{ "id": "R43933", "type": "CRS Report", "typeId": "REPORTS", "number": "R43933", "active": false, "source": "EveryCRSReport.com", "versions": [ { "source": "EveryCRSReport.com", "id": 444348, "date": "2015-03-06", "retrieved": "2016-04-06T22:47:57.823435", "title": "The Federal Budget: Overview and Issues for FY2016 and Beyond", "summary": "Congressional Research Service\n7-5700\nwww.crs.gov\nR43933\nSummary\nThe federal budget is central to Congress\u2019s ability to exercise its \u201cpower of the purse.\u201d Each fiscal year Congress and the President undertake a variety of steps intended to set levels of spending and revenue and to make policy decisions. The purpose of this report is to provide an overview and background on the current budget debate. This report will track legislative events related to the federal budget and will be updated as budgetary legislation moves through Congress. \nIn recent years, policies enacted to restrain spending, along with a stronger economy, have led to reductions in the budget deficit. On August 2, 2011, the President signed into law the Budget Control Act of 2011 (P.L. 112-25). The BCA contained a variety of measures intended to reduce the deficit by at least $2.1 trillion over the FY2012-FY2021 period, along with a mechanism to increase the debt limit. Two subsequent pieces of legislation have modified the BCA since it was enacted\u2014the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240) and the Bipartisan Budget Act of 2013 (BBA; P.L. 113-67). Both pieces of legislation allow for more discretionary spending than was provided under the BCA for FY2013, FY2014, and FY2015. Various deficit reduction measures were included to offset the costs of the changes to spending levels in both ATRA and the BBA. The BCA will continue to affect spending levels in FY2016 and beyond and Congress may debate enacting further changes.\nThe Obama Administration released its budget for FY2016 on February 2, 2015. If the policies contained within the budget proposal are fully implemented, spending (outlays) would total an estimated $3,999 billion (21.3% of GDP) and revenues an estimated $3,525 billion (18.7% of GDP), resulting in a budget deficit of $474 billion (2.5% of GDP) in FY2016. Over the 10-year window, the proposed budget would reduce the deficit from an estimated 3.2% of GDP in FY2015 to 2.5% of GDP in FY2025, averaging 2.5% of GDP over the next decade.\nThe President\u2019s budget proposes increasing the caps on discretionary spending, originally put in place as part of the BCA. For FY2016, the budget proposes to increase discretionary spending by $74 billion relative to current law, divided between the defense ($37.9 billion) and nondefense ($37.5 billion) categories. The budget also proposes to eliminate the sequester on mandatory programs through FY2024. Deficit reduction is proposed through various changes to the tax code, immigration reform, and other mandatory health programs.\nCongressional consideration of the FY2016 budget has already begun. The budget committees in the House and Senate each work to develop a budget resolution as they receive information and testimony from various sources, such as the Administration, CBO, and congressional committees with jurisdiction over spending and revenues. House Budget Committee Chairman Tom Price (R-GA) and Senate Budget Committee Chairman Mike Enzi (R-WY) have stated that they are committed to completing budget resolutions by mid-March and have them ready for consideration and passage by the House and Senate before the end of March.\nThough the federal budget deficit has fallen in recent years, CBO, GAO, and the Administration agree that current federal fiscal policies are unsustainable in the long term. Projections indicate that putting the federal budget on a sustainable long-term path will require an agreement on additional deficit reduction. Such an agreement could include increases in revenues, changes to large spending programs, or some combination of the two.\nContents\nOverview\t1\nBudget Cycle\t1\nBudget Baseline Projections\t2\nSpending and Revenue Trends\t4\nFederal Spending\t5\nFederal Revenue\t7\nDeficits, Debt, and Interest\t8\nBudget Deficits\t9\nFederal Debt and Debt Limit\t9\nNet Interest\t10\nRecent Budget Policy Legislation and Events\t10\nBudget Control Act of 2011\t11\nAmerican Taxpayer Relief Act of 2012\t11\nAppropriations and Government Shutdown\t12\nThe Bipartisan Budget Act of 2013\t12\nBudget for FY2016\t12\nObama Administration\u2019s FY2016 Budget\t12\nDeficit Projections in the FY2016 Budget\t14\nThe FY2016 Congressional Budget Resolution\t16\nConsiderations for Congress\t16\nAddressing Ongoing Budget Issues\t16\nAppropriations and Related Legislation\t17\nDebt Limit\t17\nLong-Term Considerations\t17\n\nFigures\nFigure 1. Total Outlays and Revenues, FY1970-FY2014\t4\nFigure 2. Outlays by Type, FY2000-FY2025\t6\nFigure 3. Revenue by Type, FY2000-FY2025\t8\nFigure 4. Discretionary Cap Changes in the President\u2019s FY2016 Budget Proposal\t13\nFigure 5. Budget Deficit Projections\t15\n\nTables\nTable 1. Selected CBO Baseline Budget Projections\t3\nTable 2. Fiscal Gap Under CBO\u2019s Extended Baseline\t19\n\nAppendixes\nAppendix. Budget Documents\t20\n\nContacts\nAuthor Contact Information\t21\n\nT\nhe federal budget is central to Congress\u2019s ability to exercise its \u201cpower of the purse.\u201d Federal budget decisions also express Congress\u2019s priorities and reinforce Congress\u2019s influence on federal policies. Making budgetary decisions for the federal government is a complex process and requires balancing competing goals. Over the last decade, economic turmoil put a strain on the federal budget due to declining revenues and increasing spending levels. Subsequently, policies enacted to restrain spending, along with an improved economy, have improved the budget outlook, at least in the near term. \nIn August 2011, budget negotiations resulted in the enactment of the Budget Control Act of 2011 (BCA; P.L. 112-25), which contained provisions to reduce the budget deficit by about $2 trillion over the next decade. Since that time, various legislative changes to the law have lessened the impact on certain types of federal spending. However, the long-term costs of federal health care programs and the effects of the baby boom generation\u2019s retirement continue to put pressure on the federal budget. Operating these programs in their current form may pass on substantial economic burdens to future generations. Congress and the President may consider proposals for additional deficit reduction if fiscal issues remain a key item on the legislative agenda.\nThis report will provide an overview of federal budget issues, focusing on recent fiscal policy changes. It will also discuss the major policy proposals contained in the President\u2019s FY2016 budget and the House and Senate budget resolutions. Finally, it also addresses major short- and long-term fiscal challenges. This report will track legislative events related to the federal budget and will be updated as budgetary legislation moves through Congress.\nOverview\nEach fiscal year Congress and the President undertake a variety of steps intended to set levels of spending and revenue and to make policy decisions. This section provides a brief summary of the budget cycle along with an explanation of how budget baselines are constructed. Budget baselines are used to measure how legislative changes affect the budget outlook and are integral to evaluating these policy choices.\nBudget Cycle\nA single year\u2019s budget cycle takes roughly three calendar years from initial formation by the Office of Management and Budget (OMB) until final audit. The executive agencies begin the budget process by compiling detailed budget requests in the calendar year before the President\u2019s budget submission. Many agencies start working on their budgets during the spring and summer\u2014about a year and a half before the fiscal year begins. OMB oversees the development of these agency requests. The President submits a budget to Congress, which is based on work by OMB and federal agencies, typically around the first Monday in February or about eight months before the fiscal year begins.\nCongress typically begins formal consideration of the budget resolution once the President submits the budget request. The budget resolution sets out a plan, agreed to by the House and Senate, which establishes the framework for subsequent budgetary legislation. Because the budget resolution is a concurrent resolution, it is not sent to the President for approval.\nCongress does not always complete action on a budget resolution. In years when Congress is late in adopting, or does not adopt, a budget resolution, the House and Senate independently may adopt \u201cdeeming resolution\u201d provisions for the purpose of enforcing certain budget levels. The last time the House and Senate agreed to a budget resolution was for FY2010. The FY2010 budget resolution was agreed to on April 29, 2009.\nHouse and Senate Appropriations Committees and their subcommittees typically begin reporting discretionary spending bills after the budget resolution is agreed upon. Appropriations Committees review agency funding requests and propose levels of budget authority (BA). Appropriations acts passed by Congress set the amount of BA available for specific programs and activities. Authorizing committees, which control mandatory spending, and committees with jurisdiction over revenues also play important roles in budget decision making.\nDuring the fiscal year, which begins on October 1, Congress and OMB oversee the execution of the budget. Once the fiscal year ends on the following September 30, the Treasury Department and the Government Accountability Office (GAO) begin year-end audits.\nBudget Baseline Projections\nBudget baseline projections are used to measure how future legislation would affect the budget picture. They are not meant to be predictions of the future budget outlook. Due to the nature of projections, slight changes in assumptions can lead to large effects in outyear totals. Therefore, it is important to understand what projections include and the assumptions on which they are based. Baseline projections are included in both the President\u2019s budget and the congressional budget resolution.\nThe Congressional Budget Office (CBO) computes current law baseline projections using assumptions set out in budget enforcement legislation. Since Congress and the President have resolved certain questions related to expiring tax policy and have enacted specific policies set to control discretionary spending over the next decade, there are fewer policy uncertainties affecting the baseline levels under current law. More specifically, the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240; see additional discussion below) permanently set into law many individual tax rates and tax policy provisions. On the spending side, baseline discretionary spending levels are largely constrained by the caps and automatic spending reductions enacted as part of the Budget Control Act of 2011 (BCA; P.L. 112-25) and further modified by the Bipartisan Budget Act (BBA; P.L. 113-67; see additional discussion below). In addition to these elements of current law, macroeconomic assumptions, specifically of gross domestic product (GDP) growth, inflation, and interest rates, will also affect the baseline estimates and projections.\nThe CBO baseline also incorporates policy provisions in current law even though they have historically been revised prior to the policy change actually taking effect. Specifically, the CBO baseline assumes that sharp reductions in Medicare\u2019s payment rates for physician services will take effect as scheduled in April 2015 and that certain expired and expiring tax provisions will not be extended. This leads to baseline projections of lower spending and higher revenue levels relative to what some consider likely based on previous policy actions.\nThe projections in the baseline also contain additional uncertainty, particularly as it relates to future federal borrowing and health care costs. Minor changes in the economic or technical assumptions that are used to project the baseline also could result in significant changes in the outyear deficit levels.\nCurrent baseline projections show stable budget deficits over the next several years. These figures represent marked declines in the budget deficit relative to the past few fiscal years. This is primarily due to continued improvements in the economy, restraints on discretionary spending, and certain assumptions used in constructing the baseline (i.e., certain tax provisions will expire as scheduled under current law). These budget deficit levels are projected to result in slight reductions in the level of debt held by the public as a percentage of GDP through FY2018. In other words, these budget deficits would be fiscally sustainable. However, after FY2018, deficit levels are projected to rise again, reaching 3.9% of GDP by FY2022 and 4.0% of GDP by FY2025. Under the baseline assumptions, budget deficits are projected to average 3.3% of GDP over the FY2016 to FY2025 period. (See Table 1 below.)\nTable 1. Selected CBO Baseline Budget Projections\n(percentage of GDP)\n\nFY2014 (actual)\nFY2016\nFY2018\nFY2025\n\nBudget Deficit\n2.8%\n2.5%\n2.6%\n4.0%\n\nDebt Held by the Public\n74.1%\n73.8%\n73.3%\n78.7%\n\nSource: CBO, The Budget and Economic Outlook: 2015 to 2025, February 2015, Table 1-2.\nCBO also provides projections based on alternative policy assumptions, which illustrate the levels of spending and revenue if current policies continue, rather than expire as scheduled under current law. If Medicare payment rates for physician services remain the same, expiring tax provisions are extended, and the provisions of the Budget Control Act\u2019s automatic spending reduction process do not remain in effect for FY2016 and beyond, CBO projects a cumulative increase in the budget deficit by more than $2.5 trillion relative to the current law baseline, including increased debt service costs, over the FY2016 to FY2025 period. Beyond the 10-year forecast window, federal deficits are expected to grow unless major policy changes are made. This is a result of increased outlays largely attributable to health care costs and baby boomer retirements.\nSpending and Revenue Trends\nOver the last four decades, on average, federal spending accounted for approximately 20% of the economy (as measured by gross domestic product), while federal revenues averaged roughly 17% of GDP. Since FY2002, spending exceeded revenue in each fiscal year resulting in budget deficits. Between FY2009 and FY2012, spending and revenue deviated significantly from historical averages primarily as a result of the economic downturn and policies enacted in response to financial turmoil. In FY2014, the U.S. government spent $3.5 trillion and collected $3.0 trillion in revenue resulting in a budget deficit of 2.8% of GDP, the smallest imbalance since 2007. The trends in revenues and outlays between FY1970 and FY2014 are shown in Figure 1. \nFigure 1. Total Outlays and Revenues, FY1970-FY2014\n(as a percentage of GDP)\n\nSource: CRS figure using data from CBO, Historical Tables, February 2015.\nFederal Spending\nFederal outlays are often divided into the broad categories of discretionary and mandatory spending, and net interest. Discretionary spending is controlled by annual congressional appropriations acts. Mandatory spending encompasses spending on entitlement programs and spending controlled by laws other than annual appropriation acts. Entitlement programs such as Social Security, Medicare, and Medicaid make up the bulk of mandatory spending. Congress sets eligibility requirements and benefits for entitlement programs, rather than appropriating a fixed sum each year. Therefore, if the eligibility requirements are met for a specific mandatory program, outlays are made automatically. Net interest comprises the government\u2019s interest payments on the debt held by the public, offset by small amounts of interest income the government receives from certain loans and investments.\nFederal Spending Relative to the Size of the Economy (GDP)\nIn FY2000, total outlays equaled 17.6% of GDP (the lowest level since FY1966). In FY2009, outlays peaked at 24.4% of GDP. Outlays have fallen steadily since then. In FY2014, total outlays were 20.3% of GDP or equal to the historical average over the last four decades. Under the CBO baseline, total outlays are projected to begin rising again after FY2014 and will reach 22.3% of GDP in FY2025. Figure 2 shows the level of federal spending as a percentage of GDP, broken into the discretionary, mandatory, and net interest categories, between FY2000 through FY2025, as projected in the CBO baseline.\nFigure 2. Outlays by Type, FY2000-FY2025\n(as a percentage of GDP)\n\nSource: CRS figure using data from CBO, Historical Tables, February 2015 and The Budget and Economic Outlook: 2015 to 2025, February 2015, Table 1-2.\nNotes: Data for FY2015 are estimates and data for FY2016-FY2025 are projections under the current law baseline.\nIn FY2000, discretionary spending totaled 6.1% of GDP. Discretionary spending increased in most years between FY2000 and FY2010 largely as a result of increases in security spending and, more recently, the funding provided in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5). Discretionary spending peaked in FY2010 at 9.1% of GDP. In FY2014, discretionary spending totaled 6.8% of GDP. By FY2018, according to CBO\u2019s baseline projections, discretionary spending will fall to 5.8% of GDP, its lowest level ever. Discretionary spending in FY2025 is projected to total 5.1% of GDP. The projected decline in discretionary spending in the baseline over the next decade is largely due to the reductions under current law contained in the Budget Control Act.\nMandatory spending totaled 12.2% of GDP in FY2014, up from 9.4% of GDP in FY2000, as shown in Figure 2. Mandatory spending peaked in FY2009 at 14.5% of GDP. Mandatory spending levels during the FY2009-FY2012 period were elevated mainly because of increases in outlays for income security programs as a result of the recession. The continuing economic recovery has resulted in lower mandatory spending on certain programs. However, mandatory spending is projected to resume its upward trend towards the end of the decade due to increases in certain entitlement programs. As a result, under current law, CBO projects that mandatory spending will total 14.2% of GDP in FY2025, nearly the FY2009 level.\nSize of Federal Spending Components Relative to Each Other\nIn addition to their size relative to the economy, the components of federal spending can also be examined relative to each other. In FY2014, mandatory spending amounted to 59.8% of total outlays, discretionary spending reached 33.6% of total outlays, and net interest comprised the remaining 6.5% of total outlays. The largest mandatory programs, Social Security, Medicare, and the federal share of Medicaid, constituted 49.8% of all federal spending in FY2014. By FY2025, mandatory and net interest spending are projected to increase, thereby reducing discretionary spending\u2019s share of total outlays. Mandatory spending is projected to rise to 63.6% of total outlays while discretionary spending\u2019s share is projected to fall to 22.9% in that year. Net interest spending is projected to rise to 13.5% of total outlays in FY2025.\nBecause discretionary spending currently represents roughly one-third of total federal outlays, some budget experts contend that to achieve significant reductions in federal spending, reductions in mandatory spending are needed. Other budget and social policy experts contend that cuts in mandatory spending would cause substantial disruption to many households, because mandatory spending comprises important parts of the social safety net. Even though the budget deficit has recently been declining, future projections of increasing deficits and resulting high debt levels still warrant further action to restore fiscal health over the long term.\nFederal Revenue\nIn FY2014, federal revenue collection totaled 17.5% of GDP, slightly higher than the historical average over the last four decades. Between FY2009 and FY2013, revenue collection was depressed as the result of the economic downturn and certain tax relief provisions. In FY2009 and FY2010, revenue collection totaled 14.6% of GDP.\nPolicies enacted during the 112th Congress enhanced certainty with respect to the revenue outlook. The American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240) permanently extended reduced tax rates for most income groups, while raising tax rates for upper-income households beginning in calendar year 2013. Under the CBO baseline, revenues are projected to total 18.3% of GDP in FY2025.\nIndividual income taxes have long been the largest source of federal revenues, followed by social insurance (payroll) and corporate income taxes. In FY2014, individual income tax revenues totaled 8.1% of GDP. Social insurance tax revenue accounted for 5.9% of GDP, and corporate income tax revenues equaled 1.9% of GDP in FY2014. All other taxes accounted for 1.6% of GDP in FY2014. Figure 3 shows revenue collections between FY2000 and FY2025, as projected in the CBO baseline.\nFigure 3. Revenue by Type, FY2000-FY2025\n(as a percentage of GDP)\n\nSource: CRS figure using data from CBO, Historical Tables, February 2015 and The Budget and Economic Outlook: 2015 to 2025, February 2015, Table 1-2.\nNotes: Data for FY2015 are estimates and data for FY2016-FY2025 are projections under the current law baseline. \nDeficits, Debt, and Interest\nThe annual differences between revenue (i.e., taxes and fees) that the government collects and outlays (i.e., spending) result in the budget deficit (or surplus). Annual budget deficits or surpluses determine, over time, the level of publicly held federal debt and affect the level of interest payments to finance the debt.\nBudget Deficits\nBetween FY2009 and FY2012, annual budget deficits as a percentage of GDP were sharply higher than deficits in any period since FY1945. The unified budget deficit in FY2014 was $483 billion, or 2.8% of GDP\u2014the lowest level since FY2007. The unified deficit, according to some budget experts, gives an incomplete view of the government\u2019s fiscal condition because it includes off-budget surpluses. Excluding off-budget items (Social Security benefits paid net of Social Security payroll taxes collected and the U.S. Postal Service\u2019s net balance), the on-budget FY2014 federal deficit was $513 billion.\nBudget Deficit for FY2015\nThe February 2015 CBO baseline estimated the FY2015 budget deficit at $468 billion or 2.6% of GDP. The decline in the estimated budget deficit for FY2015 is mainly the result of increased revenues due to higher individual income tax collections. Outlays for FY2015 are estimated to be equal as a percentage of GDP to FY2014 levels (though slightly higher in dollar terms).\nFederal Debt and Debt Limit\nGross federal debt is composed of debt held by the public and intragovernmental debt. Intragovernmental debt is the amount owed by the federal government to other federal agencies, to be paid by the Department of the Treasury. This amount largely consists of money contained in trust funds, such as the Social Security trust fund, that has been invested in federal securities as required by law. Debt held by the public is the total amount the federal government has borrowed from the public and remains outstanding. This measure is generally considered to be the most relevant in macroeconomic terms because it is the debt sold in credit markets.\nChanges in debt held by the public generally track the movements of the annual unified deficits and surpluses. Whether or not the movements of gross federal debt will follow those of debt held by the public depends on how intragovernmental debt changes.\nHistorically, Congress has set a ceiling on federal debt through a legislatively established limit. The debt limit also imposes a form of fiscal accountability that compels Congress, in the form of a vote authorizing a debt limit increase, and the President, by signing the legislation, to take visible action to allow further federal borrowing when nearing the statutory limit. Since February 2013, however, three consecutive pieces of legislation have suspended the debt limit accompanied by specific dates upon which the suspension expires. The debt limit is currently suspended as a result of the Temporary Debt Limit Extension Act (P.L. 113-83) through March 15, 2015. \nIt should be noted that the debt limit by itself has no effect on the borrowing needs of the government. The debt limit, however, can hinder the Treasury\u2019s ability to manage the federal government\u2019s finances when the amount of federal debt approaches this ceiling or when the suspension expires. In those instances, the Treasury has had to take unusual and extraordinary measures to meet federal obligations, leading to inconvenience and uncertainty in Treasury operations at times. At the end of FY2014 (September 30, 2014), federal debt subject to limit was approximately $17,824 billion, of which $12,785 billion was held by the public. \nNet Interest\nIn FY2014, the United States spent $229 billion or 1.3% of GDP on net interest payments on the debt. What the government pays in interest depends on market interest rates as well as on the size and composition of the federal debt. Currently, low interest rates have held net interest payments as a percentage of GDP below the historical average despite increases in borrowing to finance the debt. Some economists, however, have expressed concern that federal interest costs could rise once the economy fully recovers, resulting in future strain on the budget. Interest rates are projected to gradually rise in the CBO baseline resulting in net interest payments of $827 billion or 3.0% of GDP in FY2025. If interest costs rise to this level, they will be higher than the historical average.\nRecent Budget Policy Legislation and Events\nDuring the 112th and 113th Congresses, several legislative actions and events affected the fiscal outlook. In August 2011, negotiations over increasing the debt limit resulted in the enactment of the Budget Control Act of 2011 (BCA). Subsequently, two pieces of legislation have revised this law. First, the American Taxpayer Relief Act of 2012 (ATRA) was enacted in January 2013 to deal with numerous expiring tax provisions, the BCA\u2019s across-the-board spending cuts (i.e., sequester), and other short-term considerations that were scheduled to take effect at the very end of 2012 or in early 2013. This combination of policies was referred to by some as the \u201cfiscal cliff.\u201d During October 2013, certain activities of the federal government ceased operation (i.e., shutdown) due to a lapse in appropriations. Several months after the shutdown, the second piece of legislation modifying the BCA, the Bipartisan Budget Act of 2013 (BBA), was enacted (December 2014). It contained new discretionary spending levels for FY2014 and FY2015 replacing the old levels as prescribed by the BCA. These actions are discussed in more detail below.\nBudget Control Act of 2011\nThe Budget Control Act of 2011 (BCA; P.L. 112-25) was enacted on August 2, 2011. The BCA contained a variety of measures intended to reduce the deficit by at least $2.1 trillion over the FY2012-FY2021 period, along with a mechanism to increase the debt limit. The deficit reduction provisions included $917 billion in savings from statutory caps on discretionary spending and the establishment of a Joint Select Committee on Deficit Reduction (Joint Committee) to identify further budgetary savings of at least $1.2 trillion over 10 years. Because the Joint Committee was unable to reach an agreement, an automatic spending reduction process was triggered to begin in FY2013. This automatic process was intended to reduce spending levels further in the absence of other legislation to implement these changes.\nAmerican Taxpayer Relief Act of 2012\nAs the BCA\u2019s additional spending reductions were set to take effect in early 2013, the American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240) was signed into law by President Obama on January 2, 2013. ATRA included a number of spending provisions. First, ATRA postponed the start of the FY2013 BCA automatic spending reductions until March 1, 2013. ATRA also reduced the FY2013 BCA spending reductions implemented via the automatic process by $24 billion (i.e., two months\u2019 worth of reductions), to roughly $85 billion equally divided between defense and non-defense. These provisions were offset by other changes in spending or revenue. Other spending changes unrelated to the BCA included an extension of certain unemployment benefits, prevention of reductions in Medicare physician payment rates, and a one-year extension of the 2008 farm bill.\nIn addition, ATRA made a variety of changes to tax policy, including the permanent extension of the 2001 and 2003 tax cuts on both ordinary income and capital gains and dividends for taxpayers with taxable income below $400,000 ($450,000 for married taxpayers filing jointly). For taxpayers with taxable income above these thresholds, the marginal tax rate on ordinary income rose from 35% to 39.6% on the portion of their income above these thresholds, and the top tax rate on long term capital gains and dividends rose from 15% to 20%. ATRA also reinstated the personal exemption phase-out (PEP) and limitation on itemized deductions (Pease) for taxpayers with adjusted gross income (AGI) above $250,000 ($300,000 for married couples filing jointly), allowing these limitations to expire for those with AGI below these thresholds. ATRA also extended the tax changes to a variety of tax credits, provided marriage tax penalty relief, and modified certain education-related tax incentives. ATRA also included a permanent \u201cpatch\u201d for the alternative minimum tax and provided permanent estate and gift tax rules. Expiring provisions commonly known as \u201ctax extenders\u201d were extended through the end of 2013. The 113th Congress acted in December 2014 to extend most (but not all) provisions that had expired at the end of 2013 by enacting the Tax Increase Prevention Act of 2014 (P.L. 113-295).\nAppropriations and Government Shutdown\nOn October 1, 2013, the federal government experienced a funding gap and partial shutdown after appropriations to fund many departments and agencies were not enacted by the beginning of FY2014. The funding gap and associated shutdown ended on October 17, 2013, with the enactment of the Continuing Appropriations Act, 2014 (P.L. 113-46). The act provided interim appropriations through January 15, 2014. As part of the negotiations related to the passage of the Continuing Appropriations Act, the House and Senate agreed to go to conference on the FY2014 budget resolution. On December 9, 2013, Senator Patty Murray and Representative Paul Ryan released an agreement on discretionary spending caps for the remainder of the current fiscal year (FY2014) and the next fiscal year (FY2015), which was later enacted into law as the Bipartisan Budget Act of 2013.\nThe Bipartisan Budget Act of 2013\nThe Bipartisan Budget Act of 2013 (BBA; P.L. 113-67) replaced a portion of the BCA\u2019s automatic spending process reductions for FY2014 ($45 billion) and FY2015 ($18 billion). These changes allow for more discretionary spending than was provided under the BCA for FY2014 and FY2015. Various deficit reduction measures were included to offset the cost of the increased discretionary spending.\nBudget for FY2016\nThe Obama Administration released its FY2016 budget on February 2, 2015. The President\u2019s budget lays out for Congress the Administration\u2019s views on national priorities and policy initiatives. Congress has also begun its consideration of the FY2016 budget.\nObama Administration\u2019s FY2016 Budget\nIn his budget for FY2016, President Obama presented his policy agenda. If the policies are fully implemented, spending would total an estimated $3,999 billion (21.3% of GDP) and revenues an estimated $3,525 billion (18.7% of GDP), resulting in a budget deficit of $474 billion (2.5% of GDP). Over the 10-year window, the proposed budget would reduce the deficit from an estimated 3.2% of GDP in FY2015 to 2.5% of GDP in FY2024, averaging 2.5% of GDP over the next decade.\nThe President\u2019s budget proposes a variety of tax and spending measures intended to pay for a number of initiatives. Specifically, the President\u2019s budget proposes to increase the caps on discretionary spending, originally put in place as part of the Budget Control Act (BCA). 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