Impoundment

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What makes impoundment necessary, in a President’s view, is the extraordinary growth of the federal budget in the last forty years. Until 1900 the cost of government and the services it provided was relatively minuscule, both in dollar amounts and as a percentage of the gross national product. In fact, the total of all federal expenditures from 1789 through 1899, including war costs and the servicing of the Revolutionary debt, amounted to $16.4 billion. By contrast, Medicaid and Medicare, which together comprise about 6 per cent of the 1974 budget, will cost $17.3 billion. Defense costs in fiscal year 1974—excluding veterans’ benefits and foreign military assistance programs—amount to 30.2 per cent of the budget, or $81 billion. This is roughly equivalent to all federal expenditures from 1789 through 1925. Indeed, in any given year since 1968 the federal budget for that year has exceeded all federal expenditures between 1789 and 1942.

Where in the past federal spending was largely confined to operational costs, military defense, war debts, and veterans’ benefits, since 1933 increasingly larger amounts have been expended on a variety of national programs undreamed of by nineteenth-century Americans. Beginning with the New Deal the nation came to accept—if not demand—a broader governmental role in dealing with the nation’s social problems. The list of funded services seems endless, embracing everything from medical and educational projects through sewer and water systems to farm supports and industrial loans, and in recent years Congress and the President have struggled to define priorities among the competing interests, painfully aware that at some point spending has to stop.

Despite its size, however, the budget offers very little room for fiscal maneuvering. It is not newly created each year, and most of the budget items, as well as the majority of increases, carry over from year to year as the result of earlier legislation and prior commitments. Salary increments for government employees, social security benefits, scheduled payments on government bonds, and funding of the national debt are, generally speaking, fixed costs that for a variety of legal, political, and economic reasons cannot easily be reduced or eliminated.

Faced from time to time by a budget crunch, the contemporary President is caught between his statutory obligation to manage the budget prudently and to meet the priorities Congress has set. Increasingly he has resorted to impoundment as the means to extricate himself from budgetary problems.

1900–73: The Record.

Although the story of modern impoundment begins with Franklin Delano Roosevelt’s third term, which began in 1941, the record of the past thirty years is, admittedly, somewhat vague because, until this past year, the President was under no statutory requirement to report to Congress that he had placed moneys “in reserve.”∗ Legislation passed late in 1972 requires the Office of Management and Budget “promptly” to publish reports of each Presidential impoundment, along with the President’s reasons, in The Federal Register , the daily compilation of executive documents printed in Washington. Unless he publicized his actions or Congress discovered that money was not being spent, the reserved funds simply disappeared into a reserve category somewhere in die tangled thickets of the federal budget, a document so forbiddingly complex that even experts have been hard pressed to understand it fully. No one knows for certain how much money has been impounded, and what follows is merely suggestive.

It should be noted diat in addition to the deliberate—and sometimes controversial—Presidential impoundments described here, there is another kind of statutory impoundment that is regularly employed. Since 1921 the Bureau of the Budget (now the Office of Management and Budget) has been empowered to place in reserve any moneys saved in any budget area during die fiscal year. If, for example, a completed project costs less than the money allocated for it, die excess funds are automatically impounded. Or if, through greater efficiency or whatever reason, an agency does not spend its full quarterly allotment, die unspent money is reserved. Moreover, in line with sound business practice, some expenditures may be deferred in a given fiscal year until all statutory requirements (i.e., contract specifications) are met.

The President, however, is not free to spend die money thus reserved. Unlike die housewife who may use money saved from household accounts for a new dress, or die businessman who skips lunch to save for a fly rod, die President may not transfer funds from one budget account to another without die permission of Congress. As a rule, all unspent appropriations or surplus funds are placed in a contingency account for current emergencies. If unspent at die end of die fiscal year, diey pass into die yearly surplus, which may be used as Congress directs to fund die national debt or as revenue for the next year’s budget. Every administration since Harding’s has regularly impounded money in this manner. The Office of Management and Budget estimates that in die past ten years an average of 6 per cent of die budget has been placed in reserve, some of which was later released.

1941–45.

President Roosevelt’s impoundments were relatively extensive and, like many of his New Deal policies, controversial. They occurred during World War II, when the national budget rose sharply from nine billion dollars in 1940 to thirteen billion in 1941 to a high of 98.4 billion in 1945.