Congressional Budget and Impoundment Control Act (1974)

Louis Fisher

Excerpt from the Congressional Budget and Impoundment Control Act

1. to assure effective congressional control over the budgetary process;
2. to provide for the congressional determination each year of the appropriate level of Federal revenues and expenditures;
3. to provide a system of impoundment control;
4. to establish national budget priorities; and
5. to provide for the furnishing of information by the executive branch in a manner that will assist the Congress in discharging its duties.

In response to decades of budget conflicts between presidents and the legislative branch, in 1974 Congress passed the Congressional Budget and Impoundment Control Act (P.L. 93-344, 88 Stat. 297). The act was intended to reorganize budgetary procedures and place limits on presidents who refused to spend funds for the purposes set forth in appropriations bills. Through reforms contained in the Budget Act, Congress hoped to correct problems such as late appropriations, dependence on continuing resolutions (short-term spending measures), budget deficits, and inadequate control over entitlement programs (including Social Security and Medicaid).

However, those problems not only persisted, they grew worse. When budget deficits exploded after 1981, Congress and the executive branch agreed that the 1974 process could not handle the crisis. The two branches turned instead to new statutes, including the Gramm-Rudman-Hollings Act of 1985 (often referred to as Gramm-Rudman), the Budget Enforcement Act of 1990, and the Line Item Veto Act of 1996.

GOALS OF THE ACT

The Budget Act of 1974 assumed that lawmakers would behave more responsibly if they faced up to budget totals and voted explicitly on budget aggregates (in other words, budgets viewed as whole units). Previously, Congress voted on separate bills concerning appropriations, revenues, and authorizations. The heart of the statute consisted of new budget committees in each house of Congress that would be responsible for reporting budget resolutions. These resolutions contained five aggregates: total outlays, total budget authority, total revenues, the deficit or surplus, and the public debt. Outlays and budget authority were organized into major functional categories, such as national defense, agriculture, and transportation, to permit debate on budget priorities. Under the act, the first resolution (eventually discarded) would be passed by May 15 of each year, providing a target for the second resolution, to be acted on by September 15 of each year. The budget resolution provided a ceiling on spending and a floor on revenues. If a mismatch existed between the totals in the fall resolution and passage of individual bills, Congress could enact a "reconciliation bill" to direct committees to report additional savings.

The 1974 statute also established the Congressional Budget Office (CBO) to give lawmakers technical support. CBO estimates the cost of pending legislation, performs scorekeeping functions, and makes projections (forecasts) about the economy. The statute changed the fiscal year (accounting period) to begin October 1 rather than July 1. This change was meant to give Congress additional time to pass all the appropriations bills before the fiscal year began, in the hopes of avoiding reliance on continuing resolutions. However, in practice, appropriations bills are enacted later than ever, if at all. Before the Budget Act, it was rare for a fiscal year to end without Congress passing the regular appropriations bills. After 1974, it became a common practice. Moreover, deficits were larger—far larger—than they were before passage of the Budget Act. Time after time, budgets submitted by presidents and budget resolutions passed by Congress have been unreliable and deceptive, because they underestimated spending and overestimated revenues. Budget deadlines established by the statute are routinely ignored.

The purpose of the Budget Act was to restore legislative control over the purse. Under some circumstances, however, the new system vastly increases presidential power. That potential emerged in 1981 when President Ronald Reagan managed to seize control of the budget resolution, enabling him to cut back domestic programs, increase military spending, and cut taxes. The previous system was decentralized, making it difficult for any president to dictate budget results to such a degree. Under that system, action at the committee and subcommittee level served to modify presidential proposals. After 1974, however, the centralized system of budget resolutions offered presidents a new means of dominating the process.

THE PRESIDENTIAL POWER OF IMPOUNDMENT

From George Washington forward, presidents at times declined to spend all of the funds that Congress had appropriated. Political compromises and understandings between the legislative and executive branches kept those conflicts from developing into serious problems. This informal system broke down in the 1970s when President Richard Nixon began to withhold, or impound, funds in a manner—quantitatively and qualitatively—that threatened congressional power. He severely curtailed and in some instances terminated federal programs. In a series of cases, federal courts ruled against the administration's policy of impoundment.

Congress responded by passing legislation, Title X of the 1974 statute, to place new limits on the presidential power of impoundment. If the withholding was temporary (a deferral, ) either house of Congress could disapprove it at any time, and the funds would have to be released. If the withholding was to be permanent (a rescission, ) the president would have to obtain the support of both houses of Congress within forty-five days of continuous session. Otherwise, the funds would have to be released.

COURT CHALLENGES

The rule concerning deferrals was shaken in 1983 when the Supreme Court struck down the legislative veto in INS v. Chadha. The veto by one house of Congress was now no longer available to disapprove deferrals. Initially, the Reagan administration agreed not to abuse its veto-free deferral power. But after 1985 the administration began using deferrals aggressively to meet deficit targets imposed by Gramm-Rudman. Members of Congress and private parties went to court to challenge the president's deferral authority.

In 1986 a federal district judge decided that the president's deferral authority under the 1974 law was no longer available. The judge concluded that the history of the statute demonstrated that Congress would have preferred no statute to one stripped of the one-house veto. That decision was upheld by an appellate court in New Haven v. United States (1987). Those decisions limited presidential deferrals to routine managerial actions, a policy that Congress in 1987 enacted into law. As federal deficits climbed in the 1980s, lawmakers were under pressure to delegate greater authority to the president to curb spending. The result was the Line Item Veto Act of 1996.

EFFECTIVENESS

Budget resolutions were initially praised as an effective method of permitting centralized, systematic, and coherent legislative action. In 1974, as now, it was difficult to defend fragmentation, splintering, and decentralization when reformers pressed eagerly for "coordination" and a "unified budget process." However, a legislative approach that examines pieces of the whole as well as the whole is a healthy check on presidential initiatives. Ironically, the centralized framework of the 1974 statute helps advance presidential goals.

See also: Balanced Budget and Emergency Deficit Control Act; Public Debt Acts.

BIBLIOGRAPHY

Cogan, John F., Timothy J. Muris, and Allen Schick. The Budget Puzzle: Understanding Federal Spending. Stanford, CA: Stanford University Press, 1974.

Fisher, Louis. The Politics of Shared Power. College Station: Texas A & M University Press, 1998.

Gilmour, John B. Reconcilable Differences? Congress, the Budget Process, and the Deficit. Berkeley: University of California Press, 1990.

Pfiffner, James P. The President, the Budget, and Congress: Impoundment and the 1974 Budget Act. Boulder, CO: Westview Press, 1979.

Schick, Allen. Congress and Money: Budgeting, Spending, and Taxing. Washington, DC: Urban Institute Press, 1981.

Stockman, David A. The Triumph of Politics: How the Reagan Revolution Failed. New York: Harper and Row, 1986.

Line Item Veto Act of 1996

The Line Item Veto Act of 1996 allowed the president of the United States to strike individual items from spending bills approved by Congress. Previously, the president had been required either to accept an entire bill or to veto it in its entirety. The purpose of the act was to allow the president to eliminate unnecessary spending in order to help balance the budget. Proponents argued that the Line Item Veto allowed the president to target wasteful spending that Congress had approved for political reasons; critics argued, on the other hand, that it was antidemocratic and liable to be abused to subvert the will of Congress. In 1998 the Line Item Veto was declared unconstitutional by the Supreme Court on the grounds that the president was not allowed to rewrite bills approved by Congress.