I refuse to give any President the right to set aside not only the work of this Congress--but all of its predecessors since the beginning of our union.

"If it is the will of the American people to abolish the Congress, let them change the Constitution.

"We must remember that when the President has this power, members of Congress will be marching over to his office to try to get needed programs for their communities. Each one of these requests will be a mortgage, a mortgage on the very independence and freedom of the individual member."

Rep. James A. Burke (D Mass.) Oct. 10:

"No one is arguing against the need for a spending ceiling. Where we do disagree is on the manner in which this ceiling will be implemented. . . . For me, H.R. 16810 (the spending ceiling bill) is a veritable Trojan horse which anyone in favor of representative government will live to regret in the years ahead. Some of the greatest harm to our institutions in years past has occurred in the name of some of the most laudable goals or direct emergencies.

House Speaker Carl Albert (D Okla.) Oct. 10:

"The implications of this bill go far beyond the question of spending; they have to do with the integrity of the entire congressional system.

"If we need to cut spending, then let us do it--but let us do it in the manner prescribed by the Constitution, not in the manner prescribed by the President. . . ."

Sen. Len B. Jordan (R Idaho) during Senate debate Oct. 17:

"I would much rather forego expenditure control of $250-billion... than to surrender one iota of the appropriative power of Congress to the President.... Congress sets the priorities of the nation. The Congress should do that, not one man."

Senator Frank E. Moss (D Utah) Oct. 17:

"We are asked to choose an entirely foreign and heretofore unknown governmental structural of delegating to the executive the life and death control of the departments and the programs of this government. Surely, our founding fathers did not envision the republic to function that way, nor did the Constitution provide for it."

Sen. Hubert H. Humphrey (D. Minn.) Oct. 17:

"It is my judgment that this is the most significant constitutional issue that has been before this Congress since this body struggled with the issue that tore this nation apart prior to the days of the War Between the States.

"This is nothing more or less than a domestic Gulf of Tonkin resolution-the resolution, which, in foreign affairs, brought us trouble. It is a new political club for the President. With the ceiling as imposed by the conference report (on the spending ceiling legislation), the President will be able to put undue pressure on individual members of Congress, holding projects in their districts and states as ransom." Sen. Robert Taft Jr. (R Ohio) Oct. 17:

"It would be a wholesale abdication of congressional responsibility if we were to give up the power of the purse and permit any President to cut back or eliminate entire programs without congressional control."

Sen. George McGovern (D S.D.), the Democratic presidential nominee, Oct. 17:

The spending ceiling proposal "represents an unprecedented extension of presidential power, in defiance of the Constitution. And it exposes an elaborate deception being played by the administration at the expense of the Congress and the voting public... .

"The 'power of the purse' is one of those powers which helps to maintain the delicate balance on which our system rests. For the Congress to relinquish that authority now, in the face of executive blackmail, is to place ourselves in the position of adopting a domestic Gulf of Tonkin resolution."

BACKDOOR SPENDING AUTHORITY

(By Allen Schick, Senior Specialist in American Government, Government and General Research Division, Library of Congress)

FEBRUARY 19, 1973

The term "backdoor spending" has been defined in the February 7, 1973 interim report of the Joint Study Committee on Budget Control as "any spending authority which is provided other than through appropriations considered by the Appropriations Committee of the two Houses." This definition contains two related but separable criteria: the action (1) is outside the regular appropriations process and (2) it bypasses the Appropriations Committee. A more encompassing definition would be to regard an action as "backdoor" if either of these conditions is lacking. That is, an obligation or expenditure would be deemed "backdoor" if (a) it is processed by legislative committees rather than by Appropriations (even if it is pursuant to an appropriation) or (b) if it is authorized prior to or without an appropriation (even if it is handled by the Appropriations Committees.)

The Joint Study Committee identifies four types of backdoor authority. These are (1) borrowing authority; (2) contract authority; (3) permanent appropriations; and (4) mandatory entitlements. The form and magnitude of each of these practices and their implications for the appropriations process are discussed in this memo.

BORROWING AUTHORITY

Borrowing authority is an arrangement under which a federal agency is authorized by Congress to borrow funds from the Treasury or from the public for specified purposes. Usually the transaction is handled by the Treasury which loans money to agencies. In terms of the financial condition of the federal government, borrowing authority called by the Treasury "authority to expend from public debt receipts"-has the same effect as an appropriation. In both cases, the Treasury borrows funds only when it needs additional cash. But borrowing authority often is indefinite-without limit of time or money-and functions as a revolving fund with payments to the Treasury enabling an agency to reborrow an equivalent amount.

Borrowing authority was introduced for the Reconstruction Finance Corporation in 1932 and since that time it has been used to finance farm price supports, rural electrification, public housing, and dozens of other activities. During the past 40 years, Congress has authorized more than $130 billion in direct Treasury loans and these have been used to finance more than $220 billion in backdoor spending. As of June 30, 1971, agencies owed the Treasury $38.8 billion while another $16.2 billion in debts had been cancelled. The 40-year history of borrowing authority is summarized in Table 1.

Significantly, barely ten percent of this authority has been proccessed through the Appropriations Committees. Thps, of the $130 billion that has been authorized in this manner, only $15 billion have gone through Appropriations while $115 have been handled by other committees, most often the House Committee on Banking and Currency and its Senate counterpart. This pattern indicates that the Appropriations Committees have been too weak to resist encroachments by powerful forces mobilized in behalf of backdoor spending.

Understandably, the amount of loan authorization varies sharply from year to year, but the long-term evidence suggests that it is a declining percentage of new budget authority. This form of authority was unusually high in 1971 when $10 billion in loan authority was granted to the newly established Postal Service. But in recent years, borrowing authority has hovered between $5-10 billion. However, in fiscal 1972, the latest year for which actual data are available, borrowing authority dipped to $1.6 billion and in fiscal 1974 it is estimated at $1.8 billion, less than 1 percent of the total budget authority for the year. Table 2 shows borrowing authority for the 1967-74 period.

The pros and cons of borrowing authority have been examined in a 1968 article by Sun II Kim. Among the arguments advanced in favor of this form of backdoor financing is that the money borrowed from the Treasury will be repaid, unlike an appropriation for which no payment is expected. But as has been noted, $16 million in debts have been cancelled and some advances have been repaid only out of subsequent appropriations voted by Congress. Nevertheless, no cancellation has been made since 1957 and borrowing authority has been most frequently extended to commercial-type operations such as the Export-Import Bank, the Commodity Credit Corporation, and the Postal Service.

CONTRACT AUTHORITY

Contract authority is a procedure which allows agencies to incur obligations in advance of appropriations. Actual appropriations are made at some later time when the bills have to be paid. In formal language, the appropriation is made to liquidate the contract authorization. But unlike ordinary appropriations which precede the obligation, in this case the obligation comes first. By the time the matter reaches the Appropriations Committees, an obligation already exists and the Committees have no choice other than to recommend sufficient appropriations to cover the costs.

Contract authorization is a popular practice engaged in by both the Appropriations and the legislative committees. In the years since fiscal 1967, the amount of contract authority included in the budget

never has been below $8 billion and for fiscal 1973 it is close to the $20 billion level. Perhaps the largest grant of contract authority is contained in the 1972 Federal Water Pollution Control Act (PL 92–599) which authorizes $18 billion for the 1973, 1974, and 1975 fiscal years. The President has impounded $6 billion of the 1973 and 1974 allotments but this action will not have much of an immediate impact on outlays. As often is the case in contract authority, actual expenditures lag many years behind the authorization.

Despite their backdoor feature, contract authorizations often marshal overwhelming support in Congress. The water pollution issue is a case in point. The 1972 Act received unanimous approval in the Senate and passed by a 366-11 vote in the House. After President Nixon vetoed the bill (because it authorized obligations far in excess of his budget recommendations), both Houses overrode the veto by ample margins. The vote was 52-12 in the Senate and 247-23 in the House.

Table 3 displays the level of contract authority in recent years and the amounts required in each year to liquidate past authorizations. The amounts required for liquidation are uncontrollable expenses resulting from congressional actions taken years earlier.

While they induce uncontrollability at the point of appropriation, contract authorizations do not derive only from a desire to skirt the appropriations process but in recognition of the long lead times (particularly in hardware and construction programs) between initial design and completion. Contract authorization makes the full funding of such projects feasible without adding to the already mountainous carryover balances in the budget. For this reason, the Second Hoover Commission recommended in 1955 that appropriations be made on an "accrued basis" with contract authority provided for long lead time items. Contract authority also enables state and local governments to undertake costly and lengthy public works programs with advance notice of the assistance that will be forthcoming in future years.

Whatever its virtues, contract authority exacts a high price in its fragmentation of the appropriations process, in the difficulty of maintaining a lid on overall spending, and in the difficulty of maintaining a lid on overall spending, and in the uncontrollability of current outlays.

PERMANENT APPROPRIATIONS

The third type of backdoor authority is a permanent appropriation which bypasses the regular appropriations process, including the Appropriations Committees. In this category, are interest on the national debt, social security payments, and the general revenue sharing program enacted in 1972. The common characteristics of all permanent appropriations is that budget authority is available without any current action by Congress. Moreover, permanent appropriations are provided in basic legislation and often are without limit of time

or money.

It is difficult to define permanent appropriations exactly and the list on which Table 4 is based includes items which overlap with other types of backdoor authority. Thus, included on the list is the highway trust fund which operates through contract authority as well as cer

tain open-ended programs which provide mandatory entitlements to eligible beneficiaries.

The problem of permanent appropriations has plagued Congress for many years. The Legislative Reorganization Act of 1946 (60 Stat. 812) directed the Appropriation Committees to "recommend to their respective Houses what permanent appropriations, if any, should be discontinued." This plea was renewed in the Legislative Reorganization Act of 1970 which urged congressional committees to "endeavor to insure" that "to the extent consistent with the nature, requirements, and objectives of these programs and activities, appropriations will be made annually."

However, the volume of such appropriations is much greater than it was in 1946 and they continue to rise at a much quicker rate than federal spending as a whole. Almost half of the budget authority contained in the 1974 budget ($135 billion out of the $288 billion) is available without current action by Congress. As Table 4 shows, more than three-fourths of the permanent appropriations are in trust funds such as social security, civil service retirement, and highway aid.

S. 40 introduced by Senator Brock on January 4, 1973 would bar the appropriation of funds for a period of more than one fiscal year. If adopted, the ban probably would put an end to permanent appropriations including those financed via trust funds. The only exceptions would be for interest on the public debt and tax refunds. However, the prohibition would not "preclude the appropriation of funds for a fiscal year with the stipulation that such funds remain available until expended."

Yet if the revenue sharing outcome in the 92nd Congress is any indication, it will not be easy to win approval of any curtailment of permanent appropriations. The revenue sharing procedure adopted by Congress appropriates $30 billion over a five year period to a special trust fund from which allocations are to be made to states and localities on the basis of a statutory formula. Neither the revenue sharing legislation nor the annual allocations have been cleared through the Appropriations Committees.

During Senate consideration of the revenue sharing bill, Senator McClellan, chairman of the Appropriations Committee, introduced an amendment that would have subjected revenue sharing to the regular appropriations process. The vote against the McClellan amendment was 49-34, with all 22 voting members of the Appropriations Committee supporting their chairman in his campaign against this form of backdoor authority. Only 12 other Senators sided with the Appropriations Committee.

In the House, the issue was fought over reporting the revenue sharing bill with a closed rule. Chairman Mahon of the House Appropriations Committee and his supporters wanted an open rule which would allow consideration of an amendment to place revenue sharing on annual appropriations. The closed rule was sustained by the House on a 223-185 vote with Appropriation Committee members splitting 40-11 against the closed rule.

MANDATORY ENTITLEMENTS

The final category covers instances where the authorizing legislation entitles a person or government to certain federal benefits, thereby