President Bush submitted a $2.13 trillion budget for the next fiscal year that calls for significant increases in defense spending and homeland security. The President cited the new realities of war and a need to prevent terrorist attacks as justification for his reorientation of federal spending. Other federal department budgets, such as Agriculture, Interior and Commerce will be held relatively constant, while the Justice and Labor Department budgets will be cut. Overall Bush's budget reflects a philosophy that all federal programs must demonstrate that they are effective or risk being eliminated.

After four years of budget surpluses, the President's spending plan anticipates a budget deficit in each of his remaining years as President. Increased spending resulting from the terrorist attacks and decreased revenues resulting from a tax cut are responsible for an anticipated $106 billon deficit in 2002. The new budget would result in an $80 billion deficit in 2003 and $14 billion in 2004.

The federal budget is an important tool in reshaping the functions and programs of the government. This budget provides increased funding via tax credits and other financial incentives for programs that are working effectively, for example, the budget proposes to provide extra money for states that are running efficient food stamp programs, but pares other programs, such as the Community Oriented Policing Services, which the government believes is ineffective. The Administration would also like to reduce Federal services that can be provided by the private sector.

The budget issued by the President is an important first step in a lengthy process that ultimately results in his signing of 13 appropriation bills, generally around the start of the fiscal year on October 1. The next step is for the budget to be passed to both the Senate and the House. Each chamber of Congress then fashions a spending plan that emphasizes Federal functions believed to be important. Congress subsequently hashes out a consolidated spending plan that is voted on and forwarded to the President for his signing or veto.

(Updated March 20, 2002)