The Federal Debt


In 1939 Roosevelt, to tighten his grip on the budget even further, moved the bureau into the White House itself, where it would be under his immediate thumb. (In 1970 it became the Office of Management and Budget.) In 1946 Congress, wanting to increase its own power over the overall budget, passed the Legislative Reorganization Act. This required Congress to decide on a maximum amount to be appropriated each year before the actual appropriations bills were taken up. It was a dismal failure. In 1947 the Senate and House failed to agree on a spending limit. In 1948 Congress simply disregarded the limit and appropriated $6 billion more than the spending resolution had called for. In 1949 it failed to produce a resolution at all.

And Congress has often acted in ways that actually reduced its power to affect the budget as a whole, by increasing the amount of so-called backdoor spending. The members of the legislative committees still resented the power of the Appropriations Committee and its subcommittees, and in the late 1940s they began to redress the balance by writing spending into permanent law. Thus any changes in spending levels in the programs affected would have to pass through the committees that originated the laws in the first place.

Nixon impounded more and more money. An angry Congress reacted with the wildly misnamed Budget Control Act of 1974.

They did this by authorizing government agencies more and more to borrow on their own, to enter contracts, and to guarantee loans that then become obligations of the United States. Some quasi-governmental agencies such as the Postal Service were taken “off budget” and thus effectively removed from direct political control. But the most worrisome of this backdoor spending has been the “entitlements”—moneys paid without limit to all who qualify, in such programs as Social Security, food stamps, and Medicare. Today backdoor spending constitutes fully three-quarters of the entire budget but receives no direct congressional control whatever.

Congress’s failure to set total spending limits in the 1940s left the President still largely in charge of the budget for the next two decades, thanks to his ability to forecast revenues and shape the overall budget and, increasingly toward the end of the period, his power of “impoundment.” The Constitution is completely silent on whether the President is required to spend all the money that Congress appropriates. Certainly George Washington didn’t think so; he was the first to impound a congressional appropriation by simply refusing to spend it. Most Presidents, up to Richard Nixon, did likewise.

In 1950 Congress even indirectly acknowledged a limited impoundment power, by authorizing the President to take advantage of savings that were made possible by developments that occurred after an appropriation was made. But as the pressure on Congress to spend increased, and the old pay-as-you-go consensus began to fail, Presidents were forced to use the impoundment power more often and more aggressively in order to keep total spending in check.

In 1966 Lyndon Johnson used impoundment to cut a huge $5.3 billion chunk out of a $134 billion budget. His aim was to damp down the inflation that was largely caused by his guns-and-butter policy of fighting the Vietnam War at the same time he was increasing social spending at home. The impounded money included $1.1 billion in highway funds and $760 million in such popular areas as agriculture, housing, and education. The Democratic-controlled Congress, needless to say, was not happy about this. But since Johnson was both a Democratic President and perhaps the greatest political arm twister in the country’s history, he was able to enforce his way. In the following two years he impounded even larger sums.

His successor, Richard Nixon, did not fare so well. Nixon was, as he said, a Keynesian. But as a Keynesian he knew that in times of high inflation and low unemployment, such as he faced when he entered office, it was time to tighten, not increase, federal spending. Mostly by coincidence, in 1969, Nixon’s first year, the budget that was largely the work of the outgoing Johnson administration produced the last surplus the country has known.

Thereafter, congressional appropriations, despite the good times, continued to rise, and Nixon impounded more and more money. During the election of 1972 he called for a $250 billion spending ceiling for the next fiscal year, but the Senate rejected the request in October. Winning forty-nine states the following month, the reelected President decided to keep federal spending under that limit anyway, using the explicit power of the veto and the implicit one of impoundment.

Congress reacted angrily. Rep. Joe Evins, who was chairman of the Appropriations Subcommittee on Public Works—the very ladle of the political pork barrel—claimed that Nixon had impounded no less than $12 billion in appropriated funds. The Nixon administration responded that it was impounding only $8.7 billion, the smallest amount since 1966.