Do US Gov Spending Bills Mean Other Things Dont Get Money?

Question

When the US gov passes spending bills like $2Bil for A and $5Bil for B does it mean other things aren’t funded or money is taken away from other projects?

In my day to day experience nothing change whether a spending bill is passed or not, is there somewhere I can see it? Ive heard US national debt works different than personal debt, is that the case and is it related?

In: Economics

Answer 1

Yes and no.

More accurate would be to say that government programs are only funded if Congress chooses to fund them. Congress can choose many ways to fund things, and they are not restricted to allocating money that we have. So it’s not necessarily the case that we have, say, $3 trillion sitting in the bank, and if we give all $3 trillion to the military there’s nothing left to spend on other departments.

If there’s $3 trillion in tax money sitting in the government’s bank account (which there isn’t, because that’s not even how government spending works), Congress isn’t restricted to spending $3 trillion. They could write a budget that spends $4 trillion, or $10 trillion, or $30 trillion, or $150 quadrillion, and that budget would get funded through a variety of ways.

This is one way in which you can’t compare government spending to household budgeting. Governments are not restricted in the same ways that regular households are. Among other things, if they need to governments can simply print the money needed to fund budget initiatives, or they can borrow arbitrary amounts through the sale of bonds.

For a variety of different reasons (political and economic) governments don’t usually go hog-wild with spending and try to keep spending roughly proportional to tax receipts (though it has been decades since the last time that tax receipts were greater than budgeted spending). But this is a decision on the part of the government, not a requirement based on money supply.

In practical terms, Congress often does trade budget cuts in one area for spending in another area, but again, that’s for political and economic reasons, not because they have to balance a budget.