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the executive and the legislature in fiscal management. State and local governments also have clearly defined fiscal responsibilities, operating independently from the federal government. Budget documentation is easily accessible to the public, timely, comprehensive, and reliable. However, with the expiration of the BEA, and a sharp expansion in the federal deficit after 2000, there is a lack of clarity on the longer-term direction of fiscal policy (IMF, 2003).

3. Legal basis for the establishment and the powers of the actors in the budget system

3.1. The executive and the legislature

3.1.1. Overview

The federal government is composed of three separate branches: the executive, the legislature and the judiciary. The checks and balances exercised by each branch is a defining feature of the Constitution and the budget management system. The executive branch consists of the President, the Cabinet, various departments and other agencies. The power of the executive branch is vested exclusively in the President (Art. II, s. 1, Constitution). The President appoints 15 secretaries as heads of department, other officials as heads of other agencies, and oversees the various federal government departments and agencies. These administrative heads serve at the discretion of the President.

The legislative branch (Congress) consists of the Senate and the House of Representatives, each with a substantial number of committees involved in budget decision making. Congress is supported by the GAO and the CBO. The role of Congress in authorising the budget is more active and often more independent than the legislature’s role in most OECD countries (Blondal et al., 2003). Congress has no limits on the extent to which it may amend the President’s budget proposals.

The judicial branch is asked to adjudicate when issues arise concerning the constitutionality of budget procedures. For example, in 1998 the Supreme Court ruled that the Line-Item Veto Act 1995 was unconstitutional.11 This Act would have provided the President with line-item veto power against the appropriations bills approved by the Congress (Schick, 2002). The Supreme Court ruled that a constitutional amendment would be necessary to provide such sweeping powers.

3.1.2. Roles and responsibilities of the Cabinet and individual ministers

The Cabinet is an informal structure with no explicit legal basis (it is implicitly drawn from the Art. II, s. 2, Constitution). It includes the Vice-President and the heads of 15 executive departments, including the Secretary of the

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Treasury and the Director of the OMB. Although one of the principal purposes of the Cabinet is to advise the President on any subject, it plays little or no role in budget decision making (unlike Westminster countries, where the Cabinet of ministers is the most important budget decision-making body). The President is also advised by the Executive Office of the President, consisting of the White House Office and other specialised offices, including the OMB. In practice, the President relies heavily upon the OMB for budget advice – it reports directly to the President.

3.1.3. Establishment of ministries and executive branch agencies

There are only indirect references in the Constitution to administrative organisation within the executive. The President “may require the opinion, in writing, of the principal officer in each of the Executive departments, upon any subject relating to the duties of their respective officers”; “Congress may by law vest the appointment of such inferior officers, as they think proper, in the President, or in the Heads of Departments” (Art. II, s. 2, paragraphs 1 and 2). Based on these constitutional provisions, Congress, through legislation, establishes departments and agencies, and determines their missions. The 15 executive departments12 are listed in Title 5, Chapter 1. All presidential proposals for restructuring any department have to be submitted to Congress for approval, according to procedures meticulously defined in the law. Few countries have such strong control by the legislature over internal reorganisations within the executive. The strong congressional control over administrative structures has a budgetary counterpart: in a given fiscal year, every appropriations sub-committee carefully examines how much money is appropriated to each administrative structure.

Some 200 departmental agencies exist as the operating units responsible for the implementation of budget programmes. In addition, there are about 70 independent agencies that are not located within any department and which are not subject to the same management laws and regulations as agencies within departments (Moe, 2002).

Within the executive branch, the primary responsibility for budget formulation rests with the OMB, established by the BAA (s. 1105) to assist the President to oversee federal budget preparation and to supervise its administration (Tanaka et al., 2003; OMB, 2004c). The OMB evaluates the effectiveness of agency programmes, policies, and procedures, assesses competing funding demands among agencies, and sets funding priorities. OMB ensures that agency reports, rules, regulations, testimony, and proposed legislation are consistent with the President’s budget and with the administration’s policies.

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Competencies for fiscal management are shared. The primary responsibility for tax policy and tax estimates, accounting and public debt management lies with the Department of the Treasury created by an Act of Congress in 1789 (codified in Title 31, Chapter 3). Furthermore, the Council of Economic Advisors (CEA) plays an important role in formulating fiscal policy and economic forecasts in collaboration with the Treasury and the OMB. The CEA is a three-member council appointed by the President that is supported by staff (mostly political appointees). In addition to the CEA, the National Economic Council (NEC) was established in 1993 within the Executive Office of the President, to advise the President on matters (including budgeting) related to economic policy.

3.1.4. Responsibilities of senior civil servants

The general legal basis for the responsibilities of civil servants is provided in the Title 5 Chapter 15. Civil servants are not permitted to use their official authority or influence for the purpose of interfering with or affecting the result of an election or political activities (s. 1502). They are also provided with clear legal and administrative guidance concerning ethics and conflict of interest. Relevant legislation includes the Ethics in Government Act of 1978, the Office of Government Ethics Reauthorisation Act of 1988, and the Ethics Reform Act of 1989. Political activity by federal employees is also governed by law.

3.1.5. Establishment and roles of legislative committees

The CBA created congressional and senate budget committees, which play the key role in deciding the amounts approved in annual appropriations laws. Furthermore, the Rules of the House (Rule X) and the Standing Rules of the Senate (Rule XXV) specify the establishment of committees and their functions respectively.13 The House and the Senate have 19 and 16 standing committees respectively, as well as special and ad hoc committees. Several joint committees operate, including the Joint Committee on Taxation, which analyses all estimates of changes in the Tax Code.

Each house has three main committees that play a major role in the budget process: a Budget Committee, an Appropriations Committee and a Tax Writing Committee (known as the Finance Committee in the Senate and the Ways and Means Committee in the House). Budget committees in both houses have jurisdiction on matters relating to concurrent resolutions on the budget [as defined in s. 3(4) of the CBA, see below]. Appropriations committees are split into 13 sub-committees, one of which is responsible for one appropriations bill through Congress. The Ways and Means Committee in the House and the Finance Committee in the Senate have jurisdiction on matters relating to revenues (for example, tax, customs, bonded debts).