III DEFENDING IMPOUNDING IN 1943

A Senate Appropriations subcommittee headed by Senator Pat McCarran (Dem., Nev.) opened hearings in January, 1943, on the Civil Aeronautics Administration appropriations for fiscal 1944. McCarran asked CAA Administrator Charles Stanton why appropritated funds for two airports in Nevada had been impounded by the Budget Bureau. Stanton's story ran as follows: in July, 1942, Congress had passed appropriations for construction of a large number of airports. $800,000 was specifically included for two CAA airports to be built at Winnemucca and Lovelock, Nevada, communities in the northwestern part of the state having about 2500 and 1300 people, respectively. Some time in August or September, 1942, the Budget Bureau had initiated what was a new practice for Stanton, apparently on instructions from the President. Agencies with construction projects were called back before the Bureau's examiners to rejustify projects for which funds had already been appropriated, "with a view to determining projects that might be deferred or eliminated" through the process of impounding funds. After listening to CAA's rejustification of the airport program, the Budget Bureau had impounded funds including the $800,000 for the two airports in Nevada.

CAA then had specifically requested the release of funds for the Winnemucca project. On November 3, 1942, L. C. Martin of the Bureau of the Budget had informed CAA that Presidential policy forbade the construction of projects not essential to the war effort; in view of that policy, funds would not be released for Winnemucca unless additional evidence could be furnished showing its necessity. On November 7, Stanton said, he wrote to the chief of buildings and grounds of the Army Air Forces about the two airport projects. Col. James R. Newman had replied that they were not regarded as essential.

Knowing that the Bureau would have to give McCarran its own explanation, Assistant Director Martin again requested a comprehensive review of the impounding procedure. A memorandum by Curran concluded that while the Bureau of the Budget had no legal power to halt construction of projects for which Congress had appropriated money, nevertheless, acting for the President it could establish priorities for the initiation of those projects. In the absence of any Congressionally-designated date, and as long as he does not violate the specific intent of Congress, the President has the discretionary authority to decide when projects shall be undertaken. In wartime, the memorandum continued, there can be little question of the President's power to defer or suspend construction under his authority to prosecute the war. With this review, Martin readied himself for interrogation by McCarran and his colleagues.

In his testimony before the committee, Martin frankly admitted that he knew of no law specifically authorizing the Budget Bureau to set up reserves. "However, it has been the practice of the Bureau for many years to set up reserves to prevent a deficiency or to effect savings under programs where the requirements have materially changed since the submission of the appropriation estimate to Congress."

McCarran asked how the Budget Bureau, acting in the name of the President, could impound funds in an appropriation bill which the President himself had signed. Martin replied that since the President's policy was to restrict all nonessential construction projects, the Bureau had to have War Department certification that the projects were necessary for the war effort.

Senator McCarran countered: "Congress must have thought these airports essential, or they would not have made an appropriation of $800,000 for them, part of which has already been-I won't say allocated, but the bids have been taken and preliminary surveys made."

Martin said he thought it was a question "of the authority of the President to set up reserves under policies which he has enunciated respecting public works." The Senator replied:

"I think it is deeper than that. if I may say so. I think it goes to the question of whether or not the Congress of the United States governs appropriations, or whether those appropriations, after they have been molded into law and approved by the President, can then be thereafter vetoed.

"... And I believe that either the Congress of the United States has to be the law-making body, and its law has to carried out, or else we are going to have to regard the abrogation of the Constitution of the United States, and then Congress has no place in this set-up whatsoever. It is either one of the two. Either Congress is responsible for the expenditure of the taxpayers' money, which the Constitution provides, or else the Congress has little or no place in

the picture. Now, if the Army can override that, if the Budget can override it. the sooner we know it, the better."

Four months later, on May 28, 1943, Stanton of CAA appeared again before McCarran's subcommittee and revealed that the Budget Bureau had released the $800,000 for the Nevada airports. Whatever pressures the Nevada Senator had applied had proven irresistable. But, though victorious in the case of his own State's projects, McCarran had not frightened the Bureau cut of continuing to impound funds for other non-essential projects.

The Roads Bill

In the early summer of 1943 Congress proceeded to consider H.R. 2798, a bill to provide federal aid for state construction of rural post roads. In the Senate Committee on Post Offices and Post Roads (Sen. McKellar, chairman), the following language was added as Section 9:

"No part of any appropriation authorized in this act shall be impounded or withheld from obligation or expenditure by any agency or official other than the Commissioner of Public Roads."

During the floor debate Senator Vandenberg asked Senator Hayden whom the sponsors of this section were trying to by-pass. Hayden said it was the Director of the Bureau of the Budget, who had been impounding public road funds. When Vandenberg asked under what authority the Budget Director had done this, Senator McKellar replied:

"That is exactly what we want to ascertain. We inserted this inhibition for the purpose of determining whether the will of the Congress shall be supreme, or whether the will of the Bureau of the Budget shall be supreme. I think that if the Congress shows that it is in favor of having its own views carried out, they will be carried out. That is my judgment. But if we supinely let the Bureau of the Budget veto any provision it pleases in any bill, it will not be long before it will be vetoing more than the road bills. It has been vetoing road bills for several years, and we think that such legislation ought not to be vetoed in that way." Vandenberg then said that he was under the impression that there was a Presidential directive ordering cutbacks in nondefense highway expenditures and that probably the Bureau of the Budget was merely attempting to early out that directive. "It seems rather curious, he said, "that we should attempt to enact legislation which seeks to withdraw some of the obvious checks and balances which evidently now exist and have heretofore existed. Apparently, however, I am not getting to the bottom of the question."

When the bill reached conference, the House managers opposed the Senate amendment. They finally compromised by allowing funds to be impounded only on WPB certification that a given project would impede the war effort. The bill passed the Committee of the Whole House, 147 to 10, was approved by the Senate, and was signed by the President on July 13. Senator McKellar, one of the grand old spoilsmen, had curtailed by law the authority of the Budget Bureau to impound in at least one area of government expenditure. The professional civil servants in the Budget Bureau, however, regarded his rider as little more than a temporary injunction against impounding.

Smith Is Criticized in Hearings

Following the McKellar rider, opponents of impounding shifted from legal restrictions to the weapon of committee interrogation. A group of them attacked Budget Director Smith in hearings on a supplemental defense appropriation bill in the fall of 1943.

Senator Overton (Dem., La.) began by asking Smith: "Now, where is the law that authorizes either the Executive or the Bureau of the Budget to im pound funds that have been appropriated by Congress?" As Smith began to explain that the power rested largely on the apportionment statutes, Senator MeKellar entered the fray. The Senator recalled the impounding of certain funds appropriated for roads. He then asked: had either Mr. Smith or Mr. Lawton (both present before him) drafted Executive Order 6166 in 1933 transferring the apportionment authority from agency heads to the Budget Director? Neither had been with the Budget at that time. But McKellar drew the inference that the Bureau had wangled the apportionment power for itself and had then illegally extended that power to include the impounding of funds.

Senator Nye (Rep., N.Dak.) offered an example involving the "Turtle Mountain appropriation" for the purchase of certain lands in his state by the Indian Bureau. The funds were impounded, he said, before Pearl Harbor. Then Senator

Hayden (Dem., Ariz.) added the case of an appropriation for a bridge over the Gila River, Arizona, which the Indian Bureau refused to spend.

Senator Holman: Then how does the Congress express itself or announce a Congressional policy? After all, we represent the people.

Mr. Smith: . . . There may have been instances that look arbitrary. But in most cases where something has been set aside, it is because it cannot be efficiently spent, or it is because the situation had changed. I think, as far as the Budget Bureau is concerned, we have tried to be very conscientious in going back and looking at the Congressional policy. Sometimes it may look as if we have done something, when material has been held up by the War Production Board or some other agency, with the Budget Bureau being uniformly damned I think for everything.

At a later point Smith put the case for impounding in one sentence: “. . . If you desire central control on the part of the administration, improved control of these expenditure matters, someone has to have some authority." Senator McKellar retorted: "That has to be somebody competent to deal with them."

Then Senator Thomas (Dem., Okla.) said that after getting the “run-around” in trying to get the Tulsa funds unfrozen,

"I introduced an amendment directing the Budget Bureau to release those funds and I submitted the amendment on that to the committee at that time, and thought it was a good idea. Some way the Budget Bureau got hold of this amendment and during the night they unfroze the funds, and since that time the work has been progressing as fast as the engineer could do the work."

Apparently the Senator was referring to the amendment which Senator MeKellar gave notice of introducing on October 13, 1942.

There was little doubt in the minds of the committee that impounding of funds by the Budget Bureau was, in effect, an item veto of appropriation bills. As Senator McKellar put it:

"Of course if the President wanted to do it, why, he has got a right to veto any bill, and that is the time for him to veto it. That is the authority the Constitution gives him to stop appropriations, but after the appropriation is made and signed by the President and becomes a law, why, to my mind any executive officer that attempted to interfere with it in the slightest degree renders himself liable for illegal action."

In response to a committee request, the Bureau submitted a memorandum on the legality of the impounding process. The memorandum of November, 1943, gave a comprehensive history of the establishment of reserves, touching on the Anti-Deficiency Act of 1905, General Dawes' Budget Circular #4 of July 1, 1921, Executive Order 6166 of 1933, Reorganization Plan 1 of 1939, etc. Two Court of Claims decisions were cited which connoted the idea that appropriations are authority, not mandates, to spend. The memorandum referred to the role of the President as responsible manager of the Executive Branch as an additional justification for the impounding power. Reference was made to the President's letter of August 18, 1942, to Senator Russell of Georgia. If appropriations were to be regarded as mandates to spend every appropriated cent, the President had said, it would take away all incentive "for good management and the practice of common sense economy." Toward the end of its memorandum the Budget Bureau suggested the practical argument for the impounding power: it "is the most immediate and effective means by which the President, as the responsible manager of Government, can prevent useless outlay of the public funds.” McKellar's Second Rider

McKellar was unimpressed. With the help of a number of other members of the Senate Appropriations Committee who were provoked at the Budget Bureau, he won committee approval for a legislative rider to the National Defense Appropriation Bill. The proposed Section 305 read as follows:

That no appropriation or part of any appropriation heretofore, herein, or hereafter made available for any executive department or independent establishment to construct any particular project shall be impounded, or held as a reserve, or used for any other purpose, except by direction of the Congress, and any part of such appropriation not needed to complete such project, or the part thereof for which appropriation has been made, shall be retained by the Treasury. (Emphasis added.)"

The rider was approved by the Senate Appropriation Committee. Among the supporters the Bureau lined up in opposition to the rider was second-termer Harry S. Truman (Dem., Mo.), who obligingly delivered a speech based on

arguments presented to him by the Bureau. The Senator suggested that the McKellar proposal would weaken fiscal flexibility, which was essential to the prosecution of the war. The government, he pointed out, cannot undertake everything at once. Since conditions change between the time Congress appropriates and agencies spend, the President should be allowed to determine spending priorities. He then reminded the Senate that another Congressional committee, the newly-established Joint Committee on Reduction of Nonessential Federal Expenditures (the "Byrd Committee"), did not agree with the recom mendation of the Appropriations group. The Joint Committee, in its first report, had recommended "that legislation be enacted which would authorize the Director of the Budget to set up reserves out of any future appropriation, at such times and in such amounts as the Director may determine."

Later Senator Byrd (Dem., Va.) expressed his own doubts about the MeKellar proposal:

"I have some question in my mind with respect to the latter part of the amendment . . . which provides that no funds appropriated can be impounded except by the direction of Congress. I think there are probably some construction appropriations which have been made, and perhaps it might be wise that those appropriations revert to the Treasury, especially in this emergency, and could be deferred by the action of the Bureau of the Budget, and that the Bureau of the Budget should have the authority in those cases, of actually making a reversion of the money into the Treasury."

But the arguments for Section 305 carried the day. Passing the Senate by voice vote on December 8, 1943, it was the first across-the-board curtailment of the Budget's impounding procedure to be accepted by either house of Congress. The Bureau hoped, however, that the measure would fail in the House.

Three days after Senate passage of Section 305, the Washington Star editorialized against McKellar's proposal. The Star admitted strong constitutional arguments against the impounding of funds, but felt they were out-weighed by such practical necessities of fiscal management as controlling projects detrimental to the war effort and giving flexibility to government operations:

"Critics might say that the background of the Senate amendment encompasses not only principle but at least the shadow of the pork barrel as well. Thus, it appears to be aimed in part at pushing through to completion more than a score of civilian airports of dubious essentiality at this time."

On December 13, Smith conveyed the Budget Bureau's opposition to the rider to Senator McKellar and to Representative Cannon (Dem., Mo.), chairman of the House Appropriations Committee. He called attention to the fact that, for the years 1940 through 1943, savings achieved through impounding ranged from $174 mililon to $405 million. Enactment of Section 305, Smith warned, would destroy central control of expenditures. Each individual agency would then become sole judge of the timing and amounts of its expenditures. The section would end the present practice of placing appropriated funds in reserve at a time when agencies and the Bureau "believe they may not be needed," and would force a return to the practice of not effecting savings "until it is definitely known that (the funds) are not needed."

As in times past, the Bureau found ready allies in the House Appropriations Committee. Cannon spoke against Section 305 and then Congressman Taber (Rep., N.Y.) took the floor. The second half of the amendment, he said, would prevent the Budget from impounding any funds appropriated for the construction of a particular project. This would result in the waste of millions and millions of dollars and is inserted in the bill for the purpose of preventing the Bureau of the Budget from impounding funds at the time when we need the exercise of that power more than any other in the history of our country. The sands are shifting very rapidly and as we approach nearer and nearer to the end of the war, it is going to be absolutely necessary for the Budget to impound funds on all sorts of projects, or we are going to face financial bankruptcy. The second part of the proviso of this amendment would prevent the Budget from impounding the funds that need to be impounded.

The McKellar amendment was rejected 283 to 18 (128 not voting). By the end of 1943, $500,000,000 appropriated for programmed public works had been impounded.

McKellar Seeks the Last Word

Senator McKellar sought revenue in grilling Director Smith early in 1944 during hearings on the Independent Offices Appropriation Bill for 1945:

"You are operating this practice absolutely without authorization of law. You are treating the Congress of the United States with absolute-not disrespectbut contempt, when you undertake to say, after the Congress has made an appropriation of money and directed the executive officers what to do with it; when you come along and overrule the Congress and put it in a place where the executive officer whose duty it is to expend this money cannot expend it. You put yourself in the place of the Congress, Mr. Smith. I want to say with all due respect that you have no legal right, moral right, or any other right, to overturn the action of the Congress that has been approved by the President of the United States. Now, you cannot do that, and so far as I am concerned, I am going to devote a good deal of time to preventing that in the future. I hope it won't occur again. I hope that you won't undertake to take the place of Congress and pass upon these things that it is necessary for the Congress to pass upon. If you had thought that necessary by reason of not being able to get the proper materials; if you had come up here and appeared before the Congress, the Congress might have sustained you. I do not know what the facts were about it. But, when you undertake to assume the authority yourself to overrule the decision of Congress made with regard to that appropriation, you are assuming authority that you do not have under the law, you do not have under our institutions, and I am very much opposed to that action on your part. . . . And I hope it will not occur again. I want to say right now that those funds ought to be released and it ought not to occur again. I am just merely giving my judgment." Mr. Smith: "Mr. Chairman, I would hesitate very much to have this record show, without any response from me, that I treated the Congress with contempt or that I am violating the law."

Sen. McKellar: "You are doing both. . . .”

Mr. Smith: "We could disagree as to the law, which is a matter that can be corrected; but I certainly have no spirit of contempt for Congress, and I have the most deep appreciation of the problems that Congress and this committee face, and I think that we are carrying out the will of the Congress in this very respect and the powers of the President with respect to appropriations. I am sure that this committee does not want us to countenance the expenditures of funds even though appropriated, which would be wasted."

Sen. McKellar: "You have no more authority in reference to appropriations that are made by the Congress, that the President has signed, and that our administrative officers have been directed as to what to use them for; you have no more authority over those appropriations than you have got over the man in the moon; not a particle."

Mr. Smith: "The issue, Mr. Chairman, has not gone to the Supreme Court, but there are court decisions on it, and, as I said. I think the last time I was here, I would be happy to have this issue cleared up. I think I am carrying out the law... Mr. Chairman, I am sure that this is not anything between us personally."

"1

Sen. McKellar: "Oh, no."

Mr. Smith: "It is purely a matter of what we operate under in the way of legal authority."

Sen. McKellar: "Yes.. I will ask you this—”

Mr. Smith: "I think we can talk in generalities

Sen. McKellar: "Just one moment. I am going to ask you a question. You do not even give the chairman of this committee an opportunity to ask you a question."

Mr. Smith: "Pardon me."

Sen. McKellar: "You go on talking; and I do not think you mean to be disrespectful."

IV. IMPOUNDING AFTER THE WAR

The obvious usefulness of impounding for halting or cutting back appropriations no longer required for prosecution of the war led Congress to take a more favorable view of the policy late in 1944 and in the immediate post-war period. In the Federal Employees Pay Act of 1945. Congress gave the Budget Bureau authority to impound unneeded personnel funds in order to deal with

1 Dr. Vining is not so sure. "I never knew," he says, "why McKellar was so hostile to Harold Smith but I always thought that Smith rather than the Bureau was the object of his hositlity." Smith may have rankled the Senator because he was a symbol of the rising influence in government of the professional career civil servant.