The Deficit and the Public Interest "d0e787"

Creating a New Budget Process

Like a family that expected good times and then was disappointed, the federal government in the early 1970s found itself without enough money to meet all its commitments. Entitlements grew faster, and the economy (and hence revenue) grew slower than expected. The deficit rose from 5.5 percent of federal outlays in fiscal year (FY) 1967 to 11 percent in FY71. The problem was more difficult than it sounds because the growth of entitlements meant that the old budget process of appropriations covered less of the budget. To eliminate the deficit through that system would have required cutting 8.4 percent of appropriations in 1967 but 19.6 percent in FY71.^[14] The appropriators, and many other people, wanted some way to bring entitlements into the purview of annual budget choice.

Deficits alone, however, could not have united a broad bipartisan majority behind the Budget Act of 1974; for that, Congress needed Richard Nixon, who gave liberals reason to go along. Congress and the Nixon administration got into a vicious and enervating struggle over deficits and, more important, budget priorities. Nixon tried to slow the expansion of the welfare state and other functions by keeping budgets down, particularly for new programs. At the same time, he wanted to wind down ("Vietnamize") the war more slowly than did the war's critics and to employ any savings to remedy claimed military weaknesses that had been ignored while resources were poured into Indochina. Liberals particularly could not see why the military deserved a funding bill created for a war that was a mistake in the first place.

The story of these battles has been told extensively elsewhere.^[15] For our purposes, three points are crucial:

1.	Nixon blamed Congress for the deficit; members of Congress were embarrassed by the charge even if they did not believe it.
2.	Nixon continually justified his restraint of domestic programs in

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	terms of the supposed inflationary impact of deficits. He had OMB, Treasury, and the Council of Economic Advisers (CEA) justifying his fiscal policy, but Congress had no fiscal policy at all. If Congress was to look good while opposing Nixon on the details, the leaders of the opposition needed some way to claim that they were attending to the totals.
3.	Nixon kept getting beaten. After the 1972 election, he decided he could win only by changing the rules. Nixon impounded—simply refused to spend—billions of dollars in appropriations that he disliked.

Impoundment was an old device based on an understanding that if events changed, making an appropriation either no longer necessary or unserviceable, the executive did not have to spend it, so long as most concerned members of Congress agreed. It was supposed to be a tool for better management, and it presumed that the players agreed on policy. Instead, as Allen Schick wrote,

far from administrative routine, Nixon's impoundments in late 1972 and 1973 were designed to rewrite national policy at the expense of congressional power and intent. Rather than the deferment of expenses, Nixon's aim was the cancellation of unwanted programs…. When Nixon impounded for policy reasons, he in effect told Congress, "I don't care what you appropriate; I will decide what will be spent."^[16]

"The aim of impoundment was," Schick adds, "to change the mix, not merely the level, of expenditures."^[17]

The policy stakes in Nixon's impoundments were striking enough, but the political stakes were decisive. Save during a major war, no president had ever so bluntly asserted his primacy over Congress. If Nixon could get away with massive impoundments, what could he not do? If the power of the purse could be defied, what was left for Congress?

The world had been stood on its head. Since the time of royal governors and their civil lists, the legislature's problem had been to restrain the executive by limiting its funds. Now it faced a chief executive who wanted to spend too little, who defied the legislature (which, as far as Congress was concerned, meant the people) by refusing funds for the bureaucracy.