The Budget and Accounting Act was signed by President Warren G. Harding in 1921. The legislation created institutions and precedents that still govern the basic practices of federal spending in 2011. The act was part of a general policy of the Harding Administration to normalize federal spending practices after the rapid increases during the previous decade.
Under the Budget and Accounting Act, the President was required for the first time to create and submit to the U.S. Congress an annual budget that included spending from all parts of the federal government. This brought a transparency to the process of federal spending that had been absent. The annual budget the President submits to Congress every year is a major part of the national political process and debate.
Bureau of the Budget
The Bureau of the Budget, now called the Office of Management and Budget (OMB), was created to assist the President and President's staff in creating an annual budget. Requests for funding from any government agency are directed to the OMB and evaluated along with all other requests and passed along to the President. This streamlined process makes forming a budget more practicable and allows for a more coherent picture of the budget.
General Accounting Office
The General Accounting Office (GAO), which was created by the 1921 legislation, is a non-partisan and non-political part of the federal government intended to provide objective analysis of federal spending. The reports issued by the GAO form a major part of the debate on almost every issue. The GAO is headed by the Comptroller General, who is appointed by the President for a 15-year term.
Warren G. Harding was elected shortly after World War I on a promise of a "return to normalcy." In general, the policies he pursued as President were meant to restore a sense of calm to a nation that had been through major shocks. The Budget and Accounting Act was a major reform meant to curtail the excesses that could result from the significant societal changes.