The US federal budget is created according to three main principles, each of which is interconnected with the other. They are the president's budgeting, the work of the Congress on the federal budget and executing of the budget. The budgeting begins no later than the spring of each year, the least 9 months before being sent to the Congress and 18 months before the beginning of the fiscal year. The US President sets the overall direction of fiscal and financial policy. Based on these indicators, the US Office of Management and Budget are working together with the federal authorities on the definition of specific guidance on policy and planning level as for the fiscal year so for the next four years to manage the preparation of the budget requests. The Congress is considering a draft of the presidential budget, amends, approves or rejects it. It can change the level of funding to cancel the program or to make those that have been unclaimed by the president. The Congress also can cancel or improve taxes and other sources of income or make changes that affect the amount of revenue collected. The process of execution of the budget is carried out with the help of the Balanced Budget and Emergency Deficit Control Act of 1985, so-called the Gramm-Rudman-Hollings Act. This Act restricts the adoption of laws that increase costs and reduce profits up to and including 1998 year and is extended with the Omnibus Budget Reconciliation Act in 1993. The Act divides costs into two types, which are approved and established that are sometimes called mandatory. Approved expenditures are made by adopting resolutions on the annual budget and appointments. Established costs are determined by permanent laws. In contrast to the established expenditures and revenue, the Act constrains approved costs by establishing dollar limits (ceilings) on the budgetary powers and expenses for each fiscal year, including 1998. The ceilings are specified annually in the transmission budget for the difference between the inflation rates calculated when setting the limits, and their valid measures (Oleszek).
There are four major problems that the US government faces when conducting the federal budget. First, the arguments between the US President and the Congress relating to the budgeting since the Congress used to violate internal agreements. Second, the process of budgeting does not cover in full all the expenditures of the USA. Third, the process of creation of the federal budget is designed to increase the costs and taxes. Fourth, the federal budget is too complex so not each person is able to understand it, which is attractive for the abuse by those who can master its intricacies (McEachern).
There is four reasons contributed to the constant growth of the US federal debt, which are wars, economic downturns, tax cuts and a lack of political will. Some part of the federal debt was the result of the deficit of financing hostilities. The debt increased significantly during the First World War and in more than five times during the Second World War. In the periods when national income is reduced, tax revenues are automatically reduced and the budget deficit is generated. Thus, the national debt increased during the Great Depression of the 30's and more recently during the recessions of 1974-1975, 1980-1982 and 1990-1991. The annual budget deficit and the public debt increased again in 1991-1993 when the economy experienced a downturn again, and the federal government went on a huge expense, saving the bankrupt savings and loan associations. The Clinton's administration struggle for the adoption of a package of laws aimed at reducing the budget deficit in 1993 has become a living example of the difficulties that cause a decrease in spending and tax increases (Rushefsky).
One of the consequences of the US inability to reduce its debt is that it can increase the cost of servicing of the national debt, which will complicate the already difficult US fiscal position. Another consequence is that dollar depreciation may increase foreign demand for the US goods, which will cause higher borrowing costs from rising interest rates to the US companies. The third consequence is the collapse created in the US markets caused by the government's inability to reduce its dent will significantly affect the global financial system, which is related to the dollar exchange operations.
In order to reduce the US budget, it is possible to recommend for the US government to keep it at the surplus level, resolve all arguments between the President and the Congress in order to establish appropriate laws contributed to the rise of the aim and others.
McEachern, William A. Macroeconomics. 3rd ed. Mason, Ohio: South-Western, 2011. Print.
Oleszek, Walter J. Congressional Procedures, and the Policy Process. 9th edn. Thousand Oaks, California: CQ Press, 2014. Print.
Rushefsky, Mark E. Public Policy in the United States. 5th ed. Armonk, New York: M.E. Sharpe, Inc., 2013. Print.