Why Is the Budgeting & Accounting Act of 1921 Important?

The President has had to submit a budget to Congress since 1921.

The President has had to submit a budget to Congress since 1921.

Before the Budgeting & Accounting Act of 1921, no single government entity oversaw the entire budget. Departments submitted requests to Congress. After World War I, Congress members saw wartime spending raised the national debt and thought they needed more control over government expenditures. Modern budgeting debates still hinge on the powers given to the Congress and the President in this act. The restrictions keep either branch from dominating budget decisions.

Presidential Accountability

The act requires the President to submit a budget to Congress every year by the first Monday of February. The President has to justify that budget, so, depending on which party controls Congress, this usually leads to disagreements over what government programs deserve money. Both parties have used this approval process to push their own agendas. The 14th Amendment says the government's debt can't be questioned. If Congress refuses to approve enough money to pay debts, conceivably the President could override that decision to fulfill the Constitution's guidelines.

Spending Disconnection

The act didn't link the budgeting process to the amount of revenues brought in through taxes. The result is deficits and surpluses since the budget isn't based on what money is available. It puts the focus on what the country wants rather than what it can afford. In practice, Congress approves expenses and then later determines if it will increase the government's ability to borrow money. This act raises the debt ceiling.

The Bureau of the Budget

When the act created the Bureau of the Budget, it essentially gave the President control over individual departments. This bureau gathers and evaluates the competing requests of governmental departments and agencies. This allows the President to create a comprehensive budget. He can reduce or raise requests from each department. In 1970, the Bureau of the Budget was renamed the Office of Management and Budget.

The General Accounting Office

The act also created a wing that gives Congress the power to audit government departments. The Governmental Accountability Office, originally called the General Accounting Office, tells the House and Senate what it may need to cut or expand in the future. The Congress sends the President's budget back to the White House with the changes it wants. The legislative and executive branches then negotiate a compromise.

 

About the Author

Kevin Johnston writes for Ameriprise Financial, the Rutgers University MBA Program and Evan Carmichael. He has written about business, marketing, finance, sales and investing for publications such as "The New York Daily News," "Business Age" and "Nation's Business." He is an instructional designer with credits for companies such as ADP, Standard and Poor's and Bank of America.

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