Federal policy questions, answered
Every term in our glossary, phrased as the question it answers. Each answer is one sentence, followed by where you are likely to meet the term. Every one links to a fuller page.
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What are appropriations?
The annual laws that give federal agencies legal authority to spend money.
Twelve regular appropriations bills fund the discretionary side of the government each year. Without one — or a continuing resolution — an agency cannot obligate funds.
Full definition: Appropriations →What is a basis point?
One hundredth of one percentage point. A 25 basis point cut is a quarter of one percent.
FOMC decisions are almost always announced in 25 basis point increments. Bond yields, mortgage spreads and CBO interest-cost estimates are quoted the same way.
Full definition: Basis point →What is a budget resolution?
A congressional blueprint setting spending and revenue totals. It is not a law and the president does not sign it.
Passing one is what unlocks the reconciliation process. In years when Congress does not adopt a budget resolution, reconciliation is unavailable.
Full definition: Budget resolution →What is the Byrd rule?
A Senate rule that strikes provisions from a reconciliation bill when they are not primarily budgetary.
It is why reconciliation bills are shaped the way they are. A provision ruled 'extraneous' comes out unless sixty senators vote to keep it — which defeats the point of using reconciliation.
Full definition: Byrd rule →What is the CBO baseline?
The Congressional Budget Office's projection of spending, revenue and debt under current law.
Nearly every ten-year cost figure in budget coverage is measured against it. It is a benchmark, not a forecast of what will happen.
Full definition: CBO baseline →What is the Consumer Price Index?
A monthly measure of the average change in prices paid by urban consumers for a basket of goods and services — the household reading of the inflation tax.
The headline inflation number in most coverage. It is not the index the Fed targets — that is the PCE price index.
Full definition: Consumer Price Index →What is a continuing resolution?
A temporary funding measure that keeps agencies open at existing levels when the appropriations bills are not finished.
Congress passes one nearly every year. A CR is what stands between the start of a fiscal year and a government shutdown when the twelve appropriations bills have not been enacted.
Full definition: Continuing resolution →What is a cost-of-living adjustment?
The annual Social Security increase indexed to consumer prices — a partial catch-up after the inflation tax, not protection from it.
Announced each autumn for the following year. It is automatic under current law and does not require a vote.
Full definition: Cost-of-living adjustment →What is the debt ceiling?
A statutory cap on total federal borrowing. It limits paying for spending already authorised — the bill coming due, not a vote to spend more.
It appears whenever total debt approaches the cap and Treasury begins using 'extraordinary measures' to stay under it.
Full definition: Debt ceiling →What is a deficit?
The amount by which federal spending exceeds revenue in a year — a flow that adds to the debt, and is inflationary if monetized.
The deficit is an annual flow. The debt is the accumulated stock. Coverage frequently swaps the two, and rarely asks how the gap was financed.
Full definition: Deficit →What is discretionary spending?
The portion of federal spending set each year through the appropriations process.
It covers defence, most agencies, and the majority of what a shutdown interrupts — but a minority of total federal spending.
Full definition: Discretionary spending →What is the dot plot?
A chart in the Fed's quarterly projections showing where each FOMC participant expects rates to be at future dates.
It is released four times a year with the Summary of Economic Projections, and is one of the most over-read documents in economic coverage. It is not a vote and not a plan.
Full definition: Dot plot →What is the dual mandate?
The two goals Congress set for the Federal Reserve: maximum employment and stable prices. Stable prices still require that money not outrun output.
It is the frame for nearly every FOMC statement. When the two goals point in opposite directions, the statement language is where the committee's choice — who pays — shows up first.
Full definition: Dual mandate →What is the federal funds rate?
The interest rate banks charge each other for overnight loans of reserves — the price the FOMC chooses in order to invite or restrain credit.
It is the rate the FOMC targets. Every headline that says the Fed 'raised rates' or 'cut rates' is describing a change to the target range for this one rate.
Full definition: Federal funds rate →What is inflation?
A general rise in the price level, produced in the sustained case by money growing faster than output — which lowers what a unit of currency will buy.
Quoted as a percentage over twelve months. Half of monetary policy is written against it. The Federal Reserve's 2 percent target is a choice, not zero, and not a figure in the statute.
Full definition: Inflation →What is mandatory spending?
Federal spending that flows from permanent law rather than annual appropriations.
Social Security, Medicare, Medicaid and interest on the debt are the largest components. None of them require an annual vote to continue.
Full definition: Mandatory spending →What is the national debt?
The accumulated total the federal government owes from every past deficit — a stock whose interest is paid by taxpayers or inflation.
Usually quoted as total public debt outstanding. It is worth checking whether a figure means debt held by the public or the gross total, which includes what the government owes itself.
Full definition: National debt →What are open market operations?
The tools the New York Fed uses to hold the funds rate in range — and, in size, to change the stock of reserves.
This is the implementation half of a rate decision — the mechanism that turns the committee's announced target into the rate that actually prevails.
Full definition: Open market operations →What are outlays?
Money the federal government actually pays out in a period, as distinct from what it is authorised to spend.
Budget documents distinguish budget authority from outlays. A bill can create authority in one year that turns into outlays over several.
Full definition: Outlays →What is quantitative easing?
Large-scale purchases of Treasury and mortgage-backed securities, paid for with newly created reserves. That is money creation.
QE describes the Fed's balance sheet expansion after 2008 and again in 2020. It is the counterpart to quantitative tightening.
Full definition: Quantitative easing →What is quantitative tightening?
Shrinking the central bank's balance sheet by letting securities mature without replacing them — a withdrawal of base money, usually without sales.
QT is how the Fed has unwound the holdings it accumulated through quantitative easing. It runs in the background of rate decisions rather than being announced meeting to meeting.
Full definition: Quantitative tightening →What is reconciliation?
An expedited budget procedure that lets certain fiscal legislation pass the Senate by simple majority, without being subject to a filibuster.
Most major partisan tax and spending laws of the last three decades moved through reconciliation, because it is the route that does not require sixty votes.
Full definition: Reconciliation →What is a bond yield?
The return on a bond as an annual percentage of its price — set by expected short rates, inflation, and Treasury supply.
Treasury yields are quoted constantly in rate coverage. The ten-year yield in particular is what mortgage rates track.
Full definition: Yield →