The Federal Debt


The Senate convened hearings on impoundment, chaired by Sen. Sam Ervin of North Carolina, the Senate’s leading authority on the Constitution, who thought that impoundment was flatly unconstitutional, being in effect a line-item veto. Both the House and the Senate produced bills that would have severely restricted or even eliminated the President’s impoundment authority. But no impoundment bill cleared Congress that session, and Washington was soon consumed with the Watergate scandal. As Nixon’s political leverage began to erode, Congress set out to make itself supersede the Presidency in the budgetary process. The result was the wildly misnamed Budget Control Act of 1974. Nixon signed it on July 12, not because he thought it was a good idea but because he knew any veto was futile. Less than a month later he resigned, leaving the Presidency weaker than it had been in the forty years since Franklin Roosevelt had been inaugurated.

The Madison Effect

The new Budget Control Act created the Congressional Budget Office to give Congress much the same expertise as the President enjoyed from the Office of Management and Budget and, of course, duplicating most of its work. Further, it forbade impoundment, substituting two new mechanisms, recision and deferral. The first allowed the President to request that Congress remove spending items from appropriations. But unless both houses agreed, the money had to be spent. Needless to say, recision has proved useless as a means of budgetary discipline. The second mechanism, deferral, was ruled unconstitutional.

But with the Presidency already severely weakened by the folly of its most recent occupant, Congress, in writing the Budget Control Act, was much more concerned about the distribution of power within Congress itself. The original proposal of the joint committee that had been established to review budget procedures called for ceilings to be established early in the year. These, of course, would have restricted the ability of Congress to begin new programs or enlarge old ones without taking the money from somewhere else, so flexible “targets” were substituted for rigid ceilings.

The result was that there was now little to offset Congress’s natural inclination to spend, either in Congress or in the Presidency. Further, this inclination had been, if anything, only increased by a revolution in the House of Representatives that resulted in the overthrow of the seniority system.

Under the seniority system the senior member of a committee in the majority party was automatically chair of that committee. This setup had been arranged in the early days of the century as a check on the then unbridled power of the Speaker. But the many freshman representatives who entered the House in 1975, in the wake of the Watergate scandal, were typically young, liberal, and not eager to wait years before achieving real power in the House.

They forced a change in the rules so that the majority-party caucus (all members of that party meeting together) elected the committee chairs at the beginning of each new Congress. In practice this meant the Democratic caucus until this year, since the Democratic party had had a majority in the House from 1954.

In theory this made the House much more democratic. In fact it removed nearly the last check on spending. Under the seniority system the committee chairs, safe both in their seats and in their chairmanships, could look at the larger picture—the national interest—as well as their own political interests. Under the new system, however, they had to secure the support of a majority of the caucus every two years to keep their chairmanships. That, of course, meant they had to make promises—and promises, in Congress, almost invariably mean spending. Further, the spread of television as the dominant medium for political campaigns, and the political-action-committee system for funding those campaigns, made the members of Congress increasingly independent of their home base and grass-roots support and ever more dependent on the spending constituencies that ran the PACs.

The result was an explosion of deficit spending, because there was no one in Washington with the power or the inclination to stop it. In nominal terms, the national debt more than doubled in the 1970s, from $382 billon to $908 billion. In constant dollars, despite the galloping inflation of that decade, it rose more than 12 percent. And while as a percentage of GNP it had been falling every year since the end of World War II, in the 1970s it stayed nearly constant by that measure.

The only thing that kept federal deficits from getting a great deal worse than they did was the very high inflation the nation experienced in the late 1970s. The inflation caused nominal wages to rise sharply, while real wages declined. Regardless, the ever-higher nominal wages pushed people into higher and higher tax brackets. It would seem that it would have been a politician’s dream come true: a mammoth and continuing tax increase on real wages that didn’t have to be voted on.