Free «Budgeting and Finance» Essay Sample
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Nowadays, public pays a lot of attention to the governmental finances. It focuses on the budgets at all levels of the government. The competition between the three branches as well as the differences in their values makes the finances and budgets a complex subject.
In fact, legislators are trying to create the budget responsive to the needs of the society. The executive officials are concerned about the promotion of the managerial efficiency; thus, the courts face the cases where the absence of the proper funding violates the individuals’ rights and/or benefits guaranteed by the law. On the other hand, citizens are waiting for many things from the governmental budgets. Specifically, they want to be sure that their taxes are spent in the most effective way. No wonder that there are a lot of various ideas and theories about how the budget has to be developed, and each of these has its weak and strong aspects. However, the most curious thing is that the enactment of the budget is only the beginning. The most complicated concern is to execute it.
There are four major problems that occur during the process of budget adoption in the United States: the length of the budget cycle, budgetary politics, raising the debt ceiling, and uncontrollable spending. This paper will discuss each of these problems as they influence the budgeting process in different ways as well as complicate its execution.
The Length of the Budget Cycle
The first and, evidently, the main problem for the budget execution is that the length of the budget cycle from its start till the end of the fiscal year takes approximately 30 months (Rosenbloom, Kravchuk, & Clerkin, 2014). Obviously, such long period may cause the row of problems with the implementation of the budget. Moreover, the needs and assumptions that were made at the beginning of the year usually have to be revised during the budget cycle. Therefore, it causes the need to improve the flexibility in the execution of the budget. In fact, even such factors as the weather’s impact on the agricultural situation or energy consumption within the global international relations, all make any prediction unreliable.
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For instance, the length of the budget cycle makes a huge impact on the presidential transitions. Moreover, the president that will be newly elected in 2016 will take the office only in January 2017, but he or she will not be able to work with the budget till October 1, 2019, or in other words, it is almost full two years after the election. On the other hand, it has a positive aspect: it fosters the administrative continuity.
Talking about the state governments, some of them are using the two-year budget concept while others enact the one-year budgets. The difference between these two is that some states are trying to make their budget spending more flexible according to the latest trends and global situation, while other states use the model of the five-year projection of the main spending. Despite the different approaches across the country, the most of the states are moving to the model of the annual budgeting to achieve more flexibility.
As for the local governments, they usually do not have a tradition to use the multiyear budgets. The reason is that the municipal governments are trying to adjust appropriations during the fiscal year. Moreover, the biannual budget process will make it even more complicated and considerably longer.
Raising the Debt Ceiling, or Eliminating It?
The American people have never confessed the idea of the long-term deficits legitimations. The concept of the balanced budget was always a theme for the discussion. Apparently, there were some limitations provided to constrain the growth of the national debt. Unfortunately, the President and the Congress decided that the confines of the debts ceilings are undesirable and voted for their increasing.
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An example of the debt ceiling rising may be the Budget Control Act of 2011 implementation which finished the debt ceiling crisis. However, because of it the United States lost the Governments’ Credit Rating from the highest rank- “AAA” to “AA+” (Rosenbloom, Kravchuk & Clerkin, 2014). Important fact is that debt ceiling rising does not show the inability of the country to pay its debts; it only shows the willingness of the Congress to endanger the world credit market’s stability for the political purposes. Thus, nowadays the United States’ debt level is growing continually, and in addition, there are no guarantees that it will not increase again.
One more problem is that sometimes the budgeting starts to look like some game with the huge amount of the players/participants who are trying to foster their chances to be reelected and to increase the shares rate. Additionally, they are seeking the ways of keeping taxes low and promoting the administrative economy. While the number of the agency strategies is common, some politically desirable or most popular functions may be cut. For instance, school districts are usually cutting down basketball or football programs if the high taxes rate is not approved.
The same situation may occur with the federal agencies which threaten to reduce the number of the most popular programs if their full funding requests are not met. According to Rosenbloom, Kravchuk, and Clerkin (2014), approximately 800,000 federal employees were furloughed, and closures included even the iconic sites. Besides, agencies are used to increase their requests expecting that they will be reduced afterward. Such activities include a lot of noise and newspapers’ headlines; nevertheless, in reality there is no significant change.
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The last trick that may be used to increase funding is the repackaging. In general, it is the existing program explanation that appears to fit the president’s new priorities. However, such games may be the reason of the information for the voters about the way the government operates and, consequently, cause public debate rising. Moreover, it is the dishonest practice that is usually complicated by the deep disagreements between the legislative and executive branches.
The uncontrollable spending is probably the most serious problem of the federal budgeting process which has been uncontrolled since the early 1970th and has risen to more than the two-third of the budget (Rosenbloom, Kravchuk & Clerkin, 2014). The meaning of the term uncontrollable is that the funds have been taken beforehand. Such commitments usually take three major forms. The first one is the payment of the federal debt that cannot be constitutionally or legally avoided.
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The next form of the commitments involves entitlements. They appear because of the governmental obligations to the groups of citizens. For instance, these may include the following: Medicaid, Social Security, Medicare and veterans’ benefits. Moreover, the entitlements’ expense is gradually rising due to the increasing number of people who take part in different groups.
Finally, the uncontrollable spending may be a result of the government’s contractual obligation. It is usually multi-year and includes adjustments for the inflation and cost overruns. However, the uncontrollable spending may be reduced over time despite its label. The development of the five-year projections of the cost of the agencies’ programs is a part of the general reaction to this problem.
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The budgeting process in the modern world achieves a lot of attention from the society. It is a long and complicated process that involves all governmental branches at all levels. Because of it the budgeting process is usually accompanied by the confusions and conflicts between its participants. Moreover, despite the complexity of the budget developing the most complicated thing is to execute it. During the execution process, the following major problems appear: the length of budget cycle (assumptions made in the beginning of the cycle often have to be revised till its end due to the different factors that may occur in the budgeting process), raising the debt ceiling, budgetary politics, and uncontrollable spending (gradually increasing of the contractual obligations, debt and entitlements spending).