Today in 1974: The Congressional Budget and Impoundment Control Act is enacted

July 12, 2013

Today in Legal HistorySince Republicans took control of the U.S. House of Representatives in the 2010 elections, the federal budget has been a major source of conflict between the House and President Obama.

However, budget disputes between the two branches of government are, sadly, nothing new.

Despite the gravity of the consequences of the more recent budget battles (default, sequestration, etc), they won’t leave as much of a lasting effect as the budget battles in the early 1970s.

Those fights between President Nixon and the Democratically-controlled Congress are ideologically inversed from the fights we see today: Congress passed a budget, a significant portion of which Nixon opposed because of fears of the budget deficit.

Nixon proceeded to invoke a presidential power called “impoundment,” a budgeting procedure that had been used by every president since John Adams. 

Impoundment allowed the president to prevent any agency in the Executive Branch from spending any or all of the money appropriated for its use by Congress.  This was done by an executive order that would bar the Treasury from transferring the funds to the particular agency’s account (this could be accomplished because of a loophole in the Constitution: although the Constitution requires that all money spent by the Treasury must be done by a specific congressional appropriation, it does not require that all the money held by the Treasury has to be spent.

Although, as mentioned earlier, all previous U.S. presidents used impoundment, Nixon invoked this power to a much greater extent – impounding nearly $12 billion of congressional appropriations in one year.

This greatly irked Congress, which was already upset with the Nixon White House because of the Watergate scandal.

Congress decided to take action, and the Congressional Budget and Impoundment Control Act of 1974 was born.  The Act became law 39 years ago today, when Congress overrode President Nixon’s veto on July 12, 1974.

As its name implies, the Act “controlled” the practice of impoundment – in that it did away with the presidential power entirely.

Although the Act didn’t explicitly prohibit the president from issuing the impoundment executive orders (and Congress could not pass such a law under the Constitution), the reforms the Act did implement put an end to impoundments as they had existed almost since the nation’s founding.

The president could still impound funding, but the impoundment now required the president to send to Congress a request with how much was being impounded, from which programs, the reasons for the impoundment, how long the impoundment will last, and its estimated impact; additionally, all impoundments now fell into one of two categories.

An impoundment is known as a “rescission” if it is permanent.  A rescission requires the president to obtain approval from both houses of Congress within 45 days of the impoundment request.  Unless Congress specifically approves the rescission, the funds must be released.

A temporary impoundment, by contrast, is called a “deferral.”  Under the 1974 Act, deferrals could be disapproved by either house of Congress at any time, and the Treasury would have to release the funds.

In 1986, however, the constitutionality of these deferral procedure was successfully challenged in New Haven v. U.S., which relied on the Supreme Court’s 1983 I.N.S. v. Chadha ruling that held one-house vetoes of proposed presidential actions are unconstitutional.

Congress responded to New Haven by stripping away most of the president’s deferral power in 1987’s Balanced Budget and Emergency Deficit Control Reaffirmation Act (more commonly known as Gramm-Rudman-Hollings Balanced Budget Act).

Where the president could impound funding for virtually any reason he saw fit under the 1974 Act, the 1987 Act only allowed impoundments for three narrow reasons – none of which were policy-based.

The Act also had other significant impacts beyond curtailing presidential impoundment powers; it created the Budget Committees in the House and Senate.  These committees are responsible for doing continuing studies of the national budget and for putting forth budget reform proposals.

In addition, the Act also established the Congressional Budget Office (CBO).

Staffed by policy experts and economists, the CBO provides independent, nonpartisan cost estimates of pending legislation and makes economic forecasts.  The CBO has gained a reputation for being trustworthy and truly nonpartisan, and its estimates and recommendations are usually well-regarded by Congress, other areas of the government, and the public at large.

All in all, it seems that the Congressional Budget and Impoundment Control Act has been a positive addition to our nation’s laws, providing better checks and balances in our government’s budgetary procedures.

We can only hope that future conflicts between Congress and the presidency over the budget produce a similarly positive result.