the President is enjoined by the Constitution "to take care that the laws be faithfully executed." But spending of appropriated funds is unexplored legal territory. Superficially, some might think that the President has little discretion. The facts, however, are to the contrary.

The President, operating through a little-known but very powerful part of his staff, the Office of Management and Budget, screens budgetary proposals of government agencies in the first instance and controls allocation of moneys that are appropriated.

Headed now by Caspar Weinberger, the next secretary of Health, Education and Welfare, OMB is the nerve center of the federal bureaucracy, the place where the action is on scores of governmental programs.

Impoundment, in effect, permits the President to exercise, as Sen. Charles Mathias, R-Md. said in 1971, "an informal line-item veto" over projects and programs that Congress wants. Nothing in the Constitution or any statute permits such a veto, but it has been exercised by many chief executives.

Thomas Jefferson seems to have been the first to impound money-$50,000 appropriated for gunboats on the Mississippi. In addition, a few additional impoundments took place during the 19th century, although the historical record is far from complete.

Jefferson's action has led Weinberger, among others, to assert that all presidents since Jefferson have impounded-a statement not borne out by the known historical record.

The fact seems to be that the practice first began in any substantial sense during the early days of World War II, when President Roosevelt withheld some national defense funds because the particular projects were considered unnecessary for the war effort.

The battle lines were clearly drawn during the Kennedy administration. When, in 1963, the U.S. Civil Rights Commission recommended that federal funds be cut off to Mississippi because of widespread defiance of desegregation decrees. President Kennedy in a news conference flatly said that he had no authority to do so. He was not challenged, perhaps because impoundment of other funds had gotten little public attention.

At about the same time, the Pentagon convinced Congress that it needed a new bomber (the B-70), a weapon opposed by Secretary of Defense Robert S. McNamara. Rep. Carl Vinson, D-Ga., the powerful head of the House Armed Services Committee, was determined to have the plane built. Kennedy talked Vinson out of putting mandatory language in the defense appropriation bill, however, so the issue remained unresolved.

Since then impoundments have continued. under both Presidents Johnson and Nixon, reaching the high-water mark of $12 billion under Nixon. The congressional response, although slow in arising, has become increasingly bitter. In March 1971, Sen. Sam Ervin. D-N.C.. a zealous guardian of congressional prerogatives, held hearings on impoundment.

The hearing did clear some of the air. For the first time Congress learned of both the magnitude and specifics of impoundment (it took Ervin two years to pry that data from OMB).

For the first time, also, the extremely shaky legal basis for impoundment was revealed. Weinberger, trying to make the best of a bad case, maintained that the President could refuse to spend money in order to control inflation and to help the U.S. balance of payments. But he was unable to cite specific constitutional or statutory bases for Nixon's actions.

A major counterattack against presidential impoundments has now been launched. Lawsuits have been filed in Missouri, New York, Florida and Virginia; a number of others are contemplated.

The Missouri case is particularly significant. There, a federal district judge invalidated impoundment of highway trust funds in a suit brought by the state. The case is now on appeal before the Eighth Circuit Court of Appeals, which heard argument in early January. No doubt it will get to the Supreme Court. The state of Florida has challenged President Nixon's termination of money for a barge canal. This case posed the constitutional issue squarely-the Missouri case having been decided purely as a matter of statutory interpretation. This year will be a bruising one; 1973 and the other years of Nixon's second term may well settle whether this country will in fact be ruled by "presidential government" or whether the time-honored constitutional separation of powers will be followed.

A shrewd gambler would, at the moment, be forced to put his money on the President. In broadest terms, should the President prevail, the Constitution will have been changed without benefit of constitutional amendment.

[From the Morgan Guaranty Survey, the Morgan Guaranty Trust Co., New York, N.Y., January 1973]

GETTING A GRIP ON THE FEDERAL PURSE

Congress recently concluded an investigation on an unusual subject-itself. In a bipartisan critique, witnesses, some of them former lawmakers, offered some quite unflattering views. Congress, going into 1973, was pictured as a near constitutional relic, outmanned and outgunned by the Executive branch, and mired in a swamp of outworn tradition, archaic procedures, and narrow political selfinterest.

Whether such a bleak assessment is warranted is for Congressional experts to say. Yet even the nonexpert citizen, with only a rudimentary knowledge of what's happening on Capitol Hill, can detect shortcomings in the legislative process. And nowhere are such shortcomings more evident than in the handling of the budgetary process.

As the nation's master financial plan, the budget outlines the government's objectives, the way resources will be parceled out to meet those objectives, and who will shoulder the costs. Beyond that, the level of spending-and the way it is financed-plays an important role in the nation's output, employment levels, and the pace of inflation.

Under the Constitution, primary responsibility for controlling the budgetary process is lodged in Congress. It authorizes the spending and it raises the revenues. And yet, in a day of quarter-trillion-dollar federal budgets interacting with a mammoth and complex private economy, the budget system now in use is more than a century old.1

Modernization is long overdue-particularly in the role played by Congress in formulating the budget. What could turn out to be the basis for such a modernization is a law voted by the 92nd Congress in the closing days of last year's session. It created a new Joint Committee on Budgetary Control (JCBC). The committee has 32 members-seven from the House Ways and Means Committee; seven from Senate Finance; seven each from the House and Senate Appropriations Committees; and two at large from both the House and the Senate. Co-chairmen are Representatives Al Ullman of Oregon, and Jamie Whitten of Mississippi.

The aim of the JCBC is to devise procedures for establishing and maintaining an over-all view of each year's budgetary outlays which is coordinated with anticipated revenue for the year. Congress provided a $100,000 budget for a staff of experts to assist the lawmakers. The committee's recommendations for reform are required by law to be submitted by February 15.

The JCBC is concentrating on remedying the most glaring defect in the present budget procedures-the fact that Congress does not consider the national budget (both intake and outgo) as a unified whole. The overwhelming tendency of the system is, instead, to break the budget up into unrelated fragments.

In neither House nor Senate deliberations is there any effective link between revenues and expenditures. In the House, tax bills go to the Ways and Means Committee; in the Senate, to the Finance Committee. In both cases they are considered apart from questions of spending. Moreover, the appropriation proposals put forward in the President's budget, instead of being considered by Congress in a single bill, are divided up into a dozen or more different measures. These are considered separately by the twelve appropriations subcommittees-agriculture, defense, public works, and so on-in each of the two branches of Congress.

The various subcommittees finish their work at different times, so that the appropriations total comes before the parent committees and the full Congress

1 The last basic reform of the budget process occurred in 1921. The Budget and Accounting Act of that year, which President Harding signed, had its origins in a study commissioned by President Taft in 1909. Later the House of Representatives appointed a Select Committee on the Budget, and its work led finally to a 1921 law which, dealing chiefly with the Executive branch, for the first time prescribed formal annual budgetary procedures. The major innovation was a centrally prepared budget under a newly created Budget Bureau.

in individual pieces. The most critical inadequacy is that there can be no opportunity to weigh the merits of one proposed expenditure against those of others and to establish a scale of priorities.

The piecemeal approach taken by Congress gives the annual budget exercise a haphazard, even accidental, flavor. What's more, the whole process is notoriously slow-moving. Appropriations sometimes are passed six months or more after the start of the fiscal year they are supposed to cover. As a consequence, the President has to submit a new budget without knowing what Congress has provided in its actions on the prior year's budget, which was transmitted a full twelve months earlier.

Congress itself long has recognized that the uncoordinated treatment of budgetary matters is unsatisfactory. It has made several efforts in the postwar years to integrate its procedures. The most ambitious attempt occurred with passage of the Legislative Reorganization Act of 1946. Section 138 of that law provided for joint meetings, early in each session of Congress, of four committees : House Ways and Means, House Appropriations, Senate Finance, and Senate Appropriations.

The combined group was designated the Joint Committee on the Legislative Budget and was directed to examine the budget proposals made by the President. By February 15 of each year it was to submit to the full Congress in the form of a concurrent resolution (1) its own estimates of anticipated receipts and expenditures for the ensuing fiscal year and (2) its recommendations as to the maximum amount to be appropriated for expenditure. If accepted by both House and Senate, the concurrent resolution presumably was to be "binding" on Congress during the remainder of the session.

The experiment fizzled out quickly. In only two Congressional sessions-those of 1947 and 1948-were the provisions of Section 138 followed. In 1947 the Joint Committee's recommendation for an appropriations ceiling was accepted in a resolution adopted by the House but was amended in the Senate. When the conference committee that was appointed to reconcile the differences could not agree, the "legislative budget" of that session simply died. In 1948 both chambers reached agreement on an appropriations ceiling, but the concurrent resolution was couched in extremely general terms which provided no real guidance to the appropriations committees. Congress responded by simply ignoring its own self-imposed ceiling, voting total appropriations $6 billion higher than the specified ceiling and thus making the whole procedure look pointless.

In 1950, after the failure of the legislative budget approach, Congress tried a new method to achieve budget control: it combined appropriations bills in each house into one omnibus measure. This was an idea long advocated by the late Senator Harry F. Byrd, of, Virginia, who waged an unceasing struggle for better control of federal spending-some would say for better, others for worse. The omnibus bill was to provide an opportunity, prior to final action on any particular appropriations request, to re-examine each spending program in the light of all the others. However, outbreak of the Korean War at midyear brought huge supplemental appropriations, so that there was not a definitive test of the omnibus method.

A major stumbling block for the 1950 experiment was the attitude of many of the chairmen of the appropriations subcommittees who felt that the omnibus procedure gave undue influence to the chairmen of the parent committees. This narrow political self-interest was-and is-a major obstacle to sound budget reform. The Senate proposed a return to the omnibus spending bill in 1953 but the House showed no interest and that approach was abandoned.

Through the rest of the 1950s and into the 1960s the idea of reviving the joint budget committee concept had a durable if quite ineffective existence. Between 1952 and 1965, for example, the Senate no fewer than seven times approved the creation of a joint committee to consider the federal budget submitted by the President. The House, however, did not act on any of the bills.

Throughout the postwar period. Congress has used the ceiling on the federal debt as a tool to try to get the Executive branch to hold down the rise in government spending. Time and again (especially in the 1950s and early 1960s) the debt ceiling was raised and then lowered again-the latter putting pressure on the Secretary of the Treasury and the Budget Bureau to squeeze expenditures in order to limit borrowing. This turned out to be a silly and futile exercise in fiscal obstructionism. In the end, as Congress appropriated more than it raised in taxes and repeatedly ran the budget into the red, it has had no option but to raise the debt limit. In the past decade the debt ceiling has risen from $300 billion to its current $465-billion limit.

LEAKY CEILINGS

Another more recent effort to bring the budget under some semblance of control has involved the setting of expenditure ceilings. The first time this was done was at President Johnson's request for the fiscal year 1969 and the exercise was repeated in 1970 and 1971.

Such ceilings, to be sure, were "flexible"-i.e., they allowed specific exceptions, mainly for "uncontrollable" items (examples would be veterans' benefits, interest on the public debt, Social Security outlays, farm price supports). The trouble is that when exemptions are provided, expenditures in those categories show big increases which often largely offset the restraint provided elsewhere in the budget. For example, consider the spending ceiling for 1969. Under that ceiling, over-all outlays were supposed to be held $6 billion below the initial budget request. However, Congress excepted outlays for specified programs from the terms of the law. Outlays excepted from the limitation increased by $6.9 billion over original budget estimates. As a result, even though programs covered by the ceiling were reduced by $8.4 billion below budget estimates, total budget spending was reduced by only $1.5 billion instead of the $6 billion originally contemplated.

Recognizing the drawbacks of a ventilated ceiling, Congress last year attempted to make spending limitations more effective. The House and Senate tentatively voted a $250-billion ceiling on spending for the budget year ending next June 30— and allowed no exemptions. But the bill did not reach final passage owing to lack of agreement between House and Senate on the type of restrictions to be placed on the President so as to preserve some semblance of Congressional authority over spending. A major Congressional concern was that a flat ceiling would amount to abdication of powers since Congress would not be stipulating where spending cuts were or were not-to be made."

THE POLITICS OF IMPOUNDING

As it has turned out. President Nixon intends to apply the $250-billion spending ceiling anyway. He simply is refusing to spend all the funds appropriated by Congress a procedure followed by a long line of Presidents dating back to Thomas Jefferson. The latest-and much publicized-example of such a holddown is the President's determination to allot less than half of the money Congress appropriated for building sewage-treatment plants in the current budget year and in the year beginning July 1. (New York City has sued the federal government over such Presidential spending cuts, charging that they are unconstitutional. Box on page 10.)

President Nixon has defended his actions on the grounds that to spend all the money that Congress has voted would exacerbate inflationary pressures and result in a need to increase taxes-both of which he very much wants to avoid. If impounding of funds makes sense in terms of economics, it will scarcely win a popularity contest for the President in the halls of Congress. Assuredly, a President who regularly employed such a power to frustrate Congressional intent would not be able to sustain workable relations with Congress.

Presidential impounding of funds, thus, is at best a temporary, stop-gap effort to avoid a budget crisis. A flat budget ceiling, on the other hand, is unsatisfactory to many lawmakers. Clearly, what is needed is a more comprehensive, permanent system for reviewing the budget and applying restraints.

Actually, that is the task now being faced by the new Joint Committee on Budgetary Control. Some members of the committee are reported to be in favor of an over-all spending ceiling-but one in which Congress stipulated which programs were to be cut, or enlarged, to accommodate the ceiling. Furthermore, any bills creating new government programs or revising old ones would have to be passed by a two-thirds vote of both houses if they would result in spending that would violate the ceiling.

Some budget analysts feel that a flat spending ceiling, in effect, gives the President an item veto over the budget. Unquestionably, the President's power over spending are greatly increased. But such action does not result in cancellation of appropriations as would happen in the case of an item veto. Funds trimmed back to comply with an over-all ceiling generally remain available for spending in subsequent years.

3 President Jefferson, in 1803, refused to spend $50.000 allocated by Congress for gunboats. History repeated itself 146 years later. President Harry Truman, in 1949, refused to use funds for an Air Force build-up which Congress desired but which he believed to be unnecessary.

Such a major reform would in effect put salient features of old Section 138 into operation. But, realistically, it is well to remember that the idea of a permanent joint committee to recommend spending ceilings or other budgetary controls has languished unused for twenty years.

A major reason why Congress has ignored such a reform, according to political science specialists, is that the giving of real power to a joint committee appears to be repugnant to Congress. (The only exception seems to be the Joint Committee on Atomic Energy, which does have considerable power.)

It may be that the reform group will suggest an approach along more traditional lines: each house could review the President's budget, decide on its own spending ceiling, make its own estimates of expected revenues, and then iron out the differences in conference.

JCBC co-chairman Ullman sees such an approach as one way to bring about needed reform. For instance, a new law could require that each house would vote a spending ceiling with three parts. The first would be an over-all limit; the second would set individual subceilings for outlays that are not subject to the annual appropriations process (e.g., interest on the debt, revenue-sharing); and the third would be a subceiling covering all the programs that do require annual appropriations.

Under such a law, the appropriations committees would do their usual job of recommending appropriations for each agency and department and Congress would pass these. But no appropriation could be enacted that would breach the pre-established spending ceiling.

As Congress came toward the end of the annual appropriations process and found it did not have enough room left under the ceiling to pass the latest appropriations bills, the law would provide that each house a separate “wrap-up” bill. making some cuts in what it had done earlier to leave room to enact the final money bills. Significantly, it is in such a "wrap-up" bill that Congress could take a comprehensive look at its actions on money measures-something that Congress does not now do.

Beneficial as such an overview of the budget undoubtedly would be, one further radical change is needed: a lengthened time span-beyond a single year—when Congress evaluates spending and revenue. An analysis of the budget for one year is of limited benefit in assessing economic and social impacts of government programs. For example, a new program can start out with but a tiny appropriation only to blossom out in a very few years into a multi-billion-dollar extravaganza. Similarly, the short-run impact of tax law changes can be quite different from the effects such changes will produce in subsequent years. The Executive branch has recognized the need for a long-range outlook: its annual budget message includes not only a one-year projection of revenue and expenditure but also the tax and spending outlook five years ahead based on current and proposed tax legislation and continuation of all current and proposed expenditure programs.

A sensible reform proposal that would lengthen the time dimension in Congressional budget review is contained in a bill submitted by Senator William Brock of Tennessee. His bill would:

Require that Congress project expenditures over five fiscal years in passing appropriations measures.

Place a three-year limit on authorizations of appropriations for all federal programs, requiring that each program be reviewed by Congress at least every three years.

Require experimental testing of new projects before Congress authorizes a full program.

REFORM AT LAST?

What are the chances that Congress will make such radical changes in its budget procedures? Optimistic predictions would appear to be hazardous in view of Congress' past record. And yet the climate for change this year seems quite improved. There is strong and growing sentiment in Congress to regain what the lawmakers feel is a loss of power and responsibility to the Executive branch in diverse fields from foreign policy to the domestic economy.

In the budget area. Congress needs to start the search for a culprit in its own backyard. The encroachment by the Executive branch that seems to outrage so many lawmakers can be traced directly to Congress' negligence and lack of leadership in revising its own archaic procedures for controlling the federal purse strings.