his own choosing. In line with these decisions, it is clear that the President cannot control decisions of such commissions, nor take any other action which would significantly detract from their independent status. At the same time, it is clear that the independent regulatory commissions do not enjoy total freedom from Executive supervision. See Cushman, The Independent Regulatory Commissions 666 (1941). Thus for example, supergrades are allocated to an independent commission by the Civil Service Commission; and the federal property and administrative services of commissions are under the direction of the Administrator of General Services, who in turn is subject to the direction and control of the President. See 40 U.S.C. 471 et seq.

Executive control over the budgetary maters of independent commissions is important from the point of view of maintaining overall control on Government spending, and has become an established practice. See Cary, Politics and the Regulatory Agencies 11-12 (1967). The Budget and Accounting Act requires that the independent commissions submit their budgets to the Office of Management and Budget and authorizes that Office to "assemble, correlate, revise, reduce, or increase the requests for appropriations." 31 U.S.C. 16. The Antideficiency Act also clearly applies to appropriations made for independent regulatory commissions. Thus, with respect to budgeting and management of appropriated funds, an independent commission is, by definition, a "department or establishment” and "any appropriation" for it is subject to the control of the Office of Management and Budget to ensure sound and efficient operation. 31 U.S.C. 2, 665 (c) (2). In the example put to me by Professor Miller during my testimony before your Subcommittee, it was pointed out that $620,000 was withheld from the $25.189,000 appropriated for the Federal Trade Commission for fiscal 1972. In fact, such an amount was placed on reserve in November of 1971 as part of the Government-wide effort to cut pay costs of all agencies by 5%. This amount was released in February 1972 in order to cover the cost of 1972 salary increases for the Commission's employees. Any such action by the Executive branch which does not endanger the independent status of the agency in question does not contravene the principle set forth in the Humphrey and Wiener decisions.

15. Question: You stated that you "would hesitate to make a statement" about the power of the President to impound funds for the use of Congress "without looking into it futher." Now that you have had the time look into it, what is the position of the Department on that question?

Answer: Action by one branch of our Government which threatens the orderly and independent operation of a co-equal branch may run afoul of the principle of seperation of powers. Such a principle is not expressly set forth in the Constitution, but is generally recognized to be implicit in the separate and distinct establishment of the three branches of government provided by the Constitution. See Ex Parte Grossman, 267 U.S. 87, 119 (1925).

Any attempt by the executive to cut off or reduce salaries of members of Congress or otherwise hold back appropriated funds essential to the performance of its functions would, in my view, be improper under the separation of powers principle. However, such action could be taken with the consent of Congress. For example, pursuant to the power grants to him by the Economic Stabilization Act, the President froze all salary increases temporarily, which included the salaries of Congressional employees. E.O. 11615.

16. Question: You did not state a position on the question of whether the President could impond funds appropriated for the Supreme Court. What is your position on that question, now that you have had time for reflection?

Answer: Article III, section 1 of the Constitution provides that judges “of the supreme and inferior Courts" shall receive compensation "which shall not be diminished during their Continuance in Office. Apart from the question of judicial salaries, I believe that the President could not cut back funds appropriated for the use of the Supreme Court where to do so would detract from its ability to perform its constitutional responsibilities. See question 15.

17. Question: Mr. Ash, in his testimony before the Committee, said that the choice had to be made between “good” programs and “very good” programs. How is that choice made? By what criteria are programs chosen? Are those criteria promulgated in Executive Orders or other Executive publications? If not, why not? In this connection, you may wish to refer to Secretary Butz's testimony on February 7, in which he said that there were no published or articulated criteria and also that the choice, in final analysis, was “political". If Secretary Butz was accurate then under what theory of law can it be said that the Executive is acting when impounding in accordance with the law? In your answer to that it should be noted that even if it is granted (for purposes of discussion) that an 90-538-73-55

Executive power of impoundment exists that applies only to the general power; specific impoundment actions within that general power are arbitrary or “political", unless made in accordance with known standards of judgment external to the decision-maker.

Answer: I believe that most substantive aspects of this question are covered in my preceding answers. It would be inappropriate for me to comment on the statements of Director Ash and Secretary Butz, except to say that I would have preferred to characterize the basis for making choices as the "judgment of political officials." I believe this is what the Secretary must have meant because irrespective of any criteria that might or might not have been articulated, the President or one of his designated appointees had to make the choices.

Senator SAM ERVIN,
Senate Office Building,
Washington, D.C.

HINCKLEY INSTITUTE OF POLITICS,

THE UNIVERSITY OF UTAH, SALT LAKE CITY, UTAH,
February 13, 1973.

DEAR SENATOR ERVIN: At a time when the issue of the impounding of funds is at fever-heat, I though you might be interested in the origins of that practice back in 1941. The enclosed case study tells the story of how a young budget examiner by the name of Charles Curran, anxious to carry out President Franklin Roosevelt's edict against any non-essential expenditures during the war effort. suggested to his superiors in the Bureau of the Budget that an old, well-accepted precedent of reserves to effect savings could perhaps be stretched to cover unwanted projects. The case study tells the story of the soul-searching that went on in the Bureau of the Budget, anticipating the hostile Congressional reaction. President Roosevelt's endorsement of the proposal, and the ultimate Congressional approval which the Bureau won in the Budgeting and Accounting Procedures Act of 1950.

I hope the study will be of some use in throwing light on the current controversy.

Very best wishes,

Enclosure.

J. D. WILLIAMS,

Director.

THE IMPOUNDING OF FUNDS BY THE BUREAU OF THE BUDGET

(By J. D. Williams)

(Inter-University Case Program No. 28)

I INTRODUCTION

This is the story of the efforts of the Budget Bureau to impound funds appropriated by Congress for public works projects during World War II in au effort to lessen inflationary pressures and to check the diversion of scarce materials from defense production. It is also a brief life history of a policy and its political and administrative repercussions.

If the makers of the Constitution had given the President an item veto over appropriation acts, the policy which this case focuses would never have been initiated. Under the Constitution, Congress is empowered to pass laws and to appropriate money. But the public usually holds the President responsibleparticularly at election time-for the nation's economic health as well as for its security. As the federal government's role in economic affairs increased during the 1930's, it was inevitable that a President would some day have to find a means to avoid spending money appropriated by Congress for projects which, in his view, were not in the national interest.

President Roosevelt was confronted with such a situation following his reelection to a third term in 1940. As the nation's economy shifted to defense production and as the price index began to rise, it became apparent that non-essential expenditures would have to be curtailed to prevent inflation and to check the diversion of scarce materials from defense production. For this reason the

Budget Bureau drafted the following policy statement which the President included in his budget message of January 3, 1941:

"During this period of national emergency, it seems appropriate to defer construction projects that interfere with the defense program by diverting manpower and materials. Further, it is very wise for us to establish a reservoir of post-defense projects to help absorb labor that later will be released by defense industry."

However, the President's message did not stop congressmen from pressing for appropriations for public works projects in their own districts, just as it did not convince the constituents of these congressmen that their local public works projects, along with hundreds of others, constituted a threat to the defense effort or to the economic stability of the nation.

What, then, was the President to do when wartime appropriation acts, containing funds for local public works projects, came to him for signature? He could not veto the unwanted items without vetoing the entire appropriation. The 1 Budget Bureau proposed a solution: put the funds for objectionable projects in a reserve, "frozen" so that the spending agency cannot touch them.

This case describes the formulation and adoption of the policy of impounding; it then depicts the efforts of the Bureau to impound funds for two projects and to deal with the strong congressional criticism which resulted; and it recounts how Congress and the Bureau ultimately sought to settle the matter. Development of Impounding Practices

Long before the establishment of the Bureau of the Budget, Congress had provided for an apportionment procedure in the Anti-Deficiency Acts of 1905 and 1906. Agencies were required by those laws to divide their annual appropriations into quarterly allotments or three-month expenditure ceilings which were not to be exceeded. In those quarterly allotments lay the rudiments of appropriation reserves, the sine qua non of the impounding process.

The original purpose of the allotment procedure was to prevent agencies from spending their entire appropriations before the end of the fiscal year; in other words, to prevent deficiencies. A second purpose-to effect savings-was added in 1921 in Budget circular No. 4, issued by the first Director of the Budget, Charles G. Dawes. Since 1921 the reserve device has been used extensively by the Bureau of the Budget to adjust spending to actual needs in achieving the program objectives of the Congress. (For example, where Congress appropriated a million dollars to control the Mediterranean fruit fly, and the Department of Agriculture accomplished the task for a half a million dollars, impounding the balance prevented waste of public funds.)

An important issue since the twenties has been the nature of a congressional appropriation act: is it simply authority to spend a certain sum of money for a specified purpose, or is it a directive to spend? Willoughby, writing in 1927. seemed to prophesy the struggle that was to ensue fifteen years later. A few appropriations, he thought, were mandatory: e.g., "appropriations for the payment of claims, pensions, interest on the public debt, and the like." Others, he said, for political reasons, must be regarded as mandatory:

There are other appropriations such, for example, as those for the erection of a particular public building or the improvement of rivers and harbors, which if not put into effect would undoubtedly cause resentment on the part of Congress and action by it that would make the expenditure obligatory. The hand of the Bureau of the Budget in post-appropriation control was strengthened on June 10, 1933, when authority to make, waive, and modify the quarterly apportionments was transferred from the agency heads to the Bureau by Executive Order 6166. With the transfer of the Bureau itself to the Executive Office of the President six years later, the stage was set for a systematic effort by the President and his budget staff to achieve improved central control over expenditures. That effort was to be marked in part by putting the impounding process, employed during the '30s to effect savings by controlling the level of programs, to a new use; viz., impounding funds for entire public works projects which lacked Presidential approval. (The two types are referred to as program control and project control.) President Roosevelt's 1941 budget message, which emphasized the need "to defer construction projects that interfere with the dofense program", seemed to require more stringent impounding than merely establishing reserves to effect savings.

II THE POLICY IS ADOPTED

Four days before he declared an unlimited national emergency late in May, 1941, President Roosevelt was faced with the first test of his announced budget policy. Congress had just forwarded for his approval the War Department Civil Appropriation Act for 1942 (Public Law 71), containing funds for flood control and some $1.6 million for certain river and harbor projects which had not received Executive approval as important to national defense. Lacking the item veto, the President had to sign the Act. During the two months that elapsed before the War Department could submit to the Bureau of the Budget its request for apportionment of the newly-appropriated funds, the Bureau sought a tool that would halt the objectionable projects.

In the meantime a flood control authorization bill (H.R. 4911) was moving toward final passage in the Congress. The House version of the bill provided that projects contained in the measure "shall be prosecuted as speedily as may be consistent with budgetary requirements. .." On July 3, the President wrote the President of the Senate that the House had ignored the fact "that initiation of new construction projects without defense values should be deferred until the end of the present international emergency." Mr. Roosevelt suggested an amendment to section 3 of the bill to read: "That during the unlimited emergency .. no construction work shall be initiated on any project hereby authorized unless the President should find that the proposed work is of important value to the national defense."

The President was turned down. Congressman Whittington explained early in August, 1941, that the proposed amendment was killed because Congress did not want to surrender absolutely to the Executive the right to determine which projects had defense value. Anyway, he said, "if the President . . . is not satisfied... he can veto the bill."

Whittington and his colleagues did not anticipate the means the Executive Branch would use to nullify the appropriations in excess of the President's requests. Mr. Roosevelt did not veto the autorization bill. However, in signing it o August 18, he warned:

"I wish to make it clear that during the present emergency I do not intend to submit estimates of appropriations or approve allocations of funds for any project which does not have important value in the national defense."

By the time the President signed the bill, the Bureau of the Budget had decided that impounding was the only means to halt projects which had no defense value but which had been tucked into appropriation bills that the President had to sign. The decision of Budget Director Harold Smith at the end of July, to halt War Department construction of certain flood control projects for which Congress had appropriated money in Public Law 71, was the result of four weeks of intermittent discussion and head-scratching within the Bureau:

On July 7, Budget Examiner Charles Curran of the War-Civil Unit in the Estimates Division called his superiors' notice to the impending authorization by Congress of public works projects, some of which the President had not approved. Curran had recently returned from a tour of some civil and military projects of the War Department and had been struck with the waste of money and effort on projects which could never be completed because they did not carry a priority rating to obtain scarce materials. Why, he asked, should not the Bureau of the Budget impound funds for nonessential projects to keep them from getting started in the first place?

Similar concerns were felt by most others in the Bureau, beset on all sides with demands for money to meet the emergency. There was, consequently, at least a partial attitude of receptiveness when Curran proposed that for the first time the Bureau should halt entire public works projects by impounding. Heretofore the Bureau had impounded funds almost solely to effect savings in programs undergoing readjustments which Congress could not have fully foreseen in making appropriations available. A number of times during the course of 1941. reserves were established to effect savings in the traditional manner. The programs of the Civil Aeronautics Administration for civilian pilot training, of the Civilian Conservation Corps and the National Youth Administration for the surplus labor force, and of the Surplus Marketing Corporation for surplus crops, all had begun to feel the pinch of the defense effort. Military pilot training, selective service, war production, and rising food needs demanded curtailment of these peacetime programs. To force curtailment in expenditures,

the Budget Bureau impounded funds appropriated to each agency in amounts ranging from $1.6 million to $95 million.

Reducing the level of programs in this way was much safer politically than halting completely a specific project authorized and financed by Congress. To attempt the latter would place the Bureau in the risky position of running directly counter to the will of Congress--and of damaging the standings of individual Congressmen in their home districts, which stood to gain by these projects. A Congressman might easily give way on a question of broad national policy. But to cancel public works projects in his particular district was to hit him personally and in his most vulnerable spot, his reputation as a good provider for his constituents. It was to threaten the Pork Barrel principle.

Mindful of these considerations Curran's chief, Colonel C. L. Dasher, suggested that he sound out Fred Bailey, the Assistant Director for Legislative Reference. Curran recounts the story this way:

.

"Bailey gave me the impression that he thought I was trying to go a little too far. He pointed out that, in the past, reserves had been set up in order to prevent unapproved use of funds within an appropriation when a change in law had eliminated some requirement otherwise provided for or in order to give effect to the anti-deficiency law. Then he said, in effect, that the appropriation of money did not carry a mandate to spend . . Now if Congress in its wisdom appropriated more for some program than the Budget thought necessary, there was a question of soundness in attempting to reverse Congress by impounding a part of the appropriation. Certainly, at least the proper segment of the Appropriations Committee should be consulted. Perhaps a case could be made and defended for holding back funds beyond those which could be expected to be used efficiently. But any reduction would need to be made on a program basis. The executive or administering agency should determine where and how the program was to be modified....

"He went on to point out that deliberately stopping specific projects went too far beyond general economy and efficiency. It was approaching an item veto. It was one thing to shrink a whole program, but quite another thing to go into the program and eliminate specific items-items individually endorsed or perhaps inserted by Congress. But he said all he would do was advise. It was up to me to put the issue to the Director."

Consideration of the proposed policy became a matter of immediate importance with the arrival in the Bureau of the War Department's request for apportionments for funds appropriated in Public Law 71. Hopefully, the hot issue was tossed to the National Resources Planning Board. But back it came; as far as NRPB was concerned, the question of project control via impounding was strictly a budgetary matter.

The Bureau Acts to Impound

Budget Director Harold Smith accepted the project impounding suggestion. In his letter to Secretary Stimson on July 29th, after quoting the President on the necessity of deferring nonessential public works, Smith went on to say:

"You are thoroughly conversant with the need of deferring the construction of public works which would interfere with the defense program through the diversion of manpower and material. Consequently you can see how the initiation of such works at this time would be out of harmony with the policy of the President as developed since the approval of the War Department Civil Appropriation Act (that is, since May 23, 1941) and would clearly be in conflict with his present program.

"I therefore suggest that you have placed in Budgetary Reserves, in addition to any other reserves, the sum of $1,605,000 of the appropriation "Maintenance and Improvement of Existing River and Harbor Works" and $7,405,305 of the appropriation "Flood Control, General." The funds so placed in reserve under... "River and Harbor Works" would be released at such time as the President found the three projects for which the funds are earmarked to be of important defense value and the flood control funds placed in reserve would he available for initiation of authorized flood control projects when approved by the President as important to national defense."

As word spread that the Bureau of the Budget had halted certain public works projects, Congressmen began to make inquiries. Senator Wagner (Dem., N.Y.) wanted to know what constituted a defense project entitled to funds. Harold Smith replied on August 25, 1941:

"Two criteria for determination of defense value are whether the project is necessary to the armed forces and whether it is necessary to our industria! effort.