finances as a whole. In the beginning Congress required the Secretary of the Treasury to prepare and report estimates of public revenues and expenditures and plans for improving or increasing the revenues. But Hamilton and other early secretaries of the treasury were unable to evolve a budget system out of these legal provisions because of congressional jealousy of the executive, party divisions, and the structure of the government. As time passed, it became the function of the Secretary of the Treasury, so far as formulating a financial program is concerned, merely to relay to Congress requests for appropriations as prepared by the administrative services. The law was revised to reflect this practice, section 3669 of the revised statutes providing that “all annual estimates for the public service shall be transmitted to Congress through the Secretary of the Treasury, and shall be included in the book of estimates prepared under his direction.” Under this procedure the President played little or no part in the problem of determining and providing for the financial needs of the government. To be sure, the Sundry Civil Appropriation Act of 1909 provided that the President should be informed if estimated appropriations exceeded estimated revenues so that he might advise Congress how to adjust the disparity; but little or no action was taken under this provision.