"The federal budget is central to Congress's ability to exercise its 'power of the purse.' Federal budget decisions express Congress's priorities and reinforce Congress's influence on federal policies. Making budgetary decisions for the federal government is a complex process and requires balancing competing goals. Recent economic turmoil has strained the federal budget as a result of declining revenues and increasing spending levels. As the economic recovery continues, the budget process will allow the President and Congress to negotiate priorities and refine spending plans. The federal government faces very large budget deficits, rising costs of entitlement programs, significant spending on overseas military operations, and low revenue levels. The enactment of financial intervention and fiscal stimulus legislation in FY [fiscal year] 2008 and FY2009 may have helped to bolster the economy, though it increased the budget deficit. While GDP [gross domestic product] growth has returned in recent quarters, unemployment remains elevated and government spending on 'automatic stabilizer' programs, such as unemployment insurance and income support, remains higher than historical averages. This suggests that the recession's effects on the budget will likely linger for several more fiscal years. In addition to the current challenges, concerns remain about the federal government's long-term fiscal situation. The rising costs of federal health care programs and the effects of the baby boom generation's retirement present serious challenges to future fiscal stability. Operating these programs in their current form may pass on substantial economic burdens to future generations. To avoid this would require significant government action and public sacrifice at levels greater than those needed to counteract the recent economic downturn."
CRS Report for Congress, R41685