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next thing you will probably be taking them to maintain the Army and Navy, or to establish a home for blind cats or something like that. I think it is a gross injustice to impose taxes for use of the highway and then take these taxes and use them for some other purpose. If you want money to build mass transit systems, let them levy taxes on all the people and not on a selected group. In my mind taking highway funds for that purpose is about as fair and just and logical as taxing-meaning nothing personally-taxing baldheaded men and giving benefits to the redheaded men. That is my analysis of the situation. I know a great many Members of the Senate disagree with me, but that is my very abiding convictions.
Senator CHILES. Senator Muskie.
Senator MUSKIE. Senator Ervin entertained some of my convictions as to which I am willing to abide with him.
I think the Senator raised a very interesting point in the light of one of the guidelines the President gave us yesterday as to his view of the constitutional right of the President to impound the funds, and this is what he said:
Constitutional right of the President of the United States to impound funds, and that is not to spend money when the spending of money would mean either increasing prices or increasing taxes for all people. That right is absolutely clear.
Now with respect to the second criteria that he stated, increasing taxes, the case of the highway trust fund, it is sustained by its own taxes: is it not?
Mr. Arris. Yes, indeed.
Senator MUSKIE. And those taxes are earmarked for highway trust funds still. It is earmarked for that purpose, is it not?
Mr. Airis. Yes, indeed.
Senator MUSKIE. Would the full funding of the program, as authorized by the Congress have resulted in spending in excess of the reve. nues aceruing to the highway trust fund?
Mr. AIRIS. Well, I don't have those figures, Senator, with us here. I think I would have to leave it with the general statement that the trust fund was established to fund the highway program, that is 100 percent, that is with the State matching funds and that was it.
Now, of course, in any program you get deficits and small surpluses. But it was established for a particular purpose.
Senator MUSKIE. But the trust fund is in the black, is it not?
Senator MUSKIE. If it were not placed in the red by the full funding of the program that has now been held up, would it? That is my very strong impression.
Nr. Arris. Well, I pointed out the needs for a program to cut down accidents, to finish up the Interstate, and just answering you generally, I think there would be no surplus in the funds, if that is what you are driving at.
Senator MUSKIE. You are talking about down the road. I am talking about this year in which the highway funds have been impounded. If it is not this vear, the full implementation of the program as Congress authorized, would have been to put the fund in the red ?
Mr. Airis. Maybe so, maybe so. I don't have those figures. But certainly it would have been used up if it had not been the money in the fund, that is if their cutbacks had not taken place.
Senator Muskje. Money would have been drawn from the fund but the fund would not have been left in deficit; would it?
Mr. STAFSETH. I am informed back in the middle 1950's when there ter was no impoundments, there were times
Senator MuskIE. I am talking about the effect of this specific act. The President says that under the Constitution he can withhold spending and the effect of the spending would be to require an increase in taxes. Now, it is my view as a member of the Public Works Committee and as a member of the Subcommittee on Roads of the Public Works Committee that the highway trust fund is solvent, that it would have been solvent had this program been implemented, and I am rather astonished that you should now be suggesting to me that that isn't the case. Perhaps we haven't been given full information in the Public Works Committee. Mr. STAFSETH. The fund apparently is solvent. There is no question about that.
Senator MUSKIE. This year's program, if these funds would have been solvent? Mr. AIRIs. What, sir? Senator MUSKIE. Solvent. Mr. Airis. If they had not been impounded? Senator MUSKIE. Yes, at the end of this year. I am not talking about unmet needs 3 or 4 years down the road. I am talking about this year's allocation.
Mr. Arris. Well, I think I would have to just answer it in general Tords that it probably would have been solvent, but it would not have the money in it that that is now if the cutbacks had not taken place.
Senator MUSKIE. My definition if you spend money you have to guard it. I am talking about the net result at the end of the
year. The President says the effect of spending money is to increase taxes. In the case of the highway trust fund those taxes can be spent for only one purpose and that is the building of highways and other incidentally related purposes the Congress has authorized. So if spend it for highways, you don't spend it for schools, not yet, or homes for blind cats, not yet, or any of those purposes, only for highways. So if the President's argument is that his constitutional right of impoundment exists by holding up spending you can save taxes, you can focus your spending on highway taxes. If, by completely implementing the program the Congress authorized, if in the course of the Fear the fund is made insolvent or operating on a deficit basis and you don't think you can under the law, but if it were, then maybe the
President at least has got the facts to sustain his argument, whether 1 or not his argument is legally sound.
What I am trying to get at, and I guess maybe I can do it with Mr. Ash
, if he knows anything about the highway trust fund, get at it that But my point is on the base of information that we have been given in the Public Works Committee, and I had hoped that you had it, that the highway trust fund has had it, it is implementing the fund, it would not require an increase in taxes and not be left in the black and so that reason for impounding does not exist with respect to the highway trust fund. That is my view. I had hoped to get the basic kinds of facts from you to sustain the argument.
Well, I can get it elsewhere.
Senator Ervin. The theory on which the highway funds were established is that to make an estimate of how much revenue would be for use by the highway taxes and for a certain period in the future, for a year, and then that that money would be used for no purpose except roads.
Mr. ATRIS. That is as I understand it.
Senator ERVIN. And nowadays where there are deficits, where the estimate falls short, it is a self-supporting fund and operates on a pay-as-you-go basis substantially?
Mr. ÅIRIS. Yes, sir.
Senator Ervix. My information is that the executive branch has impounded $5.7 billion of highway funds, which have been collected, and refuses to spend them, or permit them to be spent.
Mr. STAFSETH. Well, the surpluses in the fund varies through the year, and I think the time that your figures were probably taken is correct. I think now it is closer to about $2 billion. It is down a little bit lower. But that has been up higher than what you stated and now it is lower.
Mr. Airis. That is as I understand it.
Senator Ervin. Since several years ago the executive branch of the Government abandoned the two-budget system, that is, one budget for operative funds and another budget for trust funds, and adopted what they called the unified budget by which it may pretend that the deficit, the operating deficit to run the money that they borrow by deficit financing and spend, is less than the amount that is actually spent. Isn't it out of operating expenses?
Mr. Airis. If I follow you, Senator-I think I do-affirmative.
Senator Ervin. In other words, if you refuse to spend $2 billion you have in the highway fund, and you add the receipts for the operating expenses and receipts for the trust funds and then add the expenditures from the operating funds and the trust funds, it would appear that the Government has failed to spend the amount that has been impounded.
Mr. Airis. Well, I think I understand what you are driving at, and as I said, I think our position would be affirmative. Now, I should probably add this: That the operating and maintenance funds come out-of-State funds. None of it comes out of Federal.
Senator Ervix. I am not talking about operation of funds. I am talking about the expenses used and the funds used and the deficits used to operate the Federal Government. So when you have a surplus in the hichway funds and a deficit in the operating funds of Government and you put them both in the same pot, it looks like your deficit of operating funds is less by the amount of trust funds that you impound, which is some bookkeeping legerdemain.
I think we can agree that the question of whether highway funds can be used for other purposes is a legislative and not executive matter.
Senator MrsKIE. I differ with you on that.
Our next witness will be Mr. Roy Ash, the Director-designate of the Office of Management and Budget.
Senator Ervin. I would just like to announce that the committee has extended an invitation to the Secretary of Agriculture, and the administration called EPA, and the committee has been assured by
the executive branch of the Government that if at all possible, without canceling other engagements that day, Mr. Butz and Mr. Ruckleshaus will appear before the committee on Wednesday of next week, and if not then, then some other day.
Senator CHILEs. The committee is delighted to receive that information.
Mr. Ash, we appreciate your taking your time to appear before us today.
STATEMENT OF ROY LASH, DIRECTOR-DESIGNATE, OFFICE OF
MANAGEMENT AND BUDGET, EXECUTIVE OFFICE OF THE PRESI. DENT; ACCOMPANIED BY SAMUEL M. COHN, ASSISTANT DIRECTOR, OMB; AND JAMES BRADLEY, ACTING GENERAL COUNSEL, OMB
Mr. Ash. I would first like to introduce those that I have with me here.
Mr. Sam Cohn, Assistant Director, Office of Management and Budget and Mr. Bradley to my right, who is Acting General Counsel of the Office of Management and Budget.
I can't think of a more appropriate subject or a more appropriate committee to appear before as my first opportunity to testify on behalf of the Office of Management and Budget. I hope there will be many more such opportunities.
Senator CHILEs. Thank you, sir.
Mr. Ash. Mr. Chairman, members of the committee, your letters, one of January 17 and one of January 24, requested that Director Weinberger or I appear before this committee and comment on the subject of impounding or reserving appropriated funds, and I am, of course, very pleased to do so.
Before going directly into that specific subject, let me say that much of the present difficulty results from the lack of a congressional mechanism to review and act upon the overall government fiscal situation in advance of taking appropriation and other legislative action, such as authorizations to obligate the Government in advance of appropriations.. We know that the Congress itself recognizes this deficiency, and last October established, by Public Law 92–599, a joint committee to review the procedures which it should adopt to improve congressional control of the budgetary totals, including a coordinated overall view of each year's budgetary outlays and anticipated revenues. As you may know, the President has pledged the full cooperation of the administration in working with that committee. We repeat this offer of cooperation now.
The need for such a mechanism was pointed out by the President in the budget message that was sent to the Congress earlier this week. He said:
Because of modifications made to reflect the desires of more than 300 congressional committees and subcommittees that influence it, the (budget) process has become more complicated and less comprehensible.
The fragmented nature of congressional action results in a still more serious problem. Rarely does the Congress concern itself with the budget totals or with the effect of its individual actions on those totals. Appropriations are enacted in
1 See also Mr. Ash's statement on Wednesday, Feb. 7, 1973, p. 481.
at least 15 separate bills. In addition, "backdoor financing" in other bills provides permanent appropriations, authority to contract in advance of appropriations, authority to borrow and spend without an appropriation, and program authorizations that require mandatory spending whether or not it is desirable in the light of current priorities.
At the same time, a momentum of extravagance is speeded by requirements created initially by legislative committees sympathetic to particular and narrow causes. These committees are encouraged by special interest groups and by some executive branch officials who are more concerned with expansion of their own programs than with total federal spending and the taxes required to support that spending. Since most programs have some attractive features, it is easy for the committees and the Congress itself to authorize large sums for them. These authorizations, however, create pressure on the appropriations committees to appropriate higher amounts than the nation's fiscal situation permits.
To this statement of the President, let me add one further point. Even if the Congress did succeed in establishing a mechanism relating specific items of spending each fiscal year to total spending, total revenues, and permissible borrowing, the Congress still cannot perform the job of spending money. The detailed administration of projects, the negotiating and letting of contracts, the identification of payees and determination of their eligibility for payment, and the essential exercise of judgment in the normal conduct of Government operations—all of these, by their very nature, are clearly executive functions. These functions are undeniably within the executive authority. Indeed, he has an absolute responsibility to carry out these functions.
To get down to specifics, and by way of background, let us review the overall budgetary and fiscal situation in which we find ourselves in the fiscal year 1973. The act of October 27, 1972—Pubic Law 92–599—temporarily increased the permanent statutory public debt limit by $65 billion for the period ending on June 30, 1973. As a result, the total debt limitation through June 30, 1973, is $465 billion. The House and Senate committee reports on H.R. 16810—which became Public Law 92–599--make it guite clear that the $465 billion limit would be “wholly inadequate" if the expenditure level for this fiscal year exceeded $250 billion. The President has determined to adhere to this spending level not only to stay within the congressionally established debt limit, but also to avoid higher taxes, higher interest rates, renewed inflation, or all three. The previous witness offered an excellent analogy. That is the proposition of stopping a huge freight train. But in this case it is a head-on collision with another freight train. That has some problems, too, and that is the analogy we have before us now.
A review of the fiscal year 1973 budget was undertaken in the early fall of 1972 to update earlier estimates of spending on the basis of the latest available information. This review showed that, unconstrained, the 1973 outlay total would approximate $261 billion. This was $11 billion in excess of the resources expected to be available from revenues, miscellaneous receipts, and borrowing, under present la ırs.
When we realize that we can spend only money that is in the Treasury—and this is explicity stated in each appropriation act--and that money gets into the Treasury only through taxation or through borrowing within the statutory debt limit, the compelling necessity to control the incurrence of financial obligations and the resulting expenditures of funds is apparent. The required expenditure adjustments for the fiscal year 1973 are explained in detail in the section cap