Federal Budget Process

Why does the budget require a forecast of the economy?

The USA’s federal budget needs an economic forecast for diverse reasons. It needs the forecast since economic performance is highly dependent on the revenues that the federal government collects and its spending levels. Without economic performance estimates, the government is incapable of projecting the expected revenue levels and expenditure levels. The most of the revenue arises from taxation (Cashell 4-10). The performance has significant impact on the revenues raised via taxation. When the federal economy is depressed, many persons lose employment and the tax revenues that would have been given by them reduce. Sales taxes and business taxes are affected in a comparable manner.

Many public, or government, expenditures are dependent on the performance as well. For instance, if the economy is depressed, more citizens will be going for unemployment cover, or insurance (Great Britain 4). More citizens will be going for food stamps. The insurance and stamps add to government expenditure. Thus, the federal government is keen on predicting the performance to gain ideas on the expected revenue, as well as expenditure, levels. Notably, such levels are essential considerations in budget creation.

Under what circumstances would actual government spending and tax revenue fall to match the budget as approved?

There are various circumstances in which the real government spending levels and the levels of revenues collected are not comparable to the levels set out in the approved budget. The levels are unlikely to match owing to the reality that in many cases, the economic does not perfectly perform as expected by the government. The levels are unlikely to match when there are widespread disasters requiring the government to incur expenditures not budgeted for priory.

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