The U.S. Congress and Its Powerful Impact on the Economy

What It Does and How It Affects You

Speaker of the Housr Nancy Pelosi (D-CA), Senate Minority Leader Chuck Schumer (D-NY) and Senate Majority Leader Mitch McConnell (R-KY) attend a reception in the White House January 23, 2017 in Washington, DC.

Ron Sachs-Pool / Getty Images

The U.S. Congress is the legislative branch of the federal government. It has two bodies: the Senate and the House of Representatives. 

The Senate comprises two elected officials from each state. The House of Representatives' membership is based on each state's population. These two houses provide a check and balance for each other. The Senate makes sure that each state has equal representation, while the House of Representatives allows states with more people to have a bigger voice.

The History of Congress

The First Congress met from 1789 to 1791, and all Congresses have been numbered in order since then. The session usually starts on or around Jan. 3.

Voters elect all 435 Representatives and a third of the Senators every other November. The newly elected Congressmen don't take office until January. The time between these two dates is known as the "lame duck session" because members who weren't re-elected have less political power during this time. Often nothing gets accomplished because they're leaving in a few weeks.

The Congressional Support Services

Congress has several support services. The Government Printing Office prepares all public documents. The Library of Congress catalogs them. The Architect of the Capitol maintains the building that houses Congress. Some offices take on even meatier concerns.

The Congressional Budget Office

The Congressional Budget Office (CBO) analyzes the president's annual budget, and it also reviews large programs, including Social Security, the Department of Defense, and even the Navy's Shipbuilding Plan.

The CBO played a critical role in resolving the 2008 financial crisis by analyzing the Troubled Asset Relief Program and the American Recovery and Reinvestment Act. These programs might never have gotten off the ground without the CBO's respected analysis. The CBO employs about 260 people, primarily economists and public policy analysts.

The General Accountability Office

The General Accountability Office (GAO) advises Congress on wasteful government spending. This includes duplication and areas that could be made more efficient. For example, the country might no longer need the Strategic Petroleum Reserve, thanks to shale oil production.

The GAO also identifies outright high-risk agencies and programs. For example, the Department of Veterans Affairs expanded rapidly, and that could create inefficiencies and duplication. 

The Joint Economic Committee

The Joint Economic Committee is a permanent committee with 10 Senators and 10 Representatives. It advises Congress on the economy. It holds hearings to educate members on economic issues. 


Congress uses its power to enact laws to create the federal budget.

The Powers of Congress

The U.S. Constitution grants Congress the unique power to create laws. Each house can write, debate, and pass bills, but these bills don't become laws until both houses agree on the final wording and they're signed by the president.

A bill can become law in two ways if the president doesn't sign it, however. It would return to Congress if the president vetoes it. Congress can override the veto if both houses pass the bill with a two-thirds majority.


It's referred to as a "pocket veto" if the president takes no action. Congress can override a pocket veto by staying in session for 10 days.

There are two types of bills. Public bills deal with general questions. They become Public Laws or Acts if approved by Congress and signed by the president. An example is the Affordable Care Act

Private bills deal with individual matters. They include claims against the federal government, immigration and naturalization cases, and land titles. These bills become private laws if approved and signed.

Congress supervises both the executive and judicial branches of the government. The House can impeach a president. The Senate approves presidential appointments, treaties, and votes on House-sponsored impeachments. It establishes the federal courts and their jurisdictions.

The Budget Process

The president kicks off each year's budget by submitting a proposal to Congress that reflects the president's priorities, estimates, and departmental requests. Congress then determines the discretionary spending for each department through appropriation bills. It can use the president's budget as a guide.

Like any other bill, the House and the Senate create separate budgets, then reconcile them before submitting to the president for signature. 

The Debt Ceiling

Congress also sets the debt ceiling. This limits how much outstanding debt the United States can owe. President Trump signed a bill that suspended the debt ceiling until July 31, 2021, on Aug. 2, 2019. Under the Biden administration, the debt ceiling once again looms, with Congress passing a stop-gap measure extending the debt ceiling through early December 2021.

Fiscal Policy

Congress' power to create laws and set the budget means it has the power to set fiscal policy. It's referred to as expansionary fiscal policy when spending increases or taxes are cut. This increases economic growth.

Contractionary fiscal policy is the opposite. For example, Congress passed the Bush tax cuts in 2001. They were due to expire in December 2012. Members disagreed on whether they should expire, and that led to the fiscal cliff in 2012. 


The government shuts down if Congress doesn't approve a budget. That occurred in 2018, 2013, and 1995. 

Foreign Policy

Congress frames foreign policy and trade. It gives the president trade promotion authority to negotiate trade agreements. It then votes "yes" or "no" on these agreements. They include:

Congress also votes on regional and bilateral agreements


Only Congress has the power to declare war, but it hasn't done so since World War II.

The president can engage in military action under three other circumstances:

  • As part of a United Nations action
  • Under a joint congressional resolution authorizing military force
  • Using the War Powers Resolution of 1973

Congress hesitates to declare a state of war because it confers special powers on the president. These include the right to take over businesses and to conduct spying without a warrant.

How Congress Affects the Economy

Congress coins the U.S. dollar and other currency. The U.S. Treasury then prints it. But the power of Congress to affect the money supply is minimal. Credit has a greater role in the economy than dollars. The Federal Reserve controls the amount of credit, and so the money supply as well.


Congress regulates interstate commerce, and it establishes immigration rules. It also holds hearings on critical national issues.

The United States must default on its debt payments if Congress doesn't raise the debt ceiling. Congress delayed raising it in 2011, setting off a crisis. Standard & Poor's lowered its outlook on U.S. debt, sending the Dow down sharply. The U.S. debt crisis is an ongoing series of events caused by the opposing strategies that Democrats and Republicans in Congress have for reducing the U.S. debt.

Individual Congressmen can also affect the economy. For example, former U.S. Representative Barney Frank was chair of the House Financial Services Committee. He investigated the banking practices that led to the 2008 financial crisis. He co-sponsored the Dodd-Frank Wall Street Reform Act.

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  1. U.S. House of Representatives. "1st Congress (1789–1791)."

  2. Congressional Research Service. "The First Day of a New Congress: A Guide to Proceedings on the Senate Floor," Page 1.

  3. Congressional Budget Office. "Organization and Staffing."

  4. U.S. Government Accountability Office. "About GAO: Overview."

  5. U.S. Congress Joint Economic Committee. "About Joint Economic Committee."

  6. U.S. Senate. "Pocket Veto."

  7. U.S. Senate. "Public Law."

  8. U.S. Senate. "Private Law."

  9. U.S. Congress. "H.R.3877 - Bipartisan Budget Act of 2019."

  10. New York Times. "Senate Approves Bill to Raise Debt Ceiling and Avert Default, for Now."

  11. Congressional Research Service. "The “Fiscal Cliff”: Macroeconomic Consequences of Tax Increases and Spending Cuts," Pages 1-2.

  12. Congressional Research Service. "Past Government Shutdowns: Key Resources," Summary.

  13. U.S. House of Representatives. "Power to Declare War."

  14. Library of Congress. "War Powers."

  15. U.S. National Archives and Records Administration. "A Common Currency."

  16. Federal Reserve Bank of Kansas City. "The Federal Reserve System."

  17. Standard & Poor's. "United States of America Long-Term Rating Lowered to 'AA+' on Political Risks and Rising Debt Burden; Outlook Negative," Pages 1-5.

  18. U.S. Congress. "H.R.4173 - Dodd-Frank Wall Street Reform and Consumer Protection Act."

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